To boost your chances of success in the South African business landscape, taking the time to work on your Broad-Based Black Economic Empowerment (BBBEE or BEE for short) scorecard is strongly recommended. Not all companies face the same requirements for BBBEE accreditation – they differ according to size and, to an extent, industry. In this post we look at the BBBEE requirements for companies of different sizes, highlighting the main differences in order to give you a clearer understanding of what you can expect if you choose to undergo accreditation.
Under BBBEE legislation, companies are classified as Exempt Micro Enterprises (EMEs), Qualifying Small Enterprises (QSEs), or Generic Enterprises (GENs) according to their annual turnover. EMEs are the smallest entities, with an annual turnover of R10 million or less. QSEs are those with an annual turnover of between R10 million and R50 million, and GENs are the largest entities, with an annual turnover in excess of R50 million. These figures were adjusted in 2013, when the BBBEE Codes of Good Practice were revised to enhance the efficacy of BBBEE in the transformation of South African society. Thanks to the changes, many companies that would previously have been classified as QSEs are now deemed EMES, and likewise QSEs that would have been marked as GENs. This makes BBBEE compliance much easier for many people.
EMEs are subject to relatively light requirements for BBBEE accreditation. By default, all EMEs receive Level 4 BBBEE status (positioning them in the middle of the scorecard, which has eight levels) upon declaring their turnover. To do this, they simply need to produce a sworn affidavit that is stamped by a Commissioner of Oaths. Thereafter the level is adjusted based on their percentage of black ownership. EMEs with 51% black ownership are upgraded to Level 2 status, while EMEs with 100% black ownership are awarded Level 1 status, positioning them at the top of the BBBEE rankings. EMEs are automatically classified as Empowering Suppliers, giving them access to the chain of preferential procurement.
Like EMEs, QSEs that are able to show 51% or higher black ownership are classed as Level 2 BBBEE contributors, while those with 100% black ownership receive Level 1 status. However, other QSEs are required to prove compliance with the five categories on the BBBEE scorecard, and their level is then calculated. These categories are: ownership, management control, skills development, enterprise and supplier development, and socio-economic development. Of these categories, ownership is top priority, followed by either skills development or enterprise and supplier development. In order to be classified as an Empowering Supplier, QSEs must show that they meet certain other requirements relating to the sourcing of cost of sales, creation of jobs, relationships with EMEs, and other considerations.
GENs, as the largest and therefore arguably most influential entities in the market, are subject to the most stringent BBBEE requirements for accreditation. Like QSEs, they must show compliance with all of the categories on the scorecard, and they need to meet similar requirements when it comes to the cost of sales, job creation and so on.
To find out more about the BBBEE requirements for your business, contact one of our consultants today.