Common misconceptions about B-BBEE (Broad based black economic empowerment) demystified


Broad based black economic empowerment (B-BBEE) aims to accelerate the participation of black people in the economy by encouraging change in the key areas of businesses as stipulated in the B-BBEE scorecard. When correctly applied B-BBEE supports job creation, global competitiveness and most importantly economic growth. It also has the potential to relieve entrepreneurs from their burdens and aids in creating a more skilled workforce. However, like with many other things, there are often misconceptions about B-BBEE. These misconceptions about B-BBEE often confuse people’s business minds, leaving a non-beneficial concept and implementation thereof. This could result in uncertainty with regards to the fact that B-BBEE is a process that operates in the context of sound businesses practices. 

With many companies, who may be feeling uncertain about B-BBEE in its entirety, it is crucial to dispel some of the misconceptions surrounding it. B-BBEE is both viable and value adding to businesses, it is therefore important that it is approached as such. Below are some common misconceptions about B-BBEE: 

B-BBEE is a compliance expense-  

  • There is an increasing operational dependence on the B-BBEE scorecard for businesses that operate in South Africa. This is for the most part true for B2B or the government as well as those that need public sector licensing.  
  • B-BBBEE can therefore be a strategic instrument for business development activities. Utilizing the proper B-BBEE transformation strategy as well as the right B-BBEE scorecard can be a weighty asset for a business. 

B-BBEE requires giving away your shareholding in your business-  

  • Nowhere in the B-BBEE codes or the B-BBEE act is it stipulated that donating shares is the only means that would allow one to obtain B-BBEE ownership points. There are many other ways through which this can be achieved such as, the sale of equity to a black individual or black-owned entity, the sale of assets to a black owned entity etc. 

Only black owned businesses are B-BBEE compliant-  

  • Your business is considered as a B-BBEE level 4 contributor if your annual turnover is less than R10 million and in this case, you are only required to sign an affidavit.  
  • In the case where your business is 100% or 51% black-owned and your annual turnover is less than R50 million, your business is considered a B-BBEE level 1 or 2 contributor.  
  • If your business does not meet the criteria set out above, your business would need to undergo the B-BBEE verification process to establish your contribution level. This is usually identified by your business’s performance against the 5 points on the B-BBEE scorecard. Consulting agencies like Cenfed assists businesses thoroughly with the verification process.  

Ownership equals empowerment-  

  • B-BBEE stretches far beyond just mere equity and management. Black-owned businesses have a head start but they need to perform in other areas as well such as procurement and socio-economic development before they are acceptably empowered.  

Calculating B-BBEE points is a straightforward and easy process-  

  • B-BBEE calculations are not as straightforward as they may sound or seem, it is quite a complicated process. It is also not just everyone and anyone who can do these calculations, they would have to be done by persons who have the sufficient knowledge, understanding and expertise. This should preferably be done by B-BBEE consulting agencies such as Cenfed who have the required expertise on the process and who would also be able to do a substantial job.  

Hiring of black staff to a great extent leads to a transformed business-  

  • From the point of view of the B-BBEE scorecard there are many factors that contribute to transformation and equity is only one point. With that said, equity requires diversity at all different levels of a business. It is not merely about placing people of color at junior levels and that is the end, careful consideration needs to be given to placing people of color at the different levels of the business. Transformation has everything to do with business culture and having employed the right people for the right job in order to achieve business goals.  

The above list of common misconceptions could stretch even further.  

  • However, only a few were dispelled in this case. We know that there are many individuals as well as businesses who may also have some misconceptions about B-BBEE. Cenfed consulting agency will gladly help you in addressing those misconceptions that you might have or any questions relating to B-BBEE which you may need answers to. 
  • In most instances it would be possible for a Corporate entity to become B-BBEE compliant with a maximum scorecard without parting with valuable shares in favour of someone who’s only value is his or her skin colour. 

Feel free to contact Cenfed for any B-BBEE assistance or guidance that you may require. +27 10 040 9293 

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Client Testimonial

"I would like to thank all the staff at Cenfed/Chamberlink for their professional and friendly service.

We have dealt with numerous BEE verification agencies and have found that Cenfed has a proper procedure that they stick to. We have never experienced the BEE verification process in this manner before and have come to the realisation that Cenfed are doing it correctly.

Thank you for your patience and advice and the wonderful manner in which Yolandi Storm conducted herself with the on site audit.

We would recommend Cenfed to anyone in need of assistance with their BEE verification."

Monique Beets - Accounting Clerk
TMF Construction & Electrical CC