Broad-Based Black Economic Empowerment policies can be confusing for business owners, especially when words like “certificate” and “verification” are added to the mix. However, the rules and procedures are often not as complicated as they seem – particularly for smaller businesses. In this article, we provide a brief overview of the BBBEE verification requirements for the smallest of companies – Exempt Micro Enterprises, commonly known as EMEs for short.
Businesses in South Africa are classified as EMEs if their annual turnover is under R10 million. The next category up is Qualifying Small Enterprises (QSEs), which have annual revenue of R10 million to R50 million. Both EMEs and QSEs are often family businesses. EMEs receive two primary benefits under BBBEE legislation – the first involving verification procedures, and the second pertaining to revenue generation.
BBBEE legislation comprises the BBBEE Act (No. 53 of 2003) and the Codes of Good Practice (last revised in 2015). Under the previous Codes, EMEs had to produce an auditor or accredited accountant’s certificate for verification purposes. However, recent revisions have simplified things, and EMEs now only need to provide a sworn affidavit that has been stamped by a Commissioner of Oaths.
The affidavit, samples of which can be freely downloaded online, needs to clearly state the EME’s annual turnover, as well as their percentage of black ownership. All EMEs automatically gain Level 4 BBBEE status (there are eight levels, with Level 1 being the highest ranking). If there is 51% black ownership, they are given Level 2 status, while EMEs with 100% black ownership immediately gain Level 1 status. Affidavits are valid for a period of one year, and then need to be re-done.
It is true that BBBEE verification requirements differ for some EMEs. Affidavits are only accepted for EMEs in the general sector. EMEs in some industry sectors, including transport, media, construction, tourism, ICT, finance and property, are required to obtain a BBBEE certificate just like QSEs. This process, while not overly complex, involves more documents and time. For example, financial statements need to be provided. However, it is still worthwhile for the businesses to undergo verification, as it opens up access to a range of benefits.
EMEs experience one of these benefits in the area of supply – they automatically qualify as Empowering Suppliers, and businesses are encouraged to spend 15% of their total measured procurement spend with EMEs. Thus, BBBEE verification creates opportunities for income generation and the establishment of working relationships with larger businesses.
In addition, EMEs may benefit from BBBEE verification in the realm of brand management and marketing. Because BBBEE is aimed at creating progressive social change in South Africa, certified or verified businesses project a good image by being part of it. BBBEE verification can be included in a business’s marketing materials.
To complete BBBEE verification or to clarify any issues on the topic, EMEs are encouraged to contact a BBBEE verification agency. Cenfed is one such agency with substantial experience and good reviews.