April 21, 2020
B-BBEE Accreditation – simplified for small business
South Africa's broad-based black economic empowerment (“B-BBEE”) policy is not simply a moral initiative to redress the wrongs of the past, it is a practical growth strategy that aims to realise the country's full economic potential, while helping to bring the black majority into the economic mainstream.
Most people find the B-BBEE accreditation process to be overly complicated and are not aware of what is required of their business. The current B-BBEE policies are found in the Broad-Based Black Economic Empowerment Act of 2003 and are reinforced by the Codes of Good Practice. Under this legislation, companies are categorized according to their annual turnover:
- exempt micro enterprises (“EMEs”) are the smallest entities, with an annual turnover of R10 million (or less);
- qualifying small enterprises (“QSEs”) are entities with an annual turnover exceeding R10 million and no more that R50 million;
- generic enterprises (“GENs”) are the largest entities, with an annual turnover exceeding R50 million.
The B-BBEE “scorecard” consists of eight levels, with level one being the highest level. This scorecard allows for the transforming of the economy as companies increase their points in areas such as skills development, corporate social investment and employment equity. Although not compulsory, a verification certificate offers assurance to other businesses of your B-BBEE status and becomes important if other businesses want to claim points for conducting business with your company.
EMEs are automatically placed in the middle of the B-BBEE scorecard as they receive level 4 B-BBEE status by declaring their annual turnover. EMEs are only required to produce a sworn affidavit (samples of which are freely available online) that has been attested by a commissioner of oaths. These affidavits are valid for one year and need to be renewed annually.
Black ownership percentages will determine the adjustment of an EME’s level. A Level 2 status may be acquired by virtue of an EME having 51% black ownership, while Level 1 statuses are granted to EMEs with 100% black ownership.
EMEs have direct access to the chain of preferential procurement as they are classified as “empowering suppliers”. Businesses are encouraged to spend at least 15% of their procurement spend with EMEs. As a result, B-BBEE accreditation builds opportunities for income generation and the formation of working relationships with larger businesses. It is important to note that B-BBEE accreditation requirements differ for some EMEs and affidavits are only recognized for EMEs in the general sector. Certain sectors require the same B-BBEE certificate as QSEs.
QSEs that have 51% black ownership receive Level 2 status, while those that are 100% black owned are ranked at Level 1. QSEs which fall in neither of these categories must be compliant with the five categories on the B-BBEE scorecard (being ownership, management control, skills development, enterprise and supplier development, and socio-economic development) from which the B-BBEE levels are calculated.
GENs are measured against all five categories on the B-BBEE scorecard. GENs need to comply with at least three of the categories in order to qualify as an Empowering Supplier. These larger companies must obtain a B-BBEE certificate by a verification professional accredited with the South Africa National Accreditation Systems (SANAS).
Benefits of obtaining a BBBEE Certificate
Many businesses feel that the task of ensuring B-BBEE compliance and completing all the relevant paperwork is a complicated task. It is important that businesses understand the numerous benefits it will receive with the correct B-BBEE certification:
- Tendering: your business has a better chance of forging business relationships with government departments and public entities through applying for tenders. Businesses are further able to purchase state-owned assets and enter into public-private partnerships
- Contracting with industry giants: big businesses are more likely to contract with your business if you have a B-BBEE certificate, as their own B-BBEE rating is dependent on the B-BBEE rating of their service providers. Having B-BBEE certification can set your business apart from your competitors and could increase your ranking on a company’s list of preferential service providers
- Grants and Financing: if your business has a B-BBEE certificate, you are exposing your business to various grants and obtaining lucrative financing
- Reputation: an important consideration your business should take into account is the general impression people will have if you have a B-BBEE certificate. By participating in this transformational endeavour, you are contributing to the progression of this country. Your business will also qualify to appear on the B-BBEE directory which is available to all those looking for B-BBEE compliant suppliers.