05 Oct B-BBEE Basics
Broad-Based Black Economic Empowerment is an initiative that seeks to encourage economic participation of black people by focusing on the following key areas: ownership, management control, skills development, enterprise and supplier development and socio-economic development.
All state and state-owned entities are bounded by law to adhere to the B-BBEE Codes of Good Practice. Therefore, all government entities are required to use the Codes to measure B-BBEE compliance when choosing suppliers, granting licences and making concessions. This means that all suppliers doing business with the government need to be B-BBEE compliant. Non-compliant firms will be faced with limited growth opportunities.
These limitations do not just begin and end with establishing and maintaining relationships with government entities; publicly owned entities, like government entities, also require suppliers with high B-BBEE ratings, so do privately held companies, and so on and so forth.
ELIGIBILITY CRITERIA
Eligibility as an Exempt Micro Enterprise (EME)
Any entity with annual total revenue of R10 million or less qualifies as an exempt micro enterprise. Start-up entities are generally regarded as EMEs, unless tendering for a contract in excess of the threshold for EMEs, in which case the corresponding scorecard will apply. EMEs automatically qualify as level 4 B-BBEE contributors with a B-BBEE recognition level of 100%. Using the flow-through principle, B-BBEE recognition levels can be enhanced to level 1 contributor with a recognition level of 135% if EME is 100% black owned and level 2 contributor with a recognition level of 125% if EME is at least 51% black owned.
EMEs are required to present a sworn affidavit or certificate issued by the Companies and Intellectual Property Commission (CIPC) on an annual basis confirming annual total revenue of R10 million or less and level of black ownership.
Eligibility as a qualifying small enterprise (QSE)
A qualifying small enterprise is a measured entity with an annual total revenue between R10 million and R50 million. A QSE must comply with all the elements of B-BBEE for purposes of measurement. Using the flow-through principle, B-BBEE recognition levels can be enhanced to level 1 contributor with a recognition level of 135% if QSE is 100% black owned and level 2 contributor with a recognition level of 125% if QSE is at least 51% black owned.
QSEs are required to present a sworn affidavit on an annual basis confirming annual total revenue between R10 million and R50 million and level of black ownership.
Eligibility as a generic entity
A generic entity is any enterprise with an annual turnover of R50 million and above. Generic enterprises must comply with all elements of B-BBEE for purposes of measurement.
Eligibility of joint ventures and start-ups
Unincorporated joint ventures are required to compile a consolidated verification certificate. This will allow the verified compliance data of joint venture partners to measure as if they were a single entity. The weight of each entity, for the relevant Code of Good Practice, will be based on the joint venture agreement and added together for a combined score of 100.
Start-up enterprises, as mentioned above, are treated the same as EMEs for B-BBEE purposes, unless the entity chooses to be measured using a QSE or generic scorecard.
For more information on the above topic, please contact the khulanathi Global Information desk at:
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