Broad-Based Black Economic Empowerment Scorecard

  • Date Posted: April 15, 2015
  • Author: Deon Oberholzer

Broad-Based Black Economic Empowerment Scorecard

The Amended B-BBEE Codes’ compliance transitional period ends on 30 April 2015 with effectiveness of the Codes for all commencing on the 1st of May 2015. The Broad-Based Black Economic Scorecard for Generic enterprises has been changed significantly, and Generic entities and QSEs are all deeply affected.

All QSE measured entities will need to ensure compliance with two of the three priority elements:

  • Ownership (compulsory)
  • Skills Development
  • Enterprise & Supplier Development

Large Generic entities must comply with all of the priority elements (all three). Entities not meeting the minimum requirements for the priority elements will be discounted on their score. Generic entities will drop two levels with QSEs dropping one level.

EMEs

Exempt Micro Enterprises which are 100% black owned qualify for the status of Level 1 BEE Contributors, while EMEs with more than 50% black ownership are set as Level 2 BEE Contributors. The threshold for EMEs has been changed to an annual turnover below R10 million.

Thresholds for QSEs and Generic Enterprises

The threshold for QSEs has been changed to an annual turnover of R10 million to R50 million with Generic Enterprises set at R50 million plus annual turnover.  As such, only about 5% of economically active firms have to comply with the QSE and Generic Broad-Based Black Economic Empowerment Scorecard requirements. The dti estimates that only 2% of companies will be required to comply with the Generic Scorecard requirements of the Amended BBBEE Codes.

How Points Have Changed on the Generic Scorecard

The Generic Scorecard features 5 elements with the total points now set at 105 instead of 100 with 13 bonus points. Management Control and Employment Equity are now a single element with Preferential Procurement and Enterprise Development also being combined into one.

Ownership is at 25 points, with Management set at 15 points, Skills Development at 20 points, Enterprise & Supplier Development at 40 points and Socio-Economic Development now at 5 points, bringing the total to 105 points.

VAS Replaced By Empowering Supplier

The Empowering Supplier concept has replaced the measure of value adding suppliers and refers to a B-BBEE compliant entity that has the ability to prove that its production or value-adding services take place within South Africa. With such, four mechanisms are addressed:

  • Job creation
  • Local business activity support
  • Local production
  • Transfer of skills

Large Generic enterprises must aim for complying with at least three of the above, while QSEs only have to ensure compliance with one of the above mechanisms.

BEE Status – Level Changes

Note that to obtain Level 1 contributor status, an enterprise must have 100 points or more. For Level 2 status, a score of minimum 95 must be attained and for Level 3, a score of at least 90 must be gained. To get Level 4 status and enterprise must score at minimum 80 points and at Level 5 a minimum of 75 points. An enterprise will need a minimum of 70 points for Level 6, a minimum of 50 points for Level 7 and at least 40 points for Level 8.  Enterprises with scores less than 40 will be non-compliant.

The above changes to the Broad-Based Black Economic Scorecard have far-reaching implications for businesses operating in South Africa. For the most part, Generic enterprises and QSEs can expect a drop of at least two to four levels in their BEE Status, unless they’ve already made the necessary changes to ensure compliance with the priority elements and the sub-requirements. This will severely affect firms that have contracts with the Government or where their clients require a minimum Broad-Based Black Economic Empowerment status.

Strategies that include getting black partners and empowering suppliers, spending more on skills development and ensuring compliant management profiles will need to be implemented.

Contact us: Gestalt offers unique solutions for maximum BEE compliance, using cost effective solutions while ensuring maximum business benefit.