Summary for EME & Black owned QSE’s

If your business is in its first year of operation, or it is classified as an Exempt Micro Enterprise or Black Owned Qualifying Small Enterprise, you should read this carefully.

It is required for an EME or Black Owned QSE to comply with the Amended B-BBEE Codes of Good Practice is a sworn affidavit correctly completed by one of the shareholders, members or directors of the business or a CIPC Certificate that you could get from CIPC directly. We cannot comment on the efficiency of the CIPC process, so we suggest you use the sworn affidavit.

EME and QSE Meaning

An EME has less than R10m annual revenue and a QSE has between R10m – R50m annual revenue. “Black Owned” means a company with black ownership of 51% or more. In terms of Practice note PG 01 of 2017 released on 31 March 2017, the B-BBEE Commissioner concluded that the modified flow-through principle cannot be used to benefit from the enhanced recognition status reserved for 51% and 100% black owned EMEs and QSEs. This is not clearly defined in the BEE Codes, but business would take a significant risk if they ignore this interpretation. Download the Practice note here.

Verification agencies, auditors, and accounting officers are no longer allowed to issue BEE certificates to EMEs under the Previous B-BBEE Codes. The Amended B-BBEE Codes are vividly clear that there is no provision for BEE Certificates for EMEs and Black owned QSEs. So effectively there may be no EME Certificates issued by any of the above.

At this time of writing, some of the Sector Codes have not yet been repealed or amended, so it is implied that verification agencies, auditors or accounting offices that have the correct accreditation may do EME certificates or confirmatory letters in the Transport, Property, Forestry, Agri-BEE and the Financial Sector, but the limitation is that the financial period must be less than one year from the date of the certificate. Once any of these Codes are gazetted, which is expected to happen in mid-2017, this falls away and only affidavits apply to these entities.

The CA Sector and Construction Sector Codes have been repealed, so in terms of companies operating in those industries clients, they revert back to the Amended Codes as if the Sector Codes do not exist. Note also that the thresholds in some Sector Codes are different, so if you operate or think that you operate in a Sector Code, it is best to read the Sector Code that is available on our website, or to check with us.

Any service provider offering anything that seems to imply that what they provide is an EME BEE Certificate under the Amended Codes is issuing an invalid document. Anyone offering help with this for a fee is really ripping you off. Any state owned or private business insisting on a SANAS or IRBA certificate for EMEs is, in our opinion doing so unlawfully.

We have loaded the correct dti affidavits on our website. It is accessible by clicking here. You need to complete it accurately and get it sworn in, either at a police station or with any Commissioner of Oaths. It is not supposed to cost you any money at all.

The circular issued by Treasury confirming the acceptability of the sworn affidavits for all government tenders and business is available here.

If any client or potential client insist on a BEE Certificate for an EME, please send us a copy of it. The Gestalt Group CEO, Deon Oberholzer, is on the board of the Association of BEE Professionals and he has undertaken to report any such instances to the BEE Commissioner so that she can intervene. The office of the B-BBEE Commissioner issued a practice note about this, which is also available here. Unfortunately, there remains a lot of uncertainty in the market and it is common that small business gets exploited.

Good luck with your venture and let us know when you hit the revenue thresholds that would require transformation because then you would really need our help with the compliance.