Being a B-BBEE compliant company is of utmost importance for the growth and development of any South African business.
In collaboration with a leading B-BBEE Consulting firm, we advise our clients, and assist with, the responsible implementation of all the elements of the B-BBEE scorecard.
Our B-BBEE regime is governed by the:
Our B-BBEE regime provide scorecards against which a business’s compliance is measured. The scorecard consists of various elements. For a company to comply with those elements it will have to achieve certain targets relating to those elements. Achieving or partially achieving the targets will result in points being allocated for each element. Adding up all the points will provide a score which then translates into a B-BBEE level (1 to non-compliant) being allocated to your business.
If targets in the Codes are not met, the main consequence is that the firm will not score the maximum number of available BBBEE points (although some points may still be scored on a pro rata basis if the target is not achieved) and this may negatively affect its BBBEE status.
Ownership, skills development and enterprise and supplier development are “priority elements” and “sub-minimum requirements” are provided for these elements. They are:
Concerning priority elements, if a business does not meet the subminimum requirements for the elements mentioned above, it will be discounted by 1 level on their final scorecard. A generic (large entity) entity needs to comply with all three priority elements, while a QSE (qualifying small enterprise) needs to comply with ownership and any one other priority element.
A business is measured against the following elements:
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There has been a lot of publicity lately concerning ownership in the B-BBEE context especially relating to structures where trusts are part of the ownership scheme. Unfortunately, the attention it has been receiving from the B-BBEE Commission has not been good. According to the commission, trusts are being used to circumvent our B-BBEE laws and ultimately results in the envisaged objectives not being attained and the benefits not reaching those who are supposed to benefit from the system.
According to the commission, three important aspects distinguish a good broad-based scheme from one that is a front. They are:
Ownership compliance can be achieved in various ways. The most obvious being direct shareholding in your business by a black individual (as defined) and the most noticeable being the registration of trusts, non-profit companies or profit companies which will hold shareholding in your business.
Some examples of ownership structures are:
These ownership structures can be straight forward or complex depending on your business and your needs.
We can help you with your Ownership Element needs in the following ways:
We construct the following ownership schemes as provided for by the Amended Codes of Good Practice:
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This element effectively measures the demographics of a company’s employees against specified targets.
The compliance targets currently are:
The compliance targets for senior, middle and junior management in the new codes are based on the overall demographic representation of “Black” people. It is then broken down into specific criteria according to the different race and gender sub-groups in accordance with the definition of “black” as defined in the Regulations of Employment Equity Act and commission on Employment Equity Report, as well as the Codes of Good Practise.
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This element requires your business to investment in Skills Development with an emphasis on accredited training and learnerships. The aim is to transfer hard skills (qualifications and accredited courses) to black employees and black unemployed persons. Little weight (maximum of 15%) is given to soft skills training (internal training).
Skills Development is a priority element which means that a company should reach the sub-minimum target (at least 8 out of the 20 points), or they will be discounted by one level.
The targets are:
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Enterprise development entails, but is not limited to, the investment of time, knowledge and capital into SMME’s to establish, expand and improve financial and operational independence and to promote sustainability. The goal would ideally be to graduate these enterprises to become sustainable suppliers to your company in the future. Companies must spend 1% of their annual net profit after tax to achieve the full 5 points on their B-BBEE scorecard for this element.
Supplier development is the same as Enterprise Development, with the added criteria of the beneficiary entity being on your company’s supply chain. The goal would ideally be for your business to improve their performance for the benefit of any buying organisation, leading to improvements in the total added value from the supplier in terms of product or service offering, business processes and performance, as well as improvements in lead times and delivery. Companies must spend 2% of their annual net profit after tax to achieve the full 10 points on their B-BBEE scorecard for this element.
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Socio-Economic Development consist of contributions that can either be monetary or non-monetary, implemented for individuals (natural individual or group of natural individuals) or communities, where at least 75% of the beneficiaries are classified as black people in terms of race. This element is further about facilitating sustainable access into the economy for black people and encourages organisations to help the previously disadvantaged.
Points will be allocated to the SED scorecard for the average annual value of all SED contributions made by a company.
The compliance target is set at 1% of net profit after tax for a weighting of five points. The full value of SED contributions is recognisable if at least 75% of the full value benefits black people. If less than 75% benefits black people, only the value of the contribution made multiplied by the percentage that benefits black people is recognisable.
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