What is BBBEE?
BBBEE stands for:
The Broad – Based Black Economic Empowerment Act No 53 of 2003 (The Act).
The term BEE (Black Economic Empowerment) is generally used.
An entity is certified in terms of the act and given a certain BEE level.
Why does your business require a BEE certificate?
For tender purposes.
An entity cannot do business with a government entity without a BEE certificate.
If a supplier requires the entities BEE certificate.
What is BEE compliance?
An entity is rated according to the BEE codes of good practice and a certificate is issued indicating the level that the business has obtained.
A business is BEE compliant if a BEE level of 8 or higher has been obtained.
A level between 1 and 9 can be obtained.
Level 9 is issued when the entity is non compliant.
What is a BEE certificate?
A BEE certificate is issued to a business by indicating the level of BEE compliance that the business has obtained.
The following levels can be obtained in terms of the Act:
How are entities BEE rated?
Industries are placed into different sectors which are rated differently.
Transport, Construction, Property, Financial sector etc.
Codes of good practice are published by the Department of Trade and Industry and are used to rate entities.
Construction code has been published 5 June 2009.
Who is included in the Construction Sector?
Contractors.
Built Environment Professionals (BEP).
How is the Construction sector currently rated?
According to construction sector code of 5 June 2009.
New construction sector code has been published for comment on 28 October 2016 and will be implemented shortly.
Entities will be rated on the new code when it is published and there will not be a transitional period.
Classification of BEP entities in terms of the old code and new code:
Start up enterprise
New entity that has just started trading
EME (exempted micro enterprise)
Entity that has a turnover of less than 1,5 million Rand (old code).
Entity that has a turnover of less than 6 million Rand (new code).
QSE (Qualifying small enterprise)
Entity that has a turnover between 1,5 million Rand or less than or equal to 11,5 million Rand (old code).
Entity that has a turnover between 6 million Rand or less than or equal to 25 million Rand (new code).
Large enterprise
Entity that has a turnover of more than 11,5 million Rand (old code).
Entity that has a turnover of more than 25 million Rand (new code).
How does the new construction code differ from the old code?
In the old code an affidavit from an individual would be sufficient.
In the new code affidavits are not accepted for a start up enterprise or an EME unless these have been issued by:
The CIPC in the case of a start up enterprise; or
Commercial attorneys, accountants and officers with a competent understanding of the BEE policy framework, in the case of entities seeking that they are either 51% or 100% black owned.
EME certificates can however be obtained at a rating agency for a nominal fee.
In the old code an automatic level 4 BEE certificate can be obtained for a EME.
In terms of the new code an EME obtains the following BEE levels:
The Built Environment Professional term has been broadened:
Three priority elements have been added:
Ownership
Skills development
Preferential procurement and supplier development
No priority elements exists in the old code.
If the entity does not obtain the minimum threshold for the priority element then the entity will be penalised by a reduction in its BEE compliance with one level.
A minimum of 13% black ownership for a large enterprise and 10% for a QSE is required to obtain the minimum threshold.
A QSE must be rated on ownership and may choose between Skills development and Preferential procurement and supplier development.
A large enterprise will be rated on all of the priority elements.
The elements in the old code are as follows:
A large enterprise are rated on all of the elements and a QSE can choose 4 elements to be rated on.
A large enterprise are rated on all of the elements and a QSE can choose 4 elements to be rated on.
The elements in the new code are as follows:
Both a large enterprise and a QSE are rated on all of the elements.
Conclusion:
In terms of the new code it will be harder to obtain a good BEE rating if the minimum thresholds of the priority elements have not been obtained.
If I certificate in terms of the old code is obtained, the certificate will be valid until the date stated thereon and only after the certificate has expired it will be necessary to be rated on the new code.
References:
1. Draft amended construction sector code, Government Gazette Number: 40375, 28 October 2016.
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