© Webber Wentzel 2015
B-BBEE ENTERPRISE AND SUPPLIER DEVELOPMENT
10 November 2017
Adam Ismail
INTRODUCTION
“BEE IS FUNDAMENTAL TO ECONOMIC ACTIVITY IN SOUTH
AFRICA AND ENCOURAGES THE OPENING UP OF THE ECONOMY
TO THOSE PREVIOUSLY EXCLUDED BY THE SYSTEM OF
APARTHEID THROUGH A MIX OF ECONOMIC PERSUASION AND
INCENTIVE.”
• Origins of BEE – Freedom Charter
• Constitutional Mandate
• Assessments of models elsewhere in the world
• Carrot and stick approach, not a stick approach
BBBEE LEGISLATIVE HISTORY (1)
2004• BBBEE Act
2007
• BBBEE Generic Codes
2008-2012
• Various sector charters under section 12
• Various sector codes under section 9
BBBEE LEGISLATIVE HISTORY (2)
2011
• Revised Preferential Procurement Policy Framework Regulations to accord with BBBEE Codes
2013 -2014
• Revised BBBEE Generic Codes
• Draft Phase 2 Revised Generic Codes
• BEE Amendment Act - effective 24 October 2014
May 2015
• Clarification note published and withdrawn
• Further amendments to the Revised Generic Codes
• Phase 2 Revised Generic Codes finalised
BBBEE LEGISLATIVE HISTORY (3)
2015
• Trumping provisions in BEE Amendment Act becomes law
• Tourism Sector Code aligned with the Revised Generic Codes
2016
• Existing Sector Codes repealed due to slow progress on alignment –Chartered Accountancy / Construction. (Legal???)
• Further draft Sector Codes Published for comment
• BEE Regulations
2016 -2017
• BEE Commission established (within DTI)
• Acting Commissioner appointed – Zodwa Ntuli
• First investigations start
• Revised Sector Codes published
EXEMPTED MICRO-ENTERPRISES
EME = Annual Total Revenue of less than R10m
EME = deemed Level 4 Contributor Status
51%+ black owned EME = deemed Level 2 Contributor Status
100% black owned EME = deemed Level 1 Contributor Status
QUALIFYING SMALL ENTERPRISES
• Verification of annual turnover and black ownership by sworn affidavit
• QSE scorecard now finalised. Threshold higher but still requires compliance with all elements – no longer choose 4 elements.
• Keep Key principles in mind at all time
• Also keep sector in mind
QSE
Annual Total Revenue of between R10m and R50m
100% black owned QSE = deemed Level 1
Contributor Status
51% + black owned QSE= deemed Level 2
Contributor Status
PRIORITY ELEMENTS: COGP
• Large enterprise must comply with all priority elements
• QSEs must comply with 2 (1 of which must be ownership)
• Non-compliance= BBBEE status level discounted by 1 level. Discounted level must be reflected on BEE verification certificate.
Ownership
40% of net value points
Skills Development
40% of total weighting points
Enterprise and Supplier
Development
40% for each of preferential procurement, supplier development and enterprise development
B-BBEE STATUS TABLE:
B-BBEE Status Qualification B-BBEE
recognition
level
Level One Contributor ≥ 100 points on the Scorecard 135%
Level Two Contributor ≥ [85] 95 but < 100 points on the Scorecard 125%
Level Three Contributor ≥ [75] 90 but < [85] 95 on the Scorecard 110%
Level Four Contributor ≥ [65] 80 but < [75] 90 on the Scorecard 100%
Level Five Contributor ≥ [55] 75 but < [65] 80 on the Scorecard 80%
Level Six Contributor ≥ [45] 70 but < [55] 75 on the Scorecard 60%
Level Seven Contributor ≥ [40] 55 but < [45] 70 on the Scorecard 50%
Level Eight Contributor ≥ [30] 40 but < [40] 55 on the Scorecard 10%
Non-Compliant Contributor < [30] 40 on the Generic Scorecard 0%
ENTERPRISE AND SUPPLIER DEVELOPMENT
• Largest element on the BEE scorecard for points – 44 points out of 100 points
• Clear focus from government where priorities must be focussed, SMMEs as the engine room for growth, black industrialists and radical economic transformation
• three components – all three priority elements:
o preferential procurement
• empowering suppliers
• QSEs
• EMEs
• 51% black-owned
• 30% black women owned
ENTERPRISE AND SUPPLIER DEVELOPMENT: SOME KEY NOTES
• All B-BBEE procurement spend (except if EME) must be from Empowering Suppliers
• Empowering supplier = good SA citizen; comply with all laws and must meet at least 3 (and if QSE 1) of following:
o at least 25% of COS (ex labour and depreciation) must be from local suppliers – in service industry labour may be included up to 15%
o Jobs created – at least 50% of jobs created must be for black people provided that the number of black employees in previous measurement period maintained
o At least 25% of raw materials beneficiated by local manufacturing, production, assembly or packaging
o Skills transfer - At least 12 days per annum of productivity deployed in assisting Black EME and QSE to increase their sustainability
o at least 85% of labor costs should be paid to South African employees by the service industry
ENTERPRISE AND SUPPLIER DEVELOPMENT
o supplier development
• monetary and non-monetary contributions
• to value adding suppliers to the measured entity
• contributing to development, sustainability and financial and operational independence
• to EMEs and QSEs which are at least 51% black owned or 51% black women owned (what does this mean?)
o 2% of net profit of tax
ENTERPRISE AND SUPPLIER DEVELOPMENT
• enterprise development
o monetary and non-monetary contributions
o to beneficiaries
o contributing to development, sustainability and financial and operational independence
o to EMEs and QSEs which are at least 51% black owned or 51% black women owned
o 1% of net profit of tax
General observations
• timing
• various ways of achieving it
• use of agents
• sincerity and helping one another
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Legal Notice: these materials are for training purposes only and do not constitute legal or other professional advice