Who is the B-BBEE Commission?
We are a regulatory body established as an entity within the administration of the Department of Trade and Industry (“the dti”) by the Broad-Based Black Economic Empowerment Act 53 of 2003, as amended by Act 46 of 2013 (“the B-BBEE Act”), to oversee the implementation of the B-BBEE Act and investigate violation.
Jurisdiction of the B-BBEE Commission
We operate within the dti with jurisdiction throughout the Republic, and be impartial and perform its functions without fear, favour or prejudice, across all provinces.
B-BBEE Clarifications
In terms of section 13F (1) (a) of the B-BBEE Act, we are mandated to oversee, supervise and promote adherence with the B-BBEE Act in the interest of the public. In so doing, we must increase knowledge on the nature and dynamics and promote guidance to the public on the interpretation of the B-BBEE Act and Codes of Good Practice, and clarifications form part of our advisory services.
Nature of clarification provided
We have a mandate to provide clarification on all aspects of the B-BBEE, which includes the generic codes of good practice and the various sector codes. These are some of the issues that have been raised with us.
General Principles
B-BEEE seeks to advance access of black people in the South African Economy. The term “black people” is a generic term which means Africans, Coloureds and Indians—
(a) who are citizens of the Republic of South Africa by birth or descent; Or
(b) who became citizens of the Republic of South Africa by
Naturalisation —
(i) before 27 April 1994; or
(ii) on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date.
The following Entities are measurable under the Codes:
- all Organs of State and Public Entities;
- all Measured Entities that undertake any economic activity with all Organs of State and Public Entities;
- any other Entity that undertakes any economic activity, whether direct or indirect, with any Entity that is subject to measurement under the Codes.
In terms of Code Series 100, an entity may apply the modified-flow through principle to determine black ownership, where in the chain of ownership structure black people have a flow-through level of participation of at least 51%, then only once in that entire ownership structure of the entity such black participation may be treated as though it were 100%.
B-BBEE classify entities based on annual turnover, namely:
- Start-up Enterprise. This is a recently formed or incorporated entity that has been in operation for less than one (1) year. A start-up enterprise does not include any newly constituted enterprise which is merely a continuation of a pre-existing enterprise;
- Exempted Micro-Enterprises (EMEs). This are entities that generate an annual turnover of R0 and less R10 million.
- Qualifying Small Enterprises (QSEs). These entities have an annual turnover of above R10 million and less R50 million.
- Large Enterprises, are entities with an annual turnover of above R50 million.
EMEs:
- All EMEs are exempted from B-BBEE compliance and receive automatic B-BBEE Recognition Level 4.
- An EME which is at least 51% black owned automatically receive level 2 status and those which are 100% black owned receive level 1.
- EMEs only have to obtain a sworn affidavit or CIPC certificate.
- The sworn affidavit must be signed by a Commissioners of Oaths.
QSEs:
- QSEs which are at least 51% black owned or 100% black owned are treated the same as EMEs, they receive automatic B-BBEE Recognition Levels 2 and 1 respectively and also have to only obtain a sworn affidavit.
- The rest of the QSEs (less 51% black shareholding) must be verified through an accredited verification professional.
Large Enterprises:
- Large companies must be verified by an accredited verification professional.
A B-BBEE certificate can only be issued by a verification professional accredited with the South Africa National Accreditation Systems (SANAS).
The codes do not have a provision for consolidation of Sworn Affidavits in joint venture.
Anyone who qualifies as commissioner of oath in terms of Justices of the Peace and Commissioner of oaths Act can commission an affidavit.
No, a Sworn Affidavit must be commissioned by someone with no interest in the company to exercise objectivity.
The 40% sub-minimum is applied as follows:
Ownership:
- 40% on the 8 points for Net Value based on time graduation factor.
Skills Development:
- 40% to the total weighting points for skills development (40% to 20 points).
Enterprise and Supplier Development:
- 40% sub-minimum targets for Code Series 400 apply to each category namely, preferential procurement, supplier development and enterprise development.
This is interpreted as 40% to the total points of each of the three categories, meaning 40% of 25 points for preferential procurement, 40% of 10 points for supplier development and 40% of 5 points for enterprise development.
Send the request letter to Mr Madidimalo Ramare at MRamare@beecommission.gov.za
In terms of Para 2.5 Codes Series 000, if an entity splits itself to ensure eligibility as an EME or QSE such would constitute an offence and such will be dealt with in terms of the Act.
The inclusion or identification of priority elements in the Codes is an intervention to accelerate the achievement of an inclusive economy and decent job creation.
Inclusion of the bonus points to calculate the sub-minimums would undermine the objective of accelerating economic transformation, and reducing B-BBEE into a tick box exercise.
In terms of the 2008 verification manual a measured entity which experienced a material change after a B-BBEE certificate was issued, must be subjected to re-verification. This process requires the withdrawal of the initial certificate, and the second certificate must indicate date of issue, date of re-issue and date of expiry.
Where a certificate is re-issued, the second certificate must indicate date of issue, date of re-issue and date of expiry. The date of expiry remains the same date as on the initial certificate, because reissuing a certificate does not extend the validity period
NPOs are already covered as a measured entity in terms of the Codes of Good Practice (the Codes) and are regarded as specialised enterprises (do not have ownership). Their B-BBEE compliance is measured in terms of statement 004 (starts on page 10 of the attached document).
Specialised enterprises are classified in terms of annual turnover, allocated budget or gross receipts. This means that a specialised entity with R0 and less R10 million annual turnover/allocated budget/gross receipts are regarded an as Exempted Micro Enterprise (EMEs), if annual turnover/allocated budget/gross receipts is above R10 million but less R50 million it is called a Qualifying Small Enterprise (QSE), and those with annual turnover/allocated budget/gross receipts of R50 million above are regarded as large entities.
Specialised EMEs are given an automatic level 4 but if it has 51% of black beneficiaries it will be level 2, and 75% black beneficiaries it will obtain a level 1. EMEs only have to obtain a sworn affidavit. See attached template for guidance.
Specialised QSEs have to be verified by an accredited verification agency (http://www.sanas.co.za) to obtain a B-BBEE certificate. But if it has 51% of black beneficiaries it will automatically be level 2 and 75% black beneficiaries it is a level. Also has to complete a sworn affidavit for QSEs.
Large specialised entities have to be verified by either a verification agency
An EME that intends to enhance its B-BBEE status must be verified against the QSE scorecard.
A start-up enterprise is regarded as an EME, and must obtain a sworn affidavit. However, start-up enterprise must submit a QSE scorecard when tendering for any contract, or seeking any other economic activity covered by Section 10 of the Act, with a value higher than R10 million but less than R50 million. For contracts of R50 million or more they should submit the Generic scorecard.
Specialised enterprises are classified according to their annual turnover or allocated budget or gross receipts or discretionary spend. This means that a specialised entity with R0 and less R10 million annual turnover/allocated budget/gross receipts are regarded an as Exempted Micro Enterprise (EMEs), if annual turnover/allocated budget/gross receipts is R10 million but less R50 million it is called a Qualifying Small Enterprise (QSE), and those with annual turnover/allocated budget/gross receipts of R50 million above are regarded as large entities.
This is how a B-BBEE Certificate is obtained:
Specialised EMEs are given an automatic level 4 but if it has 51% of black beneficiaries it will be level 2, and 75% black beneficiaries it will obtain a level 1. EMEs only have to obtain a sworn affidavit. See attached template for guidance.
QSEs have to be verified by an accredited verification agency (http://www.sanas.co.za) . But if it has 51% of black beneficiaries it will aromatically be level 2 and 75% black beneficiaries it is a level 1. Also has to complete a sworn affidavit.
Large companies have to be verified by either a verification agency.