© 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• Clarification note published and withdrawn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• Existing Sector Codes repealed due to slow progress on alignment –Chartered Accountancy / Construction.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