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BROAD-BASED BLACK
ECONOMIC EMPOWERMENT
P R E S E N T E D B Y A L E X I S S A C K S
1 9 M A R C H 2 0 1 3
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
1. What is B-BBEE?
2. Definition of Black People
3. Compliance Requirements
4. Codes of Good Practice
5. Scorecard Points and B-BBEE Recognition Level
6. The Seven Elements
7. Scorecards
8. The B-BBEE Calculations
9. Sector Charters
10. Fronting
11. Practical B-BBEE Tips
12. How to achieve a Level 1 rating as a QSE CA(SA)
13. A summary of proposed changes______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
DEFINITION OF BLACK PEOPLE
Black means African black, coloured or Indian people
who are South African citizens by birth or descent or
who became South African citizens before 27th April
1994.
NB the definition of coloured now also includes
Chinese.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
WHAT IS B-BBEE?
B-BBEE refers to Broad-Based Black Economic Empowerment. It
encourages companies to help transform the country with
broad-based activities that benefit black people by having access
to more economic opportunities.
By maximising your BEE status, you will be able to:
• Provide a competitive edge independent of your
organisation’s size,
• Encourage large companies to invest in a compliant company,
• Assist in unemployment and poverty in the long term.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
COMPLIANCE REQUIREMENTS
BEE compliance is measured by means of a scorecard.
The scorecard is based on various elements and your company
is measured out of a maximum of 100 points (in some cases it
is possible to obtain more than 100 points).
The BEE Codes of Good Practice describe the mechanisms of
the scorecard.
The seven rating elements make BEE broad-based. They cover
various aspects of the economy, society and the company.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
CODES OF GOOD PRACTICE
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SCORECARD POINTS AND B-BBEE RECOGNITION LEVEL
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
THE SEVEN ELEMENTS
1. Ownership - measures the percentage of shares in the business that are
owned by black people.
2. Management – measures the black directors and top management of the
business.
3. Employment Equity – measures the black employees in the business.
4. Skills Development - measures the amount of money spent on training of
black employees.
5. Procurement – measures your suppliers and their BEE scores.
6. Enterprise Development - your spend on helping black owned enterprises.
7. Socio-Economic Development - your spend on assisting charitable
organisations with black beneficiaries.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Qualifying Small Enterprise’s (QSE’s)
Qualifying Small Enterprise’s (QSE’s) can select any four
of the seven elements. Their annual turnover is typically
greater than R5 million but less than R35 million.
Generic Enterprises need to comply with all seven
elements of the scorecard. Their annual turnover is
typically above R35 million.
* The exceptions are highlighted in your notes for the
different sector scorecards.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SCORECARDS
SCORECARDS
Exempt Micro Enterprises (EME’s)
Total Annual Revenue typically of R5m or less.
Deemed to be a “Level 4 Contributor” (100% Recognition
Level).
If more than 50% is owned by Black people, the entity is
promoted to Level 3 Contributor (110% Recognition Level).
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SCORECARDS
The Generic Scorecard
The Generic Scorecard has the following components and points available:
THE B-BBEE CALCULATIONS
The calculations are simple – in each instance you have an
indicator. The indicator will have a target and a number of
points available – you need to reach the target to earn the
points.
Calculation Example
Socio-economic Development (SED):
Target – spend 1% NPAT on black people for SED = 5 points;
Actual – spent 0.5% NPAT
Therefore, 0.5%/1% NPAT * 5 points = 2.5
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SECTOR CHARTERS
* The turnover thresholds are highlighted in your notes
for the different sector scorecards.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
FRONTING
‘Fronting means a deliberate circumvention or
attempted circumvention of the B-BBEE Act and
the Codes.
Fronting commonly involves reliance on data or claims of
compliance based on misrepresentations of facts,
whether made by the party claiming compliance or by
any other person.’
(South Africa. Department of Trade and Industry, no
date)
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS
1. When verifying Socio-Economic Development, the following
evidence is required to support your claim for points:
�Proof of the contribution.
�A letter from the head of the beneficiary organisation
confirming receipt and confirming the percentage black
beneficiaries.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
2. When verifying Enterprise Development, the following
evidence is required:
�An agreement between both parties confirming the
arrangement.
�Documentation confirming the B-BBEE status and qualifying
category of the entity (e.g. BEE certificate, proof of turnover,
proof of black ownership, etc)
�Documentation proving that the contributions have been
made e.g. bank statements showing payments, receipts,
letter of acknowledgement from beneficiary, etc.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS
3. These are some of the most common ways to lose points on
your scorecard:
�Training takes place outside of the measurement period
�Lack of training for black employees
� Inadequate record keeping
�Unable to prove attendance at training
�No Learnership contracts
�Unable to prove amount spent on training
�No records of internal training
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS
�A generic company must comply with the following to be
rated for these elements:
�Registration with applicable SETA
�Development of a workplace skills plan
�If you are a ‘designated employer’ according to the turnover
thresholds for your industry (as indicated in Schedule 4 of
the Employment Equity Act), no points will be awarded for
Employment Equity, unless you have submitted the required
EEA2 and EEA4 reports to the Department of Labour.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS
4. Sector codes apply from the day they are gazetted as a
final sector code.
This means that you need to be aware of any new codes in
the final stages of gazetting, as they may affect your
industry scorecard, retrospectively.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS
5. Certain of the elements are time-based and certain are
based on the financial period.
�The elements of skills development, preferential
procurement, enterprise and socio-economic
development are based on the financial period.
�The remaining elements, ownership, management control
and employment equity, are all measured at the date of
verification.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS
HOW TO ACHIEVE A LEVEL ONE RATING
AS A QSE CA(SA) FIRM
1. Skills development: Target 2% of leviable payroll = salary
costs of black trainee accountants.
2. Preferential procurement: Target 50% of total costs spent on
businesses with at least Level 4 BEE rating.
3. Enterprise development: Target 2% of NPAT or 0.25% of
turnover = time or cost contribution to 50% black owned
entity.
4. Socio-Economic development: Target 1% of NPAT or 0.125%
of turnover = time or cost contribution to charity with > 75%
black beneficiaries.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
A SUMMARY OF THE PROPOSED CHANGES TO
THE CODES OF GOOD PRACTICE
A QSE will now be defined as an entity whose turnover is between
R10m and R50m.
However, there will also now be little difference between the
verification of a QSE or a Generic, other than the QSE will only be
required to meet a minimum target of 40% of the compliance
target on 2 of the 3 priority elements to avoid an automatic drop
of 1 level in its Recognition Level.
The Generic Enterprise will be required to meet a minimum target
of 40% of the compliance target on all 3 of the priority elements to
avoid an automatic drop of 2 levels in its Recognition Level.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
An EME will now be defined as an entity whose turnover is less
than R10m and will still have an automatic Recognition Level of 4.
Where the entity is more than 50% black owned, it will be
granted an automatic Recognition Level of 2 and where the EME
is 100% black owned, it will be granted an automatic rating of
Level 1.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
A SUMMARY OF THE PROPOSED CHANGES TO
THE CODES OF GOOD PRACTICE: OCTOBER 2012
There are some significant changes in the details and calculations
in each element and the requirements for inclusion such as:
• The Recognition Levels will change and more points will be
required to be recognised at each Level other than Level 1.
• All businesses will need to achieve a minimum of 40% of the
compliance targets for the Ownership element that
is 25 points of 105, as it is a priority element for QSE’s
and Generics.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
A SUMMARY OF THE PROPOSED CHANGES TO
THE CODES OF GOOD PRACTICE: OCTOBER 2012
• Junior Management will no longer be recognised as a category
for Management Control.
• The Preferential Procurement target for spend on all suppliers
will increase from 50% in February 2012 to 70% to 80%.
• Imports will no longer be allowed to be excluded from the
Preferential Procurement Spend calculation.
• Only Value-Adding Suppliers (an entity that is VAT registered
and whose NPAT plus salaries is greater than 25% of turnover)
will be eligible for recognition in the Preferential Procurement
Spend calculation?????????
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
A SUMMARY OF THE PROPOSED CHANGES TO
THE CODES OF GOOD PRACTICE: OCTOBER 2012
• 66% of the contributions to Enterprise Development must be
made to EME’s or QSE’s that are more than 50% black owned
and who are in the company’s supply chain.
• The target for Skills Development spend will increase from 3%
of leviable amount to 6% of leviable amount.
• Only training spend on black employees who are on formal
learning programmes that will be assessed by an accredited
body will be eligible for rating.
• Informal training and on the job training costs will no longer
be included in the target spend.
______________________________________________________________________
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
A SUMMARY OF THE PROPOSED CHANGES TO
THE CODES OF GOOD PRACTICE: OCTOBER 2012
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