BEE is part of government’s overall strategy to develop the economy in a way that can meet the needs of all South Africans in a sustainable manner. In a comprehensive BEE Strategy Document (which you can read on the DTI’s website) government explains how the strategy aims to redress the economic discrimination of the past and stimulate growth, employment and equity in the economy by 2014.

The process of BEE really got started with the RDP Program (1994) and over the last 10 years has been fuelled by numerous other laws like the Employment Equity Act; Competition Act; Preferential Procurement Policy Framework Act and others. But many of these strategies were fragmented and resulted in BEE lacking real focus. This all changed with the promulgation of the Broad-Based Black Economic Empowerment Act 2003 (Act No. 53 of 2003) which was passed into law on 6 January 2004. The BBBEE Act empowered the Minister of Trade and Industry to issue Codes of Good Practice on BEE (the Codes).

The BBBEE Act does not enforce legal compliance to BEE (it is only law for State enterprises to comply). It is an enterprise’s customers that are driving compliance! Customers (and government – if it is your customer) are the ones that want to know your BEE score as it will contribute to their score. If you don’t get a score, there are no fines or other penalties; it simply means that it will be more difficult to win business.

Black people is a generic term which means Africans, Coloureds and Indians and who are South African citizens.

Most importantly, the primary reason behind compliance of the BEE Codes must be due to a personal conviction that the process is the most appropriate method of trying to address the the atrocities of the past without having a negative effect on job creation and small business development. 

In addition, a BEE rating can be used for the following purposes:

• Retention of an existing client base
• Increased procurement opportunities by entities wishing to enhance their own broad-based BEE status through preferential procurement, 
• Government licensing eligibility or licensing renewal process
• Financing decisions, where empowerment is a key criterion for sourcing the fund, e.g. BEE Funds
• Independent, reliable proof of contributions made towards economic empowerment

A BEE Scorecard is a verified report on your current status as a BEE contributor according to the latest DTI codes of good practice (released 9 February 2007).

When no industry specific charters are applicable, there are three different categories of scorecard statuses, which are Generic, Qualifying Small Enterprise and Exemption Certificates. Each one is divided from the other by the turnover of a particular business. The three categories are:

Type of scorecard	Turnover per annum	Units measured
Generic Scorecards (GS):	> than R35 million rand and more	All seven elements of the scorecard
Qualifying Small Enterprises (QSE):	> R5 million and   < R35 million	Four out of seven elements of the scorecard
Exempted Enterprises (EE):	< than R5 million	Automatic level four contributor unless QSE
Industry Specific Scorecards (ISS):	Variation indicated in industry charters	Variation indicated in industry charters

The scorecard to be used by your business is indicated by what your clients require. Categories above indicate the default category your business resorts under, but it remains the choice of the client that you supply your service or your product to. Example: You may have a turnover of 4 million per annum, but you supply to a state owned body that requires a QSE or Generic scorecard. It remains your choice to obtain the required form of scorecard.

Department of Trade and Industry (DTI) has indicated that businesses with a turnover of less than R5 (five) million per annum automatically obtain a level 4 (four) contribution status (Level 3 if the business is majority black owned) and are not expected by the DTI to obtain BEE scorecards. However, many companies are not interested in exemption status for various reasons more fully described hereunder. Should you have the need for a scorecard even though your turnover is less than 5 (five) million rand per annum or need to know more about the advantages, we invite you to read on and make an informed decision.

Sufficient evidence of qualification as an exempted enterprise is:

• A certificate from your auditor stating that your annual Turnover is less than R5 million.
• A similar certificate from your Accounting Officer should the enterprise be a Closed Corporation, or
• A certificate from a Verification Agent.

The BEE Codes of Good Practice have been drafted by the DTI to set the standard of calculations for scorecards. The BEE scorecard has seven levels of contribution and each has its own formula against which data received from clients are to be tested. The seven levels are:

• Ownership,
• Management
• Employment Equity
• Skills Development
• Preferential Procurement
• Enterprise Development, and
• Socio-Economic Development.

The sum of all the scores for each level is termed a BEE scorecard.

The South African Economy has been divided into industries. Certain industries resort under the DTI scorecards and others have their own industry charters and scorecards. The industries that have their own scorecards are subject to different criteria than that of the DTI scorecard division. Examples of industries that have or are about to receive their own scorecards are: Agriculture, Mining, Maritime, Construction, ICT, Tourism, Financial Services, Petroleum and Legal Industry. The list is not exhaustive and additions are to be expected.

All businesses subject to industry charters are to adhere to the charters but when relationships are of governmental nature, DTI scorecards are required. In other words when you are dealing with government and you are subject to an industry charter, you will be in need of two scorecards. The need for dual scorecards arises out of the procurement section of the scorecard. Should two businesses be measured against each other, they are obliged to at least use the same kind of ruler. In other words the measuring criteria should at least be of the same nature; otherwise the score fails the reason/requirement.

No, it is not. This legislation applies only to those companies that are supplying goods and services to government organisations and parastatals directly. However, these organisations are asking their supplies to be verified so that they can score additional points, and so, in this way, your clients might “force” you to be rated.

No.

The requirement for rating does not depend on the number of people that you employ but rather on the annyal turnover of your business. A company turning over less than R5 million annually is considered an EXEMPT MICRO ENTERPRISE and receives an automatic Level 4 rating if they are able to prove this level of turnover.

Yes.

No, this is a normal business transaction. However, any additional support that you give them or any preferential payment terms can be included.

No, at this stage, points are awarded only for the employment of BLACK disabled people.

Yes, however, you would need to be scored against the QSE scorecard.

No, BROAD-BASED black economic empowerment is not about ownership alone. There are other elements that need to be considered and rated.

No, the verification agency will go back up to five years to see when last you made a profit. The Net Profit After Tax to Turnover percentage is then calculated and this figure is then applied to the current turnover.

No.

Yes, this qualifies as Socio-Economic Development.

This is untrue. Top Management includes any people in the organisation who are responsible for the strategic decisions taken in the organisation and the overall control and management of the company.

You need to “spend” 1% of your Net Profit After Tax on suitable initiatives however, this does not mean money only. It is possible to give away products, services or time and earn the points that way. Obviously, a value would need to be attached to any of this and will need documentation to prove that it did take place.