Being a Broad-Based Black Economic Empowerment (B-BBEE) compliant business is a certification that all businesses in South Africa should have. We’re going to take a look at how and why you need to become a B-BBEE compliant business.
When you understand all the elements of B-BBEE, you will be able to take the necessary steps to implement those practices and requirements into your business. And the reasons why you want to be a B-BBEE compliant business in South Africa is so that other businesses and governmental institutions will do business with you. There are also scorecard and business incentives for enterprises that are 100 percent compliant and with a B-BBEE certificate, you’ll be qualified for grants and financing.
What is B-BBEE?
Black Economic Empowerment (BEE) was the initial government initiative for “positive discrimination” where black employees, business owners and stakeholders would be treated as equals within the business world following the societal damage of apartheid.
It has since been changed to Broad-Based Black Economic Empowerment (B-BBEE) as a means of including all previously disadvantaged populations of South Africa, including Indian, Chinese and Coloured races.
B-BBEE is an empowering initiative to increase the number of black (and other previously disadvantaged) people who own and manage businesses within the South African economy through the implementation of Codes of Good Practice. It has almost become compulsory for businesses to obtain their B-BBEE compliance certification through B-BBEE pillars such as ownership and B-BBEE skills development services, but more on that later.
Levels of B-BBEE compliance
The different levels of compliance for B-BBEE depend largely on the size and turnover of a business. The three levels of compliance, therefore, are:
Exempted Micro Enterprises (EMEs): These businesses have a yearly income of less than R10 million.
Qualifying Small Enterprises (QSEs): These businesses’ yearly income lies between R10 and R50 million.
Medium to Large Enterprises (M&Ls): And these businesses have an income above R50 million each year.
These distinguish the turnover compliance level your business falls into and to which you then need to refer to the B-BBEE scorecard to score necessary points from the B-BBEE pillars implemented in your business to be compliant. Your business will then build from a level eight B-BBEE contributor status towards level one.
It sounds more complicated than it is. Basically, once your turnover has classified the size of your business, you have a responsibility (to your clients and employees) to build your B-BBEE status according to the scorecard system. And that is done through the five pillars of B-BBEE.
Pillars of B-BBEE
These are the pillars that contribute to your B-BBEE score as you implement and include them in your business. The top three pillars are said to be ownership, management and skills development. But each of the pillars offers a percentage contribution to your B-BBEE score and both QSEs and M&Ls are required to comply with all five pillars in order to score points.
Ownership: With a 25 percent weighting, ownership refers to black voting rights and shareholding within the business. This can be achieved by bringing in a black partnership or shareholder agreement, an employee trust scheme or a joint venture agreement.
Management Control: This has a 15 percent weighting and a possible 4 percent bonus for certain criteria. Management control refers to black members in top managerial roles and voting rights with control on the executive boards of an enterprise.
Skills Development: B-BBEE skills development is an increasingly important aspect of B-BBEE in that it provides learning opportunities for previously disadvantaged dispositions to develop new skills. Skills development has a weighting of 20 percent with a possible bonus of 5 percent for certain criteria. There are many B-BBEE skills development companies that can assist businesses in this regard.
Enterprise Development: With a 40 percent weighting and possible 4 percent bonus for certain criteria, enterprise development deals with supporting and developing fellow black-owned small businesses. Enterprise development is one of B-BBEEs sustainability pillars to encourage more black businesses by providing these support systems from already-established QSEs and M&Ls.
Socio-economic Development: And lastly, socio-economic development is a 5 percent weighting B-BBEE pillar that South African businesses need to comply with for their B-BBEE scorecard. This pillar refers to a company’s investment in social and economic initiatives of empowerment.
It’s time to make sure your company is up to the necessary B-BBEE standard in order to conduct business and procure sales without the restraints of a low score. Help us rebuild South Africa’s people by supporting those who are still affected by the events of apartheid. There will always be opportunities in business to learn more, develop and become better-skilled individuals. And that’s something every business can benefit from and build their B-BBEE score in the process.