B-BBEE in SA

B-BBEE, GOVERNMENT AND SOUTH AFRICA

B-BBEE was initiated by the South African Government to help those who were formerly seen as disadvantaged because of the old apartheid legislation. In South Africa, the term “black people” is defined as any person belonging to African, mixed race or Asian ethnicity.

BEE exists to redress the disparity of the past

The Department of Trade and Industry (DTI) is the warden of B-BBEE in terms of the B-BBEE Act.

Government intends to realize the following objectives through the BEE Act:

–          To encourage and empower black people to own or manage a company.
–          Promoting access to finances, specifically for BEE.
–          To ensure that enterprises with high BEE scores, whether black- or white owned, benefit from the Government’s preferential procurement policy which now makes allowance for the BEE score of the supplier.
–          Achieving a tangible change in the fabric of management and ownership structures, as well as the skilled occupations of new and existing business entities.
–          To increase ownership and management of new and existing enterprises by black females, and to expedite their access to skills training, infrastructure and economic activities.

 

BEE compliance is attained through one of the following mechanisms:

For small/ medium sized Business and Companies (Including all Start-ups):

  • Adherence to BEE is achieved by looking at some defined criteria to achieve a certain BEE level (criteria is a lot stricter for larger companies).
  • To attain the verification through us, a company must have an annual turnover of less than R10 million per annum and can be either black- or white owned.
  • Our verification is valid for one year.
  • The reasons for the easy procedure are 1) that businesses may grow faster into larger enterprises and 2) to invigorate the economy.

 

For large Companies and Organisations:

  • Adherence to BEE is achieved through its overall score in the different elements as specified by the law.
  • It’s an arduous process that includes auditing all of the distinct elements, visiting of the premises as well as inspection of documents by an accredited Verification Agency.
  • Each element is evaluated with a BEE scorecard, to determine the Company’s achievement and subsequent level.
  • Companies with an turnover between R10 million and R50 million per annum have a slightly easier procedure to follow, but an Accredited Verification Agency is still necessary.
  • A verification can be obtained by any large company that applies to be evaluated.

 

The New BEE Act:

The commencement date of the new BEE Act was on the 1st of May 2015. The new BEE code differs substantially from the old code.

Therefore it is of the utmost importance for all entities to understand how the amended codes work and to obtain expert advice from one of our partners. Revision of the business’ BEE strategy is in order to remain compliant with the new revised code when it does take effect.

5 elements will be evaluated to ascertain if a large company complies with the new codes.  These 5 elements are:

  • Ownership
  • Management Control
  • Skills Development
  • Enterprise
  • Supplier Development

Numerous points will be available for large companies that employ and uplift black people with disabilities, black youths, black females, black people in rural areas, as well as unemployed black people. Points will be awarded to companies that have a demographic composition representing all the designated groups, at management level.

More points are available, that we can advise you on.

 

Why was BEE introduced?

–         Not all South Africans participated or shared equally in the economy.
–         The key to stable economic growth, an integrated and affluent society, is to incorporate all South Africans into the economy.
–         Black people were prohibited from taking on employment, becoming entrepreneurs and participating in the myriad of opportunities due to the majority being landless, having limited skills and no higher education.
–         B-BBEE is a Government intervention strategy that centers on the full participation of all South Africans, not just a minority, in the economy.
–         BEE attempts to amend and change economic and social inequalities of the past.
–         Apartheid and the unjust restrictions it placed on black people with regards to the economy, has to be addressed by the Government.

 

History and the future of BEE

–          Since 1994, the Government has commenced an extensive program to provide a legislative framework for the transformation of our economy.
–          Programs that uplift black people to make them part of the South African economy, were implemented.
–          In 1997, the Government released a Green Paper on public sector procurement. Due to Government being the biggest buyer of services in the economy, it had the power and the responsibility to bring about economic and social change, by empowering black people and black owned enterprises and start-ups.

This procurement reform constituted the following:

–          Tendering is made easier for black people across the board.
–          Smaller tenders were made from dividing larger tenders to allow black owned enterprises to tender.
–          Points were awarded to tenders on the basis of an amalgamation of points and price for certain groups.
–          The Preferential Procurement Act in 2000 gave the procurement point system the much needed legislative force.

The Employment Equity Act was also introduced. The Act criminalized all types of discrimination in the workplace. Affirmative action had to be applied in companies with more than 50 people.

Affirmative Action is the process, where all ethnic groups in all vocations and organizational levels are represented in the given time frames.

The BEE Act was created to bring about an abundant growth in the volume of black people managing, owning and controlling important and key segments of the economy. The BEE Act is used as a significant tool to augment the country’s economic foundation and accelerate growth, job creation and the elimination of poverty.

The new BEE Act (came into effect on the 1st of May 2015) encourages more meaningful black participation in our economy. The new BEE Act encourage black supplier development; industrialization, job creation as well as skills development.

 

The New Direction of B-BBEE

–          The changing of South African culture to be more complementary of diversified value chains as well as Entrepreneurship
–          A joint operation combining B-BBEE with various Government economic development such as New growth path, Industrial Policy and competitive Supplier Development Programs etc.
–          The results should proceed in the promotion of a culture that ventures into new territories, strives for excellence in day to day operations and risk taking.
–          Emphasizing on businesses and industries for maximum job creation as well as engaging in socio-economic challenges.
–          Unlock opportunities through an organic type of relationship between large and small enterprises as well as between public and private sectors

 

The re-orientation of B-BBEE included the following factors:

  • Good Governance
  • Economic Growth and Development
  • Operational Excellence
  • Competitiveness
  • Inclusive Growth
  • Productivity and Industralization