True, the regulations can become a bit of a maze, really challenging to navigate. So, what are the three most important aspects of BBBEE every business must know and understand?
1. Turnover based scoring
Compliance with BBBEE is a turnover based consideration. Businesses are categorised into 3 levels for this purpose namely: Exempt Micro Enterprises (“EME”), Qualifying Small Enterprises (“QSE”) and Generic enterprises (“GENERIC”).
Entities are measured on turnover as set out below:
|EME||Annual Turnover ≤ R10 million|
|QSE||Annual Turnover of R10-50 Million|
|GENERIC||Annual Turnover > 50 Million|
QSE’s, on the other hand, have relieved compliance in terms of the scorecard while generic businesses require full scorecard compliance (without any relief).
2. Priority elements
The BBBEE Codes of Good Practice list three priority elements:
- Skills development
- Enterprise and Supplier Development
Ownership is a compulsory element. In addition, a QSE must achieve 40% of the points for two of the three priority elements.
Where businesses do not comply with the threshold in respect of the priority elements they will be penalised by one level on the QSE scorecard.
In other words, a business scoring a level 2 but failing to meet the priority elements threshold will become a level 3.
3. What happens if I am non-compliant
Because the scorecard measures businesses on various elements, including:
- Skills Development
- Supplier and Enterprise Development
- Corporate social investment.
There is no need for a traditional penalty in case of non-compliance. From an economic perspective, QSE’s as well as GENERIC’s are very reliant on maximising their score on their selected elements and for many of them supplier and enterprise development is a selected element.
Where their suppliers are non – compliant or not compliant to a sufficient level, it affects their own score. With generic businesses, this is not a likely choice only, but a reality. So, if you are a QSE or generic or you do business with them or government, this is really important.
Where you remain non-compliant or your compliance level is low, your clients will eventually opt out of doing business with you. So, prevent this and seek professional advice today.