Is your BBBEE Grading impacting your Business?

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Is your BBBEE Grading impacting your Business?

What is the meaning of BBBEE?

Broad-Based Black Economic Empowerment (BBBEE or B-BBEE as written by the South African government) is a form of economic empowerment initiated by the South African government in response to criticism against narrow-based empowerment instituted in the country during 2003/2004. It has been said that “B-BBEE legislation is the most significant piece of legislation affecting South African business today”.

The Broad-based Black Economic Empowerment Act 53 of 2003 affects all business and individuals in South Africa. It is not only vital for the country’s integrated prosperity, but a catalyst for economic growth. It makes sense to ensure that your BEE rating is as high as possible. Government has taken small and medium-sized businesses in consideration with the development of BBBEE legislation.

You have to be BBBEE compliant to be able to do business in South Africa. One of the 7 elements of the BBBEE scorecard is preferential procurement and supplier development. This is the element that carries the most weight (nearly 40%). If you procure from other entities that are BBBEE compliant your BBBEE score increases. One can see the trickledown effect from suppliers to government down to their suppliers. Once again the goal is to try and achieve a level 4 as this gives you 100% contribution towards preferential procurement.

BBBEE makes it possible for the business to get access to contracts.
BBBEE can help the business to achieve its social responsibility towards the community
BBBEE can result in the acquiring of new customers for the business.
BBBEE can lead to new innovative ideas with the input of the empowering partner.
BBBEE makes it possible for the business to invest in affordable skills development for employees.

The challenge is to improve on your B-BBEE activities and score each year. If your annual turnover is between R 10 million and R 50 million you are defined as a Qualifying Small Enterprise (QSE).

The Generic Scorecard includes all seven B-BBEE Elements, namely: Ownership, Management Control, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development, Socio-Economic & Sector Specific Contributions.

How is BEE Compliance Expressed and what Level is considered Compliant?

BEE CONTRIBUTION LEVEL SCORECARD POINTS PROCUREMENT RECOGNITION
1 100 or above 135%
2 85 to 99.99 125%
3 75 to 84.99 110%
4 65 to 74.99 100%
5 55 to 64.99 80%
6 45 to 54.99 60%
7 40 to 44.99 50%
8 30 to 39.99 10%
Non Compliant < 30 0%

 

The codes define three types of companies;

EME below R10 million
EME – exempt micro enterprise – a company that has an annual turnover of less than R10 million. These companies are automatically given a BEE score of 65 points (level 4), and if majority black owned, level 2 and if 100% black owned, level 1

QSE between R10 million and R50 million
QSE – Qualifying Small Enterprise – an enterprise with an annual turnover of between R10 million and R50 million. The QSE will need to fill in a scorecard but use slightly easier targets.

Generic above R50 million
Generic – all companies with a turnover above R50 million per annum.

Benefits of B-BBEE for business

Your clients will know that you are doing whatever it takes to stay ahead in your business – that you mean business and that you are look to them to support your efforts.
You will have a clear picture of what types of supplier you have. A rating would give you leverage to be able to negotiate better discounts, etc. Supplier analysis will assist with your procurement policy development.
Your image will be enhanced by your demonstration of leadership in your industry – be perceived as in step with development initiatives.
By focusing on HR development, enterprise development and BEE, you will demonstrate commitment towards the social, educational and economic developments in the community in which you operate.
Attempt to increase your develop your employees’ skills and potential development as well as your BEE ratings enhance fair and progressive employment practices.
Your staff will see what you are doing, which will boost their morale.
The sooner your business is rated, the sooner you will understand how to develop a BEE strategy to increase your annual BEE rating. Your BEE strategy should form part of your company’s overall strategy plan.
BEE can also be a marketing tool. As a client of BEE Empowered, your company’s name will be listed on our website’s BEE directory and will be available to all those searching for BEE-compliant suppliers.

Don’t get left in the dark. 

A level one contributor is the highest achievable status and the lowest level of BEE compliance is level eight. The higher the BEE status level, the stronger a company is in relation to its competition.

 

Sources: BeEmpowered

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About Devika Suresh

I started at Leads 2 Business in January 2010 (7 Years ago). I am presently an L2Q Assistant. Started in the Daily Tenders Bills department and worked my way up to the L2Q department working the bills.

Did You Know #DYK: BEE Amendments

posted in: Did You Know 0

BEE Amendments

BEE Amendments

 

For more information please contact:
Jako Liebenberg
Email:jako@ldsw.co.za
Linkedin:https://www.linkedin.com/in/jako-liebenberg-a2325552/

Glossary
EME – Exempted Micro Enterprise: Enterprises with an annual turnover less than R10 million or are recently formed or incorporated entities that have been in operation for less than one year. (Start-up enterprises).
QSE – Qualifying Small Enterprise: A business with an annual turnover more than R10 million but less than R50 million.

GOVERNMENT GAZETTE, 1 DECEMBER 2017
NOTICE 931 OF 2017 – CODES OF GOOD PRACTICE ON BROAD BASED BLACK ECONOMIC EMPOWERMENT
http://www.beesa.co.za/wp-content/uploads/2017/12/Amended-Construction-Codes-Final-1-12-17.pdf

 

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About Jako Liebenberg

Jako is a qualified Chartered Accountant, Registered Public Auditor and Broad Based Black Economic Empowerment Consultant. Jako has a passion for Business Development and has a hands on approach in this regard.

Did you Know…? #DYK New Tendering Rules will change the way you do business.

posted in: Did You Know 2

New Tendering Rules will change the way you do business.

Tenderers are required to make changes in the way they submit government tenders, especially in relation to sub-contracting.
Bids and tenders submitted without taking the below points into consideration stand to have their tenders deemed ‘unacceptable’ or could face hefty fines!
Gerrit Davids, owner and facilitator of a tender advisory consultancy, walks us through the new Preferential Procurement Policy Framework Act (PPPFA) Regulations.

 

 

  • The new Regulations from the outset grants an organ of state the authority to stipulate a ‘Preferred Minimum BBBEE Level’ in a tender, which will exclude certain companies with a lower BBBEE Level from submitting bids.

 

  • The Regulations will allow the state to include wide-ranging Sub-Contracting stipulations, which could force principle bidders to make use of up to 8 x different types of sub-contractors under the ‘Pre-Qualification Criteria’. Failure to do so will have the bid being declared ‘unacceptable’.

 

  • The value of the 80:20 and the 90:10 Preference Point Systems has been increased to below and above R50m respectively. However, it retains the current scoring of points for Price alongside that of BBBEE in tenders.

 

  • The new Regulations also place a 25% maximum on Sub-Contracting, which is done in the ordinary course of business with companies that have a lower BBBEE level than that of the principle bidder. Failure to comply with this stipulation will also cause tenders to be disqualified from consideration.

 

  • Regulations are introducing a new approach to pricing where a bidder scores the ‘highest points’ in a tender but its price is not market related and (the bidder) refuses to adjust it to be in-line with market related prices. The organ of state will have the right not to award the tender to such a bidder and it may even decide to cancel it.
  • An additional stipulation to the Regulations makes it obligatory for an organ of state issuing tenders to ‘make available a list’ of potential sub-contractors that qualify under the definition of ‘designated groups’ and such a list must be subject to approval by National Treasury.
  • The much-debated stipulation of compulsory Sub-Contracting of 30% for all tenders above R30m in value will also be allowed ‘where feasible’ to advance any one or more of the ‘designated groups’ as defined by these new Regulations.

 

  • Another key regulation stipulates that sub-contracting, which was not mentioned in the bidder’s tender could only be done with the permission of the organ of state ‘after a tender has been awarded’. A 10% penalty of the total value of the contract may be imposed where the correct sub-contracting procedures were not followed or where information was withheld, a ban on doing business with the state for 10 years could also be imposed by National Treasury under these new Regulations.

 

Davids says, “The meaning and understanding of the concept of ‘being proactive’ becomes a very relevant application with this new dispensation. Tenderers will be left behind if they do not make the required changes in the way they submit government tenders, especially in relation to sub-contracting”.

The Regulations will come into effect on 1 April 2017 giving tenderers less than 3 months to prepare for its impact.

Should you wish to contact the author:

Gerrit Davids – Lead Advisor at TaranisCo Advisory CC
Tel. 011-026 4891
Cell. +27 (0)82 496 1657
E-mail: advisor@taranis.co.za
Website: www.taranis.co.za

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About Gerrit Davids

Gerrit Davids is the Lead Advisor at Taranis Co Advisory with more than 20 years experience in government procurement regulations and having trained more than 2000 people on how to submit compliant tenders.