Broad-Based Black Economic Empowerment (B-BBEE) is an affirmative action policy introduced by the South African government in an attempt to promote economic participation by previously disadvantaged groups in the country. The policy has shown immense potential and more companies are becoming aware of the benefits of being B-BBEE compliant.
B-BBEE requirements compliance is based on five elements, namely: ownership, management control, skills development, enterprise and supplier development, and socioeconomic development. Each of these has its own scoring criteria and methods to measure compliance. Each scorecard has targets and if these targets are met, a score is awarded. The overall score of all elements isthen calculated which is then a company’s compliance score.
Organisations are distinguished by their annual turnover. Entities that makes less that R10 million per year are categorised as Exempt Micro Enterprises (EMEs). Companies that makes more than R10 million per year but less than R50 million per year are categorised as Qualifying Small Enterprises (QSEs) and are required to comply with all five scoring elements. Companies that make more than R50 million are regarded as large companies and must also adhere to the five elements.
Scoring elements have different weights:
- Ownership: 25 points
- Management: 19 points
- Skills development: 20 points
- Enterprise development: 40 points
- Socioeconomic development: 5 points
Ownership, skills development and enterprise development are considered priority pillars and a minimum of 40 per cent compliance is compulsory to reachthe B-BBEE level one.
The Black Economic Empowerment Act is also broken up into nine subsections:
- Code 000 outlines the framework for measuring B-BBEE
- Code 100 outlines the measurement of the ownership element
- Code 200 outlines the measurement of the management control element
- Code 300 outlines the measurement of the employment element
- Code 400 outlines the measurement of the skills development element
- Code 500 outlines the measurement of the preferential procurement element
- Code 600 focusses on the enterprise development element
- Code 700 focuses on the socioeconomic development element
- Code 800 focusses on measuring QSEs
There is still a lot of confusion regarding requirements for being B-BBEE compliant as it is an intricate programme. This is why it would be wise to consult a company that can guide you through the legal and practical processes of the policy. This will not only ensure companies are operating ethically and helping South Africa prosper, but these companies will also have more opportunities in corporate South Africa as B-BBEE compliance is a prerequisite in most licence applications and contract tenders.