BBBEE for SME’s

Blog-posts_05March
Written by: Johann Barnard

Although Broad-based Black Economic Empowerment (BBBEE) has become a staple of the South African business environment, it is an element that many small enterprises feel is beyond them: either due to cost or difficulty in complying.

This needn’t be so, says JJ Oostuysen, who provides management consultancy and business support services to small businesses. He adds that obtaining a certificate is no guartantee that you will be more successful, but it could give you a competitive edge while your business is still growing.

He explains that the latest revisions to the codes that govern compliance have been simplified and are very small businesses-friendly.

The good news for small and medium enterprises is that if your annual turnover is below R10 million you are automatically given Level 4 status. This is known as Exempted Micro Enterprises. If the company is more than 50% black-owned, you can obtain a Level 2 status, and if it is 100% black-owned it is recognised as a Level 1 company.

The table below shows the BEE ranking – Levels 1-8, the score and recognition level. The level is an indicator of how empowered your business is according to the BEE score achieved under the BEE codes. This score is calculated by adding up points for elements like ownership, management control, and so on.

The important part is the recognition level. If you have a Level 3 ranking, for example, all companies that buy services or goods from you can claim 110% of that spend toward their own BEE score. In this way, companies are encouraged to trade with businesses that have a higher ranking and in so doing increase their BEE level.

Level BEE Score Recognition Level
1 >100 135%
2 85-99,9 125%
3 75-85 110%
4 65-75 100%
5 55-65 80%
6 45-55 60%
7 40-45 50%
8 30-40 10%
Not compliant

JJ says that being BBBEE certified has distinct advantages, such as giving you a competitive edge over those that have weaker ratings. You can also use your BBBEE status in your marketing that will help elevate your business above non-compliant competitors.

The fact that large companies are encouraged to invest in smaller compliant companies through preferential procurement is obviously a big attraction, as well as the fact that you can compete for publlic sector tenders.

The path for Exempted Micro Enterprises is eased further in that you don’t need to go through a BEE verification process and only need to produce a sworn affidavit that your business qualifies based on you annual turnover and your percentage of black ownership.