Broad Based Black Economic Empowerment
Encyclopedia
Broad-Based Black Economic Empowerment (B-BBEE) is a form of Economic Empowerment initiated by the South African government
Government of South Africa
The Republic of South Africa is a constitutional democracy with a three-tier system of government and an independent judiciary, operating in a nearly unique system that combines aspects of parliamentary and presidential systems. Legislative authority is held by the Parliament of South Africa...

 in response to criticism against Narrow Based Empowerment instituted in the country during 2003/2004. While Narrow Based Black Economic Empowerment led to the enrichment of a few black (Black African, Coloured
Coloured
In the South African, Namibian, Zambian, Botswana and Zimbabwean context, the term Coloured refers to an heterogenous ethnic group who possess ancestry from Europe, various Khoisan and Bantu tribes of Southern Africa, West Africa, Indonesia, Madagascar, Malaya, India, Mozambique,...

 or Indian
Asians in South Africa
The majority of the Asian South African population is Indian in origin, most of them descended from indentured workers transported to work in the 19th century on the sugar plantations of the eastern coastal area, then known as Natal. They are largely English speaking, although many also retain the...

) individuals, the goal of Broad-Based Empowerment is to distribute wealth across as broad a spectrum of South African society as possible. In contrast, Narrow Based empowerment measures only equity ownership and management representation.

The Act

The Broad-Based Black Economic Empowerment Act (53/2003): Codes of Good Practice on Black Economic Empowerment was gazetted on 9 February 2007 in the government gazette 29617. It was put in place to replace earlier editions of the act. An Interpretive Guide was added in June 2007.

The Act is broken up into 9 Subsections
  • Code 000: Framework for Measuring Broad-Based Black Economic Empowerment
  • Code 100: Measurement of the Ownership Element of Broad-Based Black Economic Empowerment
  • Code 200: Measurement of the Management Control Element of Broad-Based Black Economic Empowerment
  • Code 300: Measurement of the Employment Element of Broad-Based Black Economic Empowerment
  • Code 400: Measurement of the Skills Development Element of Broad-Based Black Economic Empowerment
  • Code 500: Measurement of the Preferential Procurement Element of Broad-Based Black Economic Empowerment
  • Code 600: Measurement of the Enterprise Development Element of Broad-Based Black Economic Empowerment
  • Code 700: Measurement of the Socio-Economic Development Element of Broad-Based Black Economic Empowerment
  • Code 800: Measurement of Qualifying Small Enterprises
    Qualifying Small Enterprises
    A Qualifying Small Enterprise is one of the categories of South African businesses as per the Broad Based Black Economic Empowerment Act. "The Broad-Based Black Economic Empowerment Act : Codes of Good Practice on Black Economic Empowerment" was gazetted on 9 February 2007...

     of Broad-Based Black Economic Empowerment


The first Codes of Good Practice, dealing mostly with Ownership and Management, were released 1 November 2004, and the second set, incorporating special codes for SMMEs (small, medium and micro enterprises) and the remaining 5 pillars, were released 20 December 2005. These codes were open to public comment until end March 2006.

The transitional period between narrow based BEE and broad-based B-BBEE originally expired on 9 February 2008 but was extended to 31 August 2008.
BEE is referred to by the ANC as 'positive discrimination'.

Measurement

Broad-Based Black Economic Empowerment is measured using seven pillars, each with a relative weighting. Unlike Narrow Based Empowerment, Ownership & Management account for only 30% of the total contribution.
  • Direct Empowerment:
    • Equity Ownership – 20%
    • Management – 10%

  • Indirect Empowerment:
    • Employment Equity – 15%
    • Skills Development – 15%
    • Preferential Procurement – 20%
    • Enterprise Development – 15%
    • Socio-economic Development – 5%

Verification & B-BBEE Certificates

It is not mandatory to get a verification agency to audit your BEE
Bee
Bees are flying insects closely related to wasps and ants, and are known for their role in pollination and for producing honey and beeswax. Bees are a monophyletic lineage within the superfamily Apoidea, presently classified by the unranked taxon name Anthophila...

 Scorecard. It is however a requirement to have suitable documentation/evidence to score any points. SANAS (South African National Accreditation System) has been mandated with accrediting the Verification Agencies. This accreditation has been put in place in order to ensure the consistency of the independent verification of B-BBEE contributions.

Your Certificate

BEE Certificates can be issued by any Verification Agency so long as they are approved to do so by SANAS.

The Certificate can only be issued once a full verification has been performed and the documentation presented by your company has been verified.

On your certificate you should find the following information;

Company name and number
    • Type of Certificate (Group/Entity/Division)
    • BEE Category (EME/QSE/Generic)
    • BEE Level (1-8)
    • Procurement Recognition %
    • Black Ownership %
    • Black Women Ownership %
    • Value Adding Supplier (Yes/No)
    • Certificate Issue Date
    • Certificate Expiry Date


You do not need to provide any additional information to your customers. Your BEE Certificate is sufficient evidence of your B-BBEE Compliance.

Industry Specific Measurement

Companies may choose to be measured using the Generic Scorecard (as described above and created by the government) or their individual sector scorecards. Various Sector scorecards have already been finalised, including construction
Construction
In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking...

, tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...

, forestry
Forestry
Forestry is the interdisciplinary profession embracing the science, art, and craft of creating, managing, using, and conserving forests and associated resources in a sustainable manner to meet desired goals, needs, and values for human benefit. Forestry is practiced in plantations and natural stands...

, transport
Transport
Transport or transportation is the movement of people, cattle, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline, and space. The field can be divided into infrastructure, vehicles, and operations...

, finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

, ICT
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...

, mining
Mining
Mining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...

, petroleum
Petroleum industry
The petroleum industry includes the global processes of exploration, extraction, refining, transporting , and marketing petroleum products. The largest volume products of the industry are fuel oil and gasoline...

 and others. Industry scorecards are created to address industry specific issues and complications with regard to implementing BBBEE.

All industry specific scorecards must align themselves to the generic scorecard. Companies may not measure their suppliers according to their own sector scorecards. For example, a large banking institution may not measure their ICT service providers according to the financial sector scorecard. The ICT company will present a verification certificate to the financial institution based on the generic scorecard or the ICT sector scorecard.

Development of Legislation

The Broad-Based Black Economic Empowerment Bill along with the BEE strategy document of South Africa serves as guideline and driver for developing Codes of Good Practice that describe measurement criteria, targets, audit requirements and definitions for each of the 7 pillars in detail. Additional Codes of Good Practice have also been released with regards to complex structures, broad-based ownership schemes, fronting practices and verification agencies.

The codes are developed by the BEE task team set up by the South African Department of Trade and Industry (DTI) and comprises individuals representing various areas: private
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...

 and public sector
Public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...

s, various industries, research and BEE measurement etc. They are Cyril Ramaphosa
Cyril Ramaphosa
Matamela Cyril Ramaphosa is a South African lawyer, trade union leader, activist, politician and businessman. He was born in Soweto, Gauteng province...

, Saki Macozoma, Derek Cooper, Patrice Motsepe
Patrice Motsepe
Patrice Tlhopane Motsepe is a South African mining magnate and 'oligarch' as he was major beneficiary of the South African governments Black Economic Empowerment policies. His company, African Rainbow Minerals, has interests in gold, ferrous metals, base metals, and platinum...

, Gloria Serobe, Danisa Baloyi, Buhle Mthethwa, Vuyo Jack, Ronnie Ntuli, Loyiso Mbabane, Imogen Mkhize, Alan Hirsch, Philisiwe Buthelezi and Lionel October.

Companies in South Africa that deal with the government or parastatals must be empowered as required by the Preferential Procurement Act. In return, these companies require their suppliers to be empowered to improve their rating at government. Thus Broad-Based Empowerment is driven down the supply chain. Various other legislation supports the BEE effort, including the Skills Development Act and Employment Equity Act.

Enterprise Size's Effect on B-BBEE

In terms of Act 53 (2003) Codes of Good Practice for Black Economic Empowerment all enterprises in South Africa are divided into one of three categories:
  • Generic Enterprises (turnover greater than R35 Million)
  • Qualifying Small Enterprises
    Qualifying Small Enterprises
    A Qualifying Small Enterprise is one of the categories of South African businesses as per the Broad Based Black Economic Empowerment Act. "The Broad-Based Black Economic Empowerment Act : Codes of Good Practice on Black Economic Empowerment" was gazetted on 9 February 2007...

     (turnover between R5 Million and R35 Million)
  • Exempted Micro Enterprises
    Exempted Micro Enterprises
    Exempted Micro Enterprises are businesses that are exempt from measurement in terms of the DTI's codes of Good Practice for BEE. They automatically qualify as 100% contributors towards BEE, this offers small South African businesses the opportunity to grow as a result of BEE irrespective of the...

     (Turnover Less than R5 Million)


In Terms of Act 53 (2003) each of these categories have differing sets of measurement criteria.

Generic Enterprises

Generic enterprises are those enterprises that have a turnover of greater than R35 Million. It is estimated that on 4% of South African Enterprises Fall into this category. Generic Enterprises must apply all seven pillars of BBBEE in order to calculate their score as per the Generic Scorecard.

Generic Enterprises Must Apply Code 000-700 of the act and apply stringent reporting techniques.

Qualifying Small Enterprises (QSE)

Qualifying Small Enterprises
Qualifying Small Enterprises
A Qualifying Small Enterprise is one of the categories of South African businesses as per the Broad Based Black Economic Empowerment Act. "The Broad-Based Black Economic Empowerment Act : Codes of Good Practice on Black Economic Empowerment" was gazetted on 9 February 2007...

 (QSEs) are enterprises that have a turnover between R5 Million and R35 Million, they apply code 800 to calculate their scorecards. Code 800 is a simplified version of Code 000-700 which includes less stringent scorecards for each element. QSEs can choose the best four of their seven elements, with each element accounting for 25% of their scorecard out of 100.

While code 800 is a simplified version of the other 7 pillars it has been ruled by the DTI that in any issues not specifically discussed in Code 800 should be applied as per Code 100-700.

Exempted Micro Enterprises (EME)

Exempted Micro Enterprises
Exempted Micro Enterprises
Exempted Micro Enterprises are businesses that are exempt from measurement in terms of the DTI's codes of Good Practice for BEE. They automatically qualify as 100% contributors towards BEE, this offers small South African businesses the opportunity to grow as a result of BEE irrespective of the...

(EMEs) are enterprises with a turnover of less than R5 Million. EMEs do not need to be rated, but they do need to be able to provide reasonable evidence that they are EMEs. EMEs automatically qualify as 100% contributors towards Preferential Procurement. If they are greater than 50% black owned they Qualify as 110% contributors towards Preferential Procurement.

Impact

The impact of BBBEE is difficult to measure as the Codes of Good Practice were only promulgated in February 2007. According to the Institute for Justice and Reconciliation's Economic Transformation Audit, the number of Black Management and Professionals has increased from 216,772 in 1995 to 359,438 in 2005.

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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