The Codes of Good Practice provide for 3 categories of broad-based Black Economic Empowerment compliance and the only criteria used to define these categories is a measured entity’s total annual revenue. The listed categories therefore include:
- Exempted Micro Enterprise
- Qualifying Small Enterprise
- Generic Enterprise
In this article we will focus on the first category; Exempted Micro Enterprises.
What Is An Exempted Micro Enterprise (EME)?
Measured entities with less than R5m annual turnover are accordingly exempted from producing a BEE Scorecard. Annual turnover thresholds for the Tourism and Construction (Built Environment Professionals) industries is R2,5m and R1,5m respectively. Qualifying entities are therefore regarded as Exempt Micro Enterprises (EMEs) and are deemed to be automatic level 4 (four) BEE Contributors. Any qualifying purchases from such an enterprise can be claimed at 100%. In a scenario where black ownership is more than 50%, such an entity is deemed as a level 3 BEE contributor whereupon Procurement Recognition is at 110%.
Start-up companies are regarded as EMEs for the first year following their formation regardless of their expected revenue with the exception of tendering for contracts above R5million.
What Does an EME Need?
An EME must obtain the relevant documents as full proof for their status. At EconoBEE this is a very short and simplified process, which has a turnaround time of 2 working days. For further information, please contact us at firstname.lastname@example.org or 0861 11 3094
We have always stressed on the importance of doing self-assessment before going for verification. This is something that cannot be emphasized more. It is a purposive process relying on assessing and analyzing the existing situation for a measured entity and reporting thereof. The reason for doing self-assessment is to ensure that every point is accounted for in its entirety. Depending on the size of your company, earning one point can translate to a certain amount of money. Without doing self-assessment, you stand to lose a couple of points which in reality means you would have lost an X amount of money.
Let’s do the numbers game on Socio-Economic Development, both for a Qualifying Small Enterprise and a Generic Company.
|Net profit After Tax (R)||Target (%)||Target (R)||Cost/Point (R) QSE||Cost/Point (R) Generic|
As shown in the table above, it costs a certain amount of money to earn just a point under SED. Question is, how many points or how much money are you losing because you haven’t done introspection? A great deal of money is lost without a comprehensive approach to self-assessment yet more often than not, we have realized that companies pull away from looking inside. As a remedy to this constantly overlooked drawback, we have online, a software to guide you throughout the process. For the Demo version, please click here http://econobee.co.za/dmdocuments/econobeev3/econobeev3%20presentation.htm
In all fairness, self-assessment is just one the many other stages of BBBEE compliance. It is equally as important as the rest. BBBEE compliance should be seen as a process not a once-off event. We recommend companies to follow our 10-step process in becoming BBBEE compliant. Visit the following link for the 10 steps: http://www.econobee.co.za/general/become-bee-compliant/10-steps-to-bee-compliance.html
It makes no sense from the way it sounds but it does exist, there are blacks that are literally regarded as non-blacks in Broad-Based Black Economic Empowerment. A black person as defined in the Codes of Good Practice includes Africans, Coloureds, Indians and Chinese. Such a person should be a South African citizen by birth or descent, by naturalization before the 27th April 1994 or if the person became a citizen after 27th April 1994, but who because of the Apartheid Policy in place at the time, would have been entitled to acquire citizenship by naturalization prior to that date.
This is particularly important to note when calculating points for Ownership, Management Control, Employment Equity, Skills Development, Enterprise Development and Socio-Economic Development. Therefore in calculating BEE points, a measured entity may not claim points for a black person who does not qualify under the definition given in the first paragraph.
To put this in perspective, a measured entity that donates food, blankets or provides health care support in some way to black people who are foreigners in a refugee camp can not claim such an initiative to score Socio-Economic Development points. It also goes to an enterprise that is 100% black foreign owned, it couldn’t be used as an Enterprise Development beneficiary from a BEE viewpoint and it applies to Employment Equity as well as Skills Development.
This is an important aspect of BEE to take note of. Not all black people are black.
This year’s Procurement & enterprise Development Conference at Gallagher Estate proved to be a great success. How long has it been running, I wonder? Still it doesn’t mean I can’t confirm that it was a resounding success. The conference started with Keith Levenstein, EconoBEE’s CEO, welcoming all the delegates and hitting a hard-surfaced ground straight away.
It certainly started on a high note as the presenter dished out a spiral of theory, which immediately triggered interesting arguments from an actively involved audience. If the theory was anything to motivate active involvement, then the practical part of the conference was way too much to handle. With Case Studies such as the one for Mabuya Glass – EconoBEE’s Enterprise Development beneficiary, it left me without a shade of doubt that the true and genuine objectives of Broad-Based Black Economic Empowerment were being realized amongst the delegates.
I’m glad that I am not the only one who enjoyed the presentation, the delegates expressed their satisfaction too and it’s inspiring. I take my hat off to the EconoBEE team for such a magnificent job; you guys are up there amongst the best – WELL DONE. I enjoyed the food toooooo.
For the next conference, click on the link below
Two weeks ago the newsletter titled “Mbeki wants BEE Scrapped” caused a big stir. It unraveled interesting issues, which disappointingly showed the long and steep climb that lies ahead in the BEE journey. Amongst the many issues raised, was the fact that BEE has allowed room for incompetence.
I’m in no position to judge anyone for the way they feel about BEE – either robbed or benefited. However, for the record there is definitely no part in the BEE Codes that promotes nepotism, incompetence, inefficiency or sub-standards. It remains an important hiring principle, to hire based on merit as opposed to nepotism. In all fairness, hiring an incompetent person, knowingly for that matter, is a nice way of planning for failure, which I believe no one does. This means that talent mining and talent intelligence remain as vital today in the BEE era as they were before.
The Dpt of Labour emphasizes on Employment Equity (EE) and BEE is nothing different. EE as one element that makes up the BEE scorecard emphasizes on policies that recognize race, ethnicity, or gender in an attempt to promote equal opportunities for all. Every leader, in whichever capacity, has a responsibility to assemble a vibrant team that complies with employment equity requirements, exactly what BEE subscribes to. It is absolutely baseless and unjustified to say BEE is the source of incompetence levels shown by some organizations – how about those successful ones? In fact, such incompetence levels to an extent represent that particular organization’s ineffective hiring practices and not BEE.
BEE is not about incompetence and incompetence is not about BEE. All there is in BEE is establishing equality without compromise and actively involving everyone in the mainstream economy.
Given the priority of staying as competitive as possible, companies need to exploit all existing opportunity channels. This requires a knowledge and understanding of possible environmental impacts on your business.
In the South African business environment, BEE compliance plays a significant role particularly to those companies dealing at a business-to-business level. Your clients will require you to produce evidence of your BEE compliance status, without which they will opt to do business with your rival.
How do you address this problem? One of the largest sources of competitiveness is a customer-needs driven approach. Identifying and satisfying your clients’ needs provides the necessary competitive edge. Therefore, getting the proper BEE documents is not a choice for those companies with such clients who require such evidence. In such a scenario, a company’s competitiveness is based to an extent on its BEE score.
Therefore, how competitive is your business without evidence of its BEE status, in a market where such evidence is held with high regard?
One of the simplest and effective ways of earning BBBEE points is to increase the level of spending on Socio-Economic Development (SED). SED is one of the seven elements of a BEE scorecard focusing on the extent to which an organization carries out initiatives intended to uplift the South African society. It is worth 25 points for a Qualifying Small Enterprise and 5 points for a Generic company.
Publicity is the deliberate attempt to manage the public’s perception of a company and its products. From a marketing perspective, publicity is one of the variables that comprise the promotional mix where as promotion is one of the variables that comprise the marketing mix.
Therefore, without a shade of doubt, companies stand to gain immensely by channeling significant investment levels towards SED initiatives not only by earning valuable BEE points, but also from a marketing perspective. Investing in SED builds a superb image and an explosive reputation for an organization.
Needless to say, it is of paramount importance for companies to note that modern consumers are incredibly well informed and educated. They identify themselves with reputable organizations. They recognize and appreciate the active involvement of a company in uplifting the society.
It makes sense therefore for companies to engage on those SED projects, which relate to their field of expertise. Amongst other issues, such projects may be targeted towards education, HIV/AIDS, projects for the disabled and other community building initiatives.
However, engaging in SED for the purpose of earning BEE points and building a good image is a misfired and twisted approach. The bottom line is, it does not support the ideal transformation of the society and certainly it is not good enough to create a meaningful and sustainable improvement. Such entities will enjoy in the short-term and definitely not in the long-term. A company’s SED policy should be based on the commitment to contribute to the constructive transformation of the South African society. In this way, an organization gains an enormous amount of publicity at the same time earning priceless BEE points.
To put this into perspective, let us take a company that identifies an orphanage whose walls are an eye’s nightmare. It then invests in painting those walls giving them a fresh and stunning look. Such an initiative does not give back anything physical like money to that particular organization. If those involved in such a project are doing it based on the commitment to make a positive difference, that instant improvement of the orphanage’s walls may be emotionally rewarding but moreover, the community recognizes and appreciates that effort. Through such an investment a company builds a respectable and sustainable image and an explosive reputation whilst at the same time improving on its BEE points.