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A short introduction to calculating B-BBEE scorecards

Provided by Business Partners Ltd, South Africa's leading investor in SMEs


Black Economic Empowerment, BEE, BBEE... all buzzwords for doing business in South Africa. But what does it all mean and what does it mean for you and your business?

What is B-BBEE?

The Broad-based Black Economic Empowerment (B-BBEE) Codes of Good Practice was gazetted in February 2007. It stipulates that all enterprises' B-BBEE compliance level operating within South Africa should be measured.

How do you measure B-BBEE?

The framework to be used for measurement will depend on the classification of the enterprise. There are three classification of an enterprise:

  • Exempted Micro-Enterprise (EME)
  • Qualifying Small Enterprise (QSE)
  • Generic Enterprise (Does not qualify as EME or QSE)

Classification of enterprises

Exempted micro-enterprise (EME)

Any enterprise with an annual Turnover of R 5 000 000 or less and any start-up enterprise (first year following their formation or incorporation) qualifies as an EME.

Qualifying Small Enterprise (QSE)

Any enterprise with an annual Turnover of between R 5 000 000 and R 35 000 000 qualifies as a QSE.

Generic Enterprise (falls outside the parameters of an EME and QSE)

Any enterprise with an annual Turnover of more than R 35 000 000 qualifies as a Generic Enterprise.

After determining the classification of an enterprise it can now be measured according to the applicable scorecard.

Measurement of enterprises

There are currently two scorecards - a Generic Scorecard and an Adjusted Qualifying Small Enterprise Scorecard

Generic Scorecard

Generic Enterprises' B-BBEE compliance can be measured by using the Generic Scorecard. The Generic scorecard is based on seven elements and each element has an assigned weighting (identifying the importance of that specific element) and a set target.

The seven elements (codes) are:

  • Ownership
  • Management & control
  • Employment Equity
  • Skills Development
  • Preferential Procurement
  • Enterprise Development
  • Socio-Economic Development

Element

Weighting points

Ownership

20

Management control

10

Employment Equity

15

Skills Development

15

Preferential Procurement

20

Enterprise Development

15

Socio-Economic Development

5

Total

100

All Generic Enterprises are measured based on the Generic Scorecard.

Adjusted qualifying Small Enterprise Scorecard

Element

Weighting points

Management control

 25

Employment Equity

 25

Skills Development

 25

Preferential Procurement

 25

Enterprise Development

 25

Socio-Economic Development

 25

Total

150

If an enterprise is classified as a QSE, the enterprise must choose four of the six elements from the above table.

Exempted Micro-Enterprise (EME)

An EME does not have to be measured; by default it receives a B-BBEE status of a level four contributor, which is a 100% B-BBEE score. Nevertheless it is still very important to have the shareholding % information from the vendor, should there be any black or black women owners.

Measurement method of B-BBEE compliance

Independent of which scorecard is used the measurement method of B-BBEE remains consistent.

Method

Actual % of target achieved, divided by the target set per element, multiplied by the maximum weighting for that element.

Example:
The Ownership element within the Generic scorecard accounts for a 20 weighting with a target of 50%. Say the enterprise achieved 40% of the set target. What would the weighting be?

Calculation:
40% achieved / 50% set target = 80% x maximum weighting of 20 for ownership

This equals 16 weighting points out of 20. Therefore the enterprise achieved 16 points. The same has to be done for all the other elements. After calculating each element and adding all the elements' weightings achieved, you will be left with a score out of a 100. This is known as the B-BBEE score/qualification.

Range of B-BBEE score/status/recognition level achievable and application 

     B-BBEE Status

B-BBEE Score/Qualification

B-BBEE Recognition level %

Level One Contributor

 

≥ 100

 

135%

 

Level Two Contributor

 

≥ 85 but < 100

 

125%

 

Level Three Contributor

 

≥ 75 but < 85

 

110%

 

Level Four Contributor

EME

≥ 65 but < 75

EME

100%

EME

Level Five Contributor

 

≥ 55 but < 65

 

80%

 

Level Six Contributor

 

≥ 45 but < 55

 

60%

 

Level Seven Contributor

 

≥ 40 but < 45

 

50%

 

Level Eight Contributor

 

≥ 30 but < 40

 

10%

 

Non-Compliant Contributor

 

< 30 on the Generic Scorecard

 

0%

 

All enterprise classifications are measured based on the above table.

Example

Enterprise (QSE) achieves a score of 50. That will fall within the parameters of greater and equal to 45 but smaller than 55. This enterprise will have a level six contributor status and a 60% B-BBEE recognition level%.

Example

Enterprise (EME classified) provides no B-BBEE score/status/recognition level% on the vendor profile. It does not have to be measured since it is an EME and therefore by default has a level four contributor level, a score between 65 and 75, and a B-BBEE recognition level of 100%

Verification agencies

There are currently only about 11 accredited verification agencies which can facilitate the process of measuring and verifying an enterprise. Once an enterprise has been verified the verification agency will issue a B-BBEE certificate to the measured enterprise.

Copyright © 2016 Business Partners Ltd.  All rights reserved.

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