INTRODUCTION

Our country requires an economy that can meet the needs of all our economic citizens – our people and their enterprises – in a sustainable manner.  This will only be possible if our economy builds on the full potential of all persons and communities across the length and breadth of this country.  Government’s objective is to achieve this vision of an adaptive economy characterised by growth, employment and equity by 2014.

This is a pocket guide to the Codes of Good Practice on Broad-Based Black Economic Empowerment that were published in Government Gazette number 29617 on 9 February 2007. It is intended to assist the reader who wants to quickly refer to the various elements of the scorecards contained in the Codes and establish how points are allocated to these various elements. Furthermore, a summary of the method of calculating the points of the various elements is included. However, brevity dictates that not all the information required to complete all the formulae set out herein is included. Those requiring additional information about the Codes should either consult the Codes themselves or a suitably qualified advisor such as April 27 Corporate Finance (Pty) Ltd for assistance.

Many aspects of the Codes are open to different interpretations. This booklet reflects one such interpretation. Other interpretations are however possible. No rules of interpretation other than the general principles which govern the interpretation of statutes in South Africa exist. This position will, no doubt, improve over time.

The Codes are published in the terms of Section 9(1) of the Broad-Based Black Economic Empowerment Act, number 53 of 2003. No enterprise is compelled to comply with the Codes and certain types of enterprises are even exempt from compliance. The extent of an enterprise’s compliance may however affect its success in doing business with organs of the State, public enterprises and other enterprises that comply with the Codes.

The extent to which an enterprise complies with the Codes determines its BEE Status. This status is expressed with reference to different levels, as follows:

BBBEE Status

Level

BBBEE Score

BBBEE Recognition Level

1

>100

135%

2

85 – 100

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%

Non-compliant

<30

0%

 

 

 

 

 

 

The Codes create 3 different categories of enterprises and set different compliance targets or scorecards for each such category.

Total Revenue per annum Scorecard
≤ R35 million

Generic Scorecard applies

< R35 million - > R5 million

Qualifying Small Enterprise

≤ R5 million & Start-up Enterprises

Exempted Micro-enterprise – a deemed level 4 contributor, or level 3 if more then 50% black owned

The compliance scores of these different categories of enterprises are determined with reference to the following 4 different scorecards:

 

Generic Scorecard

Qualifying Small Enterprise Scorecard

Adjusted Generic Scorecard

Adjusted QSE Scorecard

Element

Weighting

Weighting

Weighting

Weighting

Ownership

20 points

25 points

0 points

0 points

Management Control

10 points

25 points

15 points

25 points

Employment Equity

15 points

25 points

15 points

25 points

Skills Development

15 points

25 points

20 points

25 points

Preferential Procurement

20 points

25 points

20 points

25 points

Enterprise Development

15 points

25 points

15 points

25 points

Socio-Economic Development

5 points

25 points

15 points

25 points

Total

100 points

100 points (ME select 4 of 7)

100 points

100 points (ME select 4 of 6)

In addition, until 9 February 2008 a Measured Entity may use a transitional scorecard.   In terms hereof the score is calculated by multiplying the total score under Codes 100 and 200 by a factor of 1.92.  In the case of a QSE this is calculated by multiplying the total score achieved under Codes 801 and 802 by a factor of 1.18.

The content of the Codes is arranged in a manner that reflects to different elements of the scorecards, namely:

Arrangement of the Codes
:


Code

Subject Matter

Description

000

Conceptual Framework

General Principles and the Generic Scorecard

100

Ownership

Effective ownership of enterprises by black people

200

Management Control

Effective control of enterprises by black people

300

Employment Equity

Achievement of equity in the workplace

400

Skills Development

Development of competitiveness of black people

500

Preferential Procurement

Economic support of BBBEE compliant enterprises

600

Enterprise Development

Promotion of enterprise development

700

Socio-economic Development

Promotion of socio-economic development

800

Qualifying Small Enterprises

Application of Codes to small enterprises