Maximise your BEE Points – EconoBEE – Newsletter May 2008
Maximise your BEE Points
Most people know that the number of BEE points you earn measures BEE compliance. The more points you get, the higher the level, the better your compliance. This is just like sport – say rugby where if the Sharks had scored more points on Saturday they would have won. It’s only in golf where golfers try to get as few shots as possible! In BEE terms there are techniques to maximise those points earned, and various strategies than can help you.
Here are 15 quick ways to get more BEE points:
If your supplier is a “value-added” supplier you can inflate your procurement spend with him by an extra 125%.
If the supplier is also your enterprise development project, you can inflate your procurement spend by a further 120%.
If your enterprise development project is a category A beneficiary( QSE or EME and more than 50% black owned) you can inflate your ED spend by 125%
If you earn points via skills development you must ensure that you have complied with all aspects of the skills development act, else you will earn no points, even if you spend in training.
If you train staff via Category B, C or D training programmes (learnerships), you can earn up to an additional 6 points on the generic scorecard.
Category B,C, or D training allows you to claim the cost of employees’ salaries as training expense.
You can claim legitimate training expenses including travel, facilitators, admin, facilities etc if you log those activities. Don’t forget in-house training – but it cannot be more than 15% of your total BEE training spend
You need to ensure you keep records of the BEE status, gender, even disabled status of your employees, and their job level as per the codes if you want to earn points on employment equity.
You will earn zero points for any BEE activity unless you have sufficient documentary evidence of that activity.
You therefore must log every activity you undertake in order to ensure you earn all the points you deserve.
If you are earning points via procurement, and you do imports, you must prove that those imports are of a different brand or specification to those available in South Africa to be able to exclude them from your calculations and maximise points.
If your business has black ownership (black/coloured/Indian SA citizens), you need to ensure that this includes black females, new entrants and black “designated” people to optimise points.
If the shareholders have any debts owing on those shares, or are going to have, you should ensure that they meet the repayment schedule in order to earn points via Net Equity Value.
Additional points can be achieved in Preferential Procurement if you focus some of your spend on QSE/EME suppliers and black owned suppliers
Employment Equity has a 40% sub-minimum, if you don’t reach this target you run the risk of not earning points you have already earned.
It may sound quite technical, with quite a bit of mathematics, but to us it is second nature. We can help you in all areas of BEE to maximise those points and become more compliant.
Contact us and be pleasantly surprised how easy it is to get the job done.
Need to be BEE Compliant – Why?
Whenever a customer asks you for your BEE status you should try and answer them. You should answer them for the same reason you answer any customer query – to give good customer service. When replying to your customer you are giving him what he needs to do business with you.
What does the law say – do you have to be BEE Compliant? What happens to you if you don’t produce a BEE Scorecard?
The B-BBEE Act makes BEE implementation compulsory only for Government and associated agencies. It is voluntary for all other enterprises. However if you do business with Government they must ask you for a scorecard and by implication if you do not have a scorecard then Government cannot do business with you. If you are not doing business with Government you do not have to produce a BEE Scorecard. It is entirely voluntary for one business doing business with another to supply a BEE Scorecard.
Although you don’t necessarily have to produce a scorecard, the reason you do is because your customer might supply government. Their scorecard depends to some extent on your BEE status and as a result by giving a scorecard to your customer you are giving that customer good service and helping them keep existing business with government. A BEE Scorecard is good service and it makes Good Business Sense to give your customer what they need.
The BBBEE Act is voluntary for businesses and compulsory for government but ultimately does not make any provision for penalties, if you don’t follow the act and don’t produce a BEE Scorecard – you run the risk of losing business.
Why does your customer want your score?
This falls under Preferential Procurement – your customers are earning or losing points by dealing with you. If your customer chooses to earn points with Preferential Procurement then they will need your scorecard. By simply preparing a scorecard and giving it to them you are helping them improve on their scorecard. Similarly, you then need to ask your suppliers for a scorecard so that you can give your customers a good scorecard. If you do not give your customer a scorecard you will be taking points away from them.
Why is a Good Score Important?
The Preferential Procurement calculation depends on the value of goods purchased and the BEE recognition level (the points that the supplier has earned). Up to 50% of procurement currently must come from B-BBEE Compliant suppliers (based on the recognition table below):
BEE Recognition Level
Level 1 Contributor
> 100 points
R1.35 for every R1 spent
Level 2 Contributor
>= 85 points but < 100 points
R1.25 for every R1 spent
Level 3 Contributor
>= 75 points but < 85 points
R1.10 for every R1 spent
Level 4 Contributor
>= 65 points but < 75 points
R1.00 for every R1 spent
Level 5 Contributor
>= 55 points but < 65 points
R0.80 for every R1 spent
Level 6 Contributor
>= 45 points but < 55 points
R0.60 for every R1 spent
Level 7 Contributor
>= 40 points but < 45 points
R0.50 for every R1 spent
Level 8 Contributor
>= 30 points but < 40 points
R0.10 for every R1 spent
< 30 points
R0 for every R1 spent
It is ideal to give a score of greater than 100 points (level 1) to the customer but in reality it can be extremely difficult to get all 100+ points. Most people realise this and will be very happy with a response or any score above 30 points. If on the other hand you are a major supplier then your score alone could determine how many points they will earn on Preferential Procurement.
To satisfy your customer, you should give them a detailed scorecard (a complete breakdown of how you achieved BEE Compliance) and when required have all relevant documentation to give them absolute confidence in your scorecard.
Remember, Preferential Procurement is used to earn points – don’t give your customer an excuse to go somewhere else.
Need to be BEE Complaint? Contact an expert to help guide you through Broad Based Black Economic Empowerment. EconoBEE has developed tools and services to help you Become BEE Compliant in a quick and easy manner with accurate documentation to assure your customers of the best possible scorecard.
The more points you get, the better it is for your customer.
Empowerment Awards 2008 – Commentary
I have grave concerns about the Wits Business School/Barloworld Empowerment Awards Function 2008 which was held recently.
Seminar – 25 June 2008 – Johannesburg
We are hosting our popular full day B-BBEE seminar on 25 June in Johannesburg. Book now to reserve your place.
“An in-depth understanding of BEE helps you manage your BEE process.”
I’m running the Comrades Marathon next month. If any of our readers are also running, best of luck to you.
That’s it for the time being.
Keith and the EconoBEE Team