Revisions will cause dramatic impact to BEE – EconoBEE Newsletter 17 August 2011

EconoBEE - BEE Points = Business
Revisions will cause dramatic impact to B-BBEE

We have all heard about Government tenders and how they are awarded to someone based on their black ownership – tenderpreneurs, fronts and bad service. Just at the thought of this, many companies proudly announce that they do not even try going for government business or that they will never submit a tender. Many of the problems were caused by one fatal flaw – the misalignment of the PPPFA (Preferential Procurement Policy Framework act) and B-BBEE (Broad-Based Black Economic Empowerment).

As from 7th December 2011, all of the legal misalignment and inconsistencies will disappear. This is because new revisions issued by the Treasury in June 2011 finally brings the PPPFA and B-BBEE Act into alignment. This change will have a major positive effect on the way companies prepare for and implement B-BBEE because they will have absolute confidence that their BEE status will be used to better their chances of winning a tender.

Government tenders will use a broad based BEE scorecard to award business – and only the scorecard will be used for transformational recognition. All businesses wanting government business will need a good BEE Scorecard.

Tenders are awarded based on a points system. The bidder who achieves the most points wins. Various other criteria are used to award points including price, quality and even availability. In many cases hundreds or even thousands of bidders submit a tender offering the same or similar products at the same or similar prices. The BEE score will offer bidders a major advantage in that a competitor with a similar product at a similar price may not earn as many points because of their BEE status.

The BEE level is used to award tender points. The conversion table is as follows;

PPPFA – Government tender points allocation
B-BBEE Level B-BBEE Score Achieved
Level 1 Contributor? 100 points20
Level 2 Contributor? 85 points but < 100 points18
Level 3 Contributor? 75 points but < 85 points16
Level 4 Contributor? 65 points but < 75 points12
Level 5 Contributor? 55 points but < 65 points8
Level 6 Contributor? 45 points but < 55 points6
Level 7 Contributor? 40 points but < 45 points4
Level 8 Contributor? 30 points but < 40 points2
Non-Compliant Contributor< 30 points0

Now more than ever having a good BEE scorecard has enormous potential to award you more business. Gain a 20/10 point advantage when tendering, contact EconoBEE on 011 483 1190 for assistance on creating and improving your BEE score.

If your turnover is below R5 million per annum you may be exempt and will therefore be automatically allocated 5 or 12 tender points.

Tutu’s wealth tax and B-BBEE

The recent comments by Archbishop Tutu caused some controversy. He complained that the rate of transformation is too slow and the inequalities in our economy still remain – the gap between rich and poor is still too great. He is of course correct. The recent release of the employment equity statistics by the commission for employment equity shows that management jobs are still dominated by white people.

Tutu then suggested a wealth tax. Please note he did not suggest a white wealth tax. The “white” was added by the media without foundation. His actual comments can be found here (courtesy of @gussilber via Twitter), and a video of his talk can be seen on Youtube. The Archbishop is probably not aware that B-BBEE is intended to solve all the problems he identified, in a far more elegant manner than a tax.

B-BBEE is not a tax, because it is voluntary and companies are encouraged to comply, by not necessarily only spending money. It is not a tax because it requests actions, rather than a pure monetary spend. In some ways it can be seen as a levy – e.g with regards to skills development it asks companies to spend 2% or 3% of their payroll on training of their own staff. With regards to enterprise development and socio-economic development it asks companies to spend between 1% and 3% of net profit after tax on those activities. The spend does not need to be pure money – it can be a monetary equivalent, e.g a company can spend time helping a smaller business, and this will be classed as enterprise development. There are other methods of earning B-BBEE points that do not require spending money (tax), like procurement where companies will encourage transformation by asking their own suppliers for their B-BBEE certificates. In this way every company will contribute towards transformation, leveling the playing fields, without the need for a wealth tax.

Some companies have done a wonderful job of complying with the B-BBEE codes and genuinely made a difference to the lives of the people they touched. Many other companies have a reluctance to achieve, and it is this reluctance that Tutu, and others are seeing. Their good, but slightly misguided intentions are a direct result at seeing slow transformation.

Some years back we wrote an article headlined “The alternative to B-BBEE is B-BBEE”, implying that when you look at it, and if transformation is needed the best alternate remains the B-BBEE codes, warts and all. Any other alternative proposed would not be as effective or efficient!

With regard to a wealth tax, government does not have a great record of spending our tax money. Given the option I’d far rather decide for myself whom to support or to train than let government tell me, and possibly waste the money. This is what B-BBEE proposes. If you do have to spend 3% of profit after tax, why not decide for yourself how best to do it, in the way that works, and makes business sense to you?

For five years we have been saying that B-BBEE has to succeed – the alternative will be people proposing some outrageous solutions that we are seeing right now, such as nationalisation or wealth taxes.

ArcelorMittal finally gets a B-BBEE Certificate – Well Done

ArcelorMittal was in the news last year for all the wrong reasons. It tried to undertake a deal – called it a “BEE deal”, that would not have earned many points. There have been calls for ArcelorMittal to produce its B-BBEE certificate for a long time, and the lack of a certificate has hurt many of its customers’ own B-BBEE scores. As a primary provider of steel, its B-BBEE credentials will flow down to most of the rest of the economy.
ArcelorMittal has now had its certificate verified – it is level 7 as follows.

Management control9.42
Employment equity0
Sills development11.09
Preferential procurement15.51
Enterprise development0
Socio-economic development5

EconoBEE supplier management. BEE Procured is a database containing over 22 000 BEE certificates. Save time by letting us contact your suppliers, earn more points with more BEE certificates. More information on BEE Procured contact 011 483 1190.

BEE Managed Services Saves Time
EconoBEE can assist you with your BEE Verification – our consultants will even sit in during your BEE Verification giving you the extra time to work in your business. Learn more about our managed service, contact us on  011 483 1190 or

Expert Advice pays for itself
Save time and effort by allowing EconoBEE, Experts in BEE Compliance and scorecard optimisation handle all of your BEE requirements. Contact us on  011 483 1190 or

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While there is demand for a B-BBEE Scorecard someone will be taking advantage, shouldn’t that someone be you…

Want us to manage your BEE Process – simple 10 steps to BEE Compliance.

Use our pre-prepared “Verification Ready” documents and templates in your business – contact us for more.

Turnover below R5 million – find out how to get your BEE Exemption.

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EconoBEE Newsletter
17 August 2011

In this issue

  • Revisions will cause dramatic impact to B-BBEE
  • Tutu’s wealth tax and B-BBEE
  • ArcelorMittal finally gets a B-BBEE Certificate

In other news

About EconoBEE

EconoBEE is an expert BEE consultancy. EconoBEE helps businesses Become BEE Compliant, prepare for verification, earn maximum BEE Points and ensure that they achieve the BEE Level they need to get more business.

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Executive summary of B-BBEE

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