CODE SERIES 000: FRAMEWORK FOR MEASURING BROAD-BASED BLACK ECONOMIC EMPOWERMENT

STATEMENT 000: GENERAL PRINCIPLES AND THE GENERIC SCORECARD

Issued under section 9 of the Broad-Based Black Economic Empowerment Act of 2003 Arrangement of this statement

Para    Subject    Page

1    Objectives of this statement   

2    Key principles   

3    Application of the Codes   

4    Eligibility as an Exempted Micro-Enterprise   

5    Eligibility as a Qualifying Small Enterprise   

6    Start-up enterprises   

7    The Elements of B-BBEE in terms of the Generic Scorecard   

8    The Generic Scorecard   

9    Enhanced recognition for certain categories of black people   

10    Framework for the Accreditation of BEE Verification Agencies   

11    Transitional period   

12    Adjustment of thresholds   

13    Duration of the Codes   

 

1    Objectives of this statement

The objectives of this statement are to:

1.1    specify interpretative principles of B-BBEE:

1.2 specify the application of the Codes and the basis for measurement under the Codes;

1.3    specify the qualifying thresholds for businesses to qualify as Exempted Micro-Enterprises (EME) or Qualifying Small Enterprises (QSE);

14 specify the method of measuring start-up enterprises;

1.5    specify the elements of B-BBEE measurable under the Generic Scorecard;

1.6    specify the Generic Scorecard;

17    specify the basis for determining compliance by entities with the Codes;

1.8    provide for the Transitional Period before the compulsory use of the Generic Scorecard starts, and

1.9    define the duration for the applicability of the Codes.

 

2    Key principles

2.1    The fundamental principle for measuring B-BBEE compliance is that substance takes precedence over legal form.

2.2    In interpreting the provisions of the Codes any reasonable interpretation consistent with the objectives of the Act and the B-BBEE Strategy must take precedence.

2.3    The basis for measuring B-BBEE initiatives under the Codes is the B-BBEE compliance of the measured entities at the time of measurement.

2.4    Any misrepresentation or attemptto misrepresent any enterprise’s true B-BBEE Status may lead to the disqualification of the entire scorecard of that enterprise.

2.5    Initiatives which split separate or divide enterprises as a means of ensuring eligibility as an Exempted Micro-Enterprise, a Qualifying Small Enterprises or a Start-Up Enterprise are a circumvention of the Act and may lead to the disqualification of the entire scorecard of those enterprises concerned.

2.6    Any representation made by an Entity about its B-BBEE compliance must be supported by suitable evidence or documentation. An Entity that does not provide evidence or documentation supporting any initiative, must not receive any recognition for that initiative.

2.7    Wherever a Standard Valuation Method applies to measuring an indicator, the same standard should apply, as far as reasonably possible, consistently in all other applicable calculations in this statement.

 

3 Application of the Codes

3.1 The following entities are measurable under the Codes:

3.1.1all public entities listed in schedule 2 or schedule 3 (Parts A and C) of the Public Finance Management Act;

3.1.2 any public entity listed in schedule 3 (Parts B and D) which are trading entities which undertake any business with any organ of state, public entity or any other Enterprise; and

3.1.3 any enterprise that undertakes any business with any organ of state or public entity;

3.1.4 any other enterprise that undertakes any business, whether director indirect, with any entity that is subject to measurement under paragraph 3.1.1 to 3.1.3 and which is seeking to establish its own B-BBEE compliance.

3.2 The basis for measuring the B-BBEE compliance of an entity in terms of paragraph 3.1 is –

3.2.1 paragraph 4, in the case of an Exempted Micro-Enterprise (EME);

3.2.2 the QSE statements in Code 800, in the case of a Qualifying Small Enterprise (QSE);

3.2.3 the Generic Scorecard, in the case of other enterprises.

3.3 Despite 3.2, a Sector Code published in terms of Statement 003 may provide the basis for measuring enterprises within that sector.

4 Eligibility as an Exempted Micro-Enterprise

4.1 Any enterprise with an annual Total Revenue of R 5million or less qualifies as an Exempted Micro-Enterprises, .

4.2 Exempted Micro-Enterprises are deemed to have B-BBEE Status of “Level Four Contributor” having a B-BBEE procurement recognition of 100% under paragraph 6.3.

4.3 Despite paragraph 4.2, an Exempted Micro-Enterprise qualifies for a promotion to a B-BBEE Status of “Level Three Contributor” having a B-BBEE procurement recognition of 110% under paragraph 6.3 if it is – more than 50% owned by black people or by black women.

4.4 Exempted Micro-Enterprises are allowed to be measured in terms of the QSE scorecard should they wish to maximise their points and move to the next procurement recognition level.

4.5 Sufficient evidence of qualification as an Exempted Micro-Enterprise is an auditor’s certificate or similar certificate issued by an accounting officer or verification agency

5 Eligibility as a Qualifying Small Enterprise

5.1 Any enterprise with an annual Total Revenue of between R5 million and R35 million qualifies as a Qualifying Small Enterprise.

5.2 A Qualifying Small Enterprise must select any four of the seven Elements of B-BBEE for the purposes of measurement under the Qualifying Small Enterprise Scorecard contained in Code 800. Where a Qualifying Small Enterprise does not make a selection, its four best element scores will be used for the purposes of measurement.

6    Start-up enterprises

6.1    Start-up enterprises must be measured as Exempted Micro-Enterprises under this statement for the first year following their formation or incorporation. This provision applies regardless of the expected total revenue of the start-up enterprise.

6.2    Start-up Enterprises are deemed to have a B-BBEE Status of “Level Four Contributor’ having a B-BBEE procurement recognition of 100% under this paragraph

6.3    In order to qualify as a Start-up Enterprise, the enterprise must provide an independent confirmation of its status.

6.4    Despite paragraph 6.1 and 6.2, Start-up Enterprises must submit a QSE Scorecard when tendering for any contract, or seeking any other business covered by section 10 of the Act, with a value higher than R 5 million but less than R35 million. For contracts above R35 million they should submit the generic scorecard. The preparation of such scorecards must use annualised data.

7    The Elements of B-BBEE in terms of the Generic Scorecard

7.1    The Ownership Element, as set out in Code series 100, measures the effective ownership of enterprises by black people.

7.2    The Management Control Element, as set out in Code series 200, measures the effective control of enterprises by black people.

7.3    The Employment Equity Element, as set out in Code series 300. measures initiatives intended to achieve equity in the workplace under the Act, and the Employment Equity Act.

7.4    The Skills Development Element, as set out in Code series 400, measures the extent to which employers carry out initiatives designed to develop the competencies of black employees.

7.5    The Preferential Procurement Element, as set out in Code series 500, measures the extent to which enterprises buy goods and services from suppliers with strong B-BBEE procurement recognition levels.

7.6    The Enterprise Development Element, as set out in Code series 600, measures the extent to which Enterprises carry out initiatives intended to assist and accelerate the development and sustainability of other Enterprises.

7.7    The Socio-Economic Development and Sector Specific Contributions Element, as set out in Code series 700, measures the extent to which enterprises carry out initiatives that contribute towards Socio-Economic Development or Sector Specific initiatives that promote access to the economy for black people.


8 The Generic Scorecard

8.1 The following table represents the Generic Scorecard and contains the:

8.1.1 elements of the scorecard

8.1.2 weightings, and

8.1.3 the Code series reference that specify the mechanisms for measurement and calculation of each of the Elements of the scorecard (Code series 100 – 700).

Element

| Weighting

Code

Ownership

20 points

100

Management control

10 points

200

Employment equity

15 points

300

Skills development

15 points

400

Preferential procurement

20 points

500

Enterprise Development

15 points

600

Socio-Economic Development initiatives

5 points

700

8.2 Based on the overall performance of a Measured Entity using the Generic Scorecard, it receives one of the following B-BBEE Status-:

B-BBEE Status

Qualification

B-BBEE recognition level

 

Level One Contributor

>100 points on the Generic Scorecard

135%

Level Two Contributor

>85 but <100 points on the Generic Scorecard

125%

Level Three Contributor

>75 but <85 on the Generic Scorecard

110%

Level Four Contributor

>65 but <75 on the Generic Scorecard

100%

Level Five Contributor

>55 but <65 on the Generic Scorecard

80%

Level Six Contributor

>45 but <55 on the Generic Scorecard

60%

Level Seven Contributor

> 40 but <45 on the Generic Scorecard

50%

Level Eight Contributor

>30 but <40 on the Generic Scorecard

10%

Non-Compliant Contributor

<30 on the Generic Scorecard

0%


9 Enhanced recognition for certain categories of black people

Throughout the Codes, various criteria appear which advance the interests of certain categories of black people. These include:

9.1    black women who should form between 40 and 50%of the beneficiaries of all Elements of the Generic Scorecard: and

9.2    black people with disabilities,, black youth, black people living in rural areas and black unemployed people who must form between 2 and 3% of the beneficiaries of all Elements of the Generic Scorecard.

10 Framework for the Accreditation of BEE Verification Agencies

10.1    Verification of BEE compliance is encouraged and to this end, the dti will from time to time issue clear guidelines on the verification process.

10.2    SANAS is a national accreditation body that operates in compliance with the requirements for accreditation bodies as defined in the International ISO/I EC Guide 62 and ISO 17011.

10.3    Accreditation of BEE verification agencies will be conducted by SANAS on behalf of the dti in terms of the accreditation criteria that will be developed, maintained and enforced by SANAS.

10.4    Such Accreditation Standards govern the terms and conditions on which the Accreditation Body may grant, refuse to grant, revoke or suspend an accreditation of a Verification Agency.

10.5    Those verification agencies wishing to apply for accreditation will do so through SANAS.

10.6    The dti encourages the establishment of an independent Industry Body that will provide guidance to the verification industry through the development and maintenance of high quality and reliable BEE verification services.

10.7    The dti together with the relevant Industry Body will from time to time develop Verification Methodology and other relevant practices that will be used as standards by all verification agencies.

10.8    The dti together with the Accreditation Body will implement such mechanisms as may be necessary to ensure that Verification Certificates are accurate and reliable.

10.9    The dti will establish a publicly accessible central database containing the information underlying each verification Certificate

11    Transitional period

11.1    For the first year after the commencement of this statement, a measured entity may elect to use –

11.1.1    the Generic Scorecard; or;

11.1.2    the transitional scorecard.

11.2    Thereafter, all B-BBEE compliance measurement under the Codes for Medium and Large enterprises is subject to the use of the Generic Scorecard.

11.3    The transitional scorecard assigns a BEE Status based on the Ownership and Management Control of the entity calculated in terms of the formula below:

A = B x 1.92

Where

A is the indicative BEE Status during the transitional period

B is the total score achieved under Code series 100 and 200

12    Adjustment Of Thresholds

12.1    The Minister may, by notice in the Gazette, adjust the thresholds in paragraphs 4 to 6. Any such changes apply to compliance reports prepared for enterprises after a 12-month period following the gazetting of the adjustment

13    Duration of the Codes

13.1    A Code remains in effect until amended, substituted or repealed under section 9 of the Act.

13.2    The Minister will review the Codes following the end of the tenth year following the commencement date of this statement, despite the aforementioned, annual reviews will take place to monitor the implementation of B-BBEE throughout the economy.