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Government Procurement Act – critical mistake – EconoBEE Newsletter – 25 October 2011

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Government Procurement Act – critical mistake

We have had to wait over 6 years for the Treasury to revise their PPPFA (Preferential Procurement Policy Framework Act). Now that it is in place we have discovered one critical mistake that undermines the Tourism and Construction – BEP Sub sector and the integrity of B-BBEE by effectively legalising a form of BEE fronting.

Specifically the Codes of Good Practice and Exempt Micro Enterprise state;

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

The above applies to the codes of Good Practice. However the Sector codes, gazetted in terms of Section 9(1) of the B-BBEE Act with equal status to the Codes, apply to all entities within that particular sector. In terms of the construction sector and the Tourism sector these thresholds are different. An Exempt Micro Enterprise in the tourism sector has a turnover of less than R2.5 million per annum and the construction built environment professionals a turnover of below R1.5 million per annum.

It has already been proven that an entity may not select which charter they want to use, meaning if they are a tourism company they may not issue a codes of good practice scorecard.

The new Regulation 10.(1) of the PPPFA regulations is therefore incorrect. Section 10 of the revised PPPFA states:

10. (1) Tenderers with annual total revenue of R5 million or less qualify as Exempted
Micro Enterprises (EMEs) in terms of the Broad-Based Black Economic Empowerment Act, and must submit a certificate issued by a registered auditor, accounting officer (as contemplated in section 60(4) of the Close Corporation Act, 1984 (Act No. 69 of 1984)) or an accredited verification agency.

Paragraph 10.(3) of the PPPFA revisions does state:

10.(3)   The submission of such certificates must comply with the requirements of instructions and guidelines issued by the National Treasury and be in accordance with notices published by the Department of Trade and Industry in the Government Gazette.

Paragraph 10.(3) is therefore slightly contradictory to 10.(1). Certain notices published by the DTI, specifically the sector codes are in contradiction to section 10.(1) above.

How do you think the average procurement officer in government is going to handle this? Is he going to accept a R5 million letter, or is he going to check on the sector code and disqualify any company in the tourism sector who does not give the correct BEE credentials for their industry as per all dti notices? We pointed this out to the dti when the PPPFA revisions were issued, and they correctly told us that it is a Dept of Treasury act. We have pointed this out to the Dept of Treasury and they have shown no interest, and said that B-BBEE certificates are a dti issue.

They are wrong. Minister Pravin Gordhan has issued flawed legislation, that is going to be misused. The whole aim of the revised legislation was to solve the tenderpreneur and fronting problem. Minister Gordhan has the opportunity of correcting a simply mistake, but if he does not it will cause embarrassment and hurt the progress of a new law before it even starts.

More info about the PPPFA – PPPFA and your Tender course.

Speeding up the Verification Process

The demand for BEE Verification has increased phenomenally in 2011. With demand increasing so does the pressure on the BEE verification agencies to deliver and of course very importantly the companies themsleves to be 100% prepared. Once the revised PPPFA comes into effect (December 7th) demand for a BEE scorecard is again going to soar. The need to make the verification process more effective is an absolute requirement, in-particular since verification will get much more competitive when IRBA starts accrediting auditing firms to do BEE verifications.

EconoBEE is a BEE consultancy and we are very proud to announce the launch of the EconoBEE V3 Documentation management module. This system is designed to be used by companies to ensure every single document the verification agency needs is readily available. Since it is stored in a secure database the data is never lost. In addition the verification agency can login and check the status of the documentation before completing the onsite assessment.

How it will work for BEE Verification agencies;

  • Allocate all clients a username and password to access the system for the duration of the BEE verification (maximum of 6 months)
  • Request that they upload all documentation to the system and that they calculate their score
    • While they are woking you can login and check the status of their documentation. If required you can add the additional documents that are needed or comment on existing documents.
  • Prior to your pre-site session you can have an idea of what documentation the client has and have an idea of where they still need to submit documentation.
  • Your overall verification time should be reduced to basic sampling and cross checking which will speed up the entire process for the client and the analyst doing the on-site.

How it will work for companies;

  • You will recieve a username and password to login to the system
  • Once logged in you will be prompted to submit company information which will be used to calculate your scorecard (before your actual verification you will know your score)
  • Upload all documentation needed by your verification agency
  • Allow access to your data and your verification agency can check all documentation prior, during and after your verification. Amendments to your score will be known to you instantly.

More information about EconoBEE V3 on our website or for verification agencies/consultants contact us directly.

No time to manage your BEE scorecardManaged Service.

Prepare for your Annual Employment Equity Assessment

The deadline for Employment Equity Returns is upon us therefore it’s vital that employers are thoroughly informed of the processes, requirements and exceptions for businesses of all sizes.  

“Many businesses are still unaware of what an EEA2 return is and its relation to black economic empowerment,” says Keith Levenstein, CEO of EconoBEE.  “This form needs to be submitted to the Department of Labour by designated employers as set out by the Employment Equity Act.”

Levenstein advised, “It’s important to note that depending on the size of your company there are certain sections of the EEA2 return that should be completed and others that should not.”

Small employers (those with more than 50 employees but less than 150) are exempted from completing certain sections of the EEA2 return. On the other hand, large employers (those that employ more than 150 people) have to complete the entire form.  Furthermore, these large employers need to submit their first form within six months of being designated and from then on must submit annually on the first working day of October.  Small employers have twelve months to submit after designation and thereafter should submit their return on the first working day of October of every year ending with an even number.  

“With regards to black economic empowerment, the EEA2 form is submitted as proof of the company’s compliance with the Employment Equity Act (unless you are exempt from doing so).  During verification of a company’s BEE scorecard, verification agents require the EEA2 form as supporting documentation when considering the Employment Equity and Management Control elements,” advised Levenstein.  

Levenstein continued: “We find that verification agencies do not operate uniformly with some saying you lose all of your points if you do not submit your EEA2, therefore it is best to submit the form.”  

Below, EconoBEE outlines the specifications on the EEA2 return that employers should take note of:

What constitutes a designated employer?
Companies that employ 50 people or more or their annual turnover threshold is equal to or more than the amounts below:

SectorTotal annual turnover
R2 million
Mining and Quarrying   
R7.5 million
R10 million
Electricity, Gas and Water   
R10 million
R5 million
Retail and Motor Trade and Repair Services   
R15 million
Wholesale Trade, Commercial Agents and Allied Services   
R25 million
Catering, Accommodation and other Trade   
R5 million
Transport, Storage and Communications   
R10 million
Finance and Business Services   
R10 million
Community, Social and Personal Services   
R5 million

Read more…

Procurement and Enterprise Development Conference & PPPFA coming into effect

We have now opened bookings for our 4th annual BEE Procurement and Enterprise Development Conference. During the conference we will show you how to maximise your points on those two elements with minimum effort to gain maximum results.

Date – BEE Procurement and Enterprise Development Conference:
8th November 2011 – CPT – Belmont Conference Centre
15th November 2011 – DBN – Makaranga Garden Lodge
22nd November 2011 – JHB – Emperors Palace

Time: 8:30 for 9:00 – 17:00
Price: R3990 incl VAT (R3500 excl VAT).

In addition we have organised a very special half day course for the new government tender regulations. Learn how the new tender process affects your business, gain a competitive advantage and win more tenders.

Date – PPPFA and your Tender:
9th November 2011 – CPT – Belmont Conference Centre
16th November 2011 – DBN – Makaranga Garden Lodge
24th November 2011 – JHB – Emperors Palace

Time: 7:30 for 8:00 – 12:30
Price: R1710 incl VAT (R1500 excl VAT).

Can’t make it contact us and we can arrange a special internal course for all your staff (minimum of 15 delegates (half day) or 10 delegates (full day)).

BEE Managed Services Saves Time
Save time and effort with EconoBEE, Experts in BEE Compliance and scorecard optimisation. EconoBEE’s managed service will handle all of your BEE requirements, collect supplier certificates and prepare all the correct documentation. Contact us on  011 483 1190 or info@econobee.co.za.

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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 – Managed Service.

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

Is BEE procurement a pain? Sort it out quick and easy – click here.

Need a scorecard – produce one yourself – EconoBEE V3.

EconoBEE Newsletter
25 October 2011

In this issue

  • Government Procurement Act – critical mistake
  • Speeding up the Verification Process
  • Prepare for your Annual Employment Equity Assessment
  • Procurement and Enterprise Development Conference & PPPFA coming into effect

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.

Our services include BEE Management Systems, Training, EME Pack, Complete Managed Services; consulting and advisory and Procurement Solutions.

As leaders in the industry we are driven to help maintain and develop knowledge in the BEE industry.

Already have a BEE Certificate?

Please send it to us and we will include it in our BEE Procured database.

Contact Us

Tel: 011 483 1190
Fax: 011 483 1195
Email: info@econobee.co.za
Web: www.econobee.co.za

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Gavin and the EconoBEE Team

Executive summary of B-BBEE

Turnover below R5 million per annum – automatic BEE status

Turnover above R5 million per annum – you need a BEE Scorecard. Our workshops, scorecard tools, procurement manager or a complete managed services will be best for you.

Complete Managed BEE Service


Preparation will speed up your verification and earn you more points – managed service.

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We have prepared an easy to follow guide “B-BBEE in 5 Minutes” and “Crash Course to BEE Verification” which explains BEE in a simple step by step approach.

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