Value adding supplier – Preferential Procurement

Please note! The concept of a value adding supplier is no longer in the B-BBEE Codes. View our news & resources for up to date info.

Value adding supplier

A value adding supplier is a BEE compliant company that the measured entity (the company whose scorecard is being worked on) acquired goods/services from whose total labour costs plus the Net Profit Before Tax is more than 25% of annual turnover.

The total amount procured from such a value adding supplier is multiplied by a factor of 1.25.


Company B (the supplier)
Annual turnoverR10 000 000
25% of TurnoverR2 500 000
Payroll spendR1 000 000
Net Profit Before TaxR2 000 000
Sum of payroll spend and Net Profit Before TaxR3 00 000
Since the sum of payroll spend and the net profit before tax is more than 25% of annual turnover company B is a value-adding supplier.
Benefit to company A (the measured entity)
Total procurement from company BR50 000
Company B’s BEE recognition level (for example)


Recognised BEE spend with company BR50 000 X 1.25 = R62 500

Thus, it is of more benefit to company A to acquire goods/services from a company like company B.

expert bee consultation

You may also like...