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NEW B-BBEE CODES
-presented by-
Charlene Skipp
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Summary of Changes
Existing Codes (R million)
Updated Codes (R million)
Exempted Micro-Enterprise
(EME)
0–5
0 – 10
Qualifying Small Enterprise
(QSE)
5 – 35
10 – 50
35 +
50 +
Generic
• Reduction of elements from 7 to 5:
• Creation of 3 priority elements, Ownership, Skills Development and
Enterprise and Supplier Development;
• Large companies to comply with ALL 3, and QSE with Ownership &
either Skills Development or Enterprise & Supplier Development
• The discounting of the Entity’s B-BBEE status by one level if the
gazetted sub-minima for these priority elements are not met;
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Summary of Changes
• The removal of Value Adding Supplier and its replacement with
Empowering Supplier;
• EME and QSE that are 100% black owned = Level 1
• EME and QSE that are more than 51% black owned = Level 2;
• EME are required to obtain either an annual:
• Sworn Affidavit, or
• Certificate from CIPC confirming Black Ownership and Annual
Revenue
• QSE need to produce an annual sworn affidavit confirming revenue
and black ownership if they are more than 51% black owned;
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Summary of Changes
• 51% black owned is an entity in which:
• Black people own at least 51% of the exercisable voting rights;
• Black people own at least 51% of the economic interest; and
• Has earned all the points for Net Value under statement 100
• A QSE with less than 51% black ownership must comply with all 5
elements of the scorecard, and is subject to discounting;
• Adjusted Recognition for Gender has been removed, black women
are separately scored;
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Contribution Levels
Qualification points
(Old COGP)
Qualification points
(New COGP)
B-BBEE
Procurement
Recognition Level
Level 1 Contributor
≥100
≥100
135%
Level 2 Contributor
≥85 but <100
≥95 but <100
125%
Level 3 Contributor
≥75 but <85
≥90 but <95
110%
Level 4 Contributor
≥65 but <75
≥80 but <90
100%
Level 5 Contributor
≥55 but <65
≥75 but <80
80%
Level 6 Contributor
≥45 but <55
≥70 but <75
60%
Level 7 Contributor
≥40 but <45
≥55 but <70
50%
Level 8 Contributor
≥30 but <40
≥40 but <55
10%
Non-compliant
Contributor
< 30 points
< 40 points
0%
B-BBEE Status
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GENERIC SCORECARD
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Ownership
Weighting
points
(Old Codes)
Compliance
target
(Old Codes)
Weighting
points
(New Codes)
Compliance
target
(New Codes)
Exercisable Voting Rights of black people
3
25% + 1 vote
4
25% + 1 vote
Exercisable Voting Rights of black women
2
10%
2
10%
Economic interest of black people
4
25%
4
25%
Economic interest of black women
2
10%
2
10%
Economic interest of black natural people in Designated
Groups; Employee Ownership Schemes; Broad-based
Ownership Schemes; Co-Operatives
1
2.5%
3
3%
2
2%
8
25%
Criteria/Indicator
Voting Rights:
Economic Interest:
Involvement in ownership of black new entrants
Realisation Points:
Ownership fulfilment
1
No Restrictions
Net Value
Time-based graduation factor:
7
25%
Involvement in ownership of black new entrants
2
10%
Involvement in ownership of black participants in Employee
Ownership Schemes; Broad-Based Ownership Schemes;
Co-operatives
1
10%
Bonus Points:
Total
20 + 3 Bonus
Points
25
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Ownership
•
Meet 40% sub minimum of Net Value or discounted by 1 level;
•
The ownership score increased from 20 points to 25;
•
Entities applying the Modified Flow through cannot also apply the
Exclusion principle;
•
Modified flow through only once in ownership structure;
•
Treatment of share ownership through family trusts has been
clarified. Only the trustees can have any discretion;
•
Only South Africa based and regulated mandated investments will
qualify for exclusion;
•
Enhanced provisions for shareholdings through private equity funds;
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Ownership
•
Ownership will include designated groups under the main points.
Previously treated as bonus points;
•
New Entrants will be included in the main points, not as bonus point
as in the past,
•
Qualification amount for a New Entrant has been increased from
R20 million to R50 million;
•
Designated groups include Black military veterans;
•
Ownership fulfilment and net value points (the realisation points)
have been consolidated;
•
DTI have prepared templates for certificates and for the EME & QSE
affidavits.
•
QSE affidavit includes a self assessment for Empowering Supplier.
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Management Control
Criteria/Indicator
Weighting points
(Old Codes)
Compliance target
(Old Codes)
Weighting points
(New Codes)
Compliance target
(New Codes)
3
50% *
2
50%
1
25%
Board Participation:
Exercisable Voting Rights of black Board members
Exercisable Voting Rights of black female Board members
Black Executive Directors
2
50% *
Black female Executive Directors
2
50%
1
25%
2
60%
1
30%
Executive Management:
Black Executive Management
3
40% *
Black female Executive Management
Black Other Top Management
2
40% *
0%
Bonus point for Black Independent Non-Executive Board Members
1
40%
0%
2
3%
5
60%
Disabled Employees
Black Disabled employees as a percentage of all employees
2
2%
Senior Management:
Black employees in Senior Management
Black female employees in Senior Management
2
60%
1
30%
Middle Management:
Black employees in Middle Management
4
75%
Black female employees in Middle Management
2
75%
1
38%
Junior Management:
Black employees in Junior Management
4
Black female employees in Junior Management
Bonus points for meeting or exceeding EAP targets
Total
80%
1
88%
1
44%
3
25 + 4 bonus points
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Management Control
• The amalgamation of Management and Control and Employment
Equity elements on the current scorecard;
• Other Executive Management replaces Top Management. Exco who
are not necessarily directors, but measured against Total Executive
Directors. DTI have indicated that measurement is against Other
Executive Management, supported by draft Verification Manual;
• The element has been aligned with the Economically Active
Population (EAP) targets published annually;
• Current payroll data must be used for this score;
• Compliance targets have been aligned to the Commission for
Employment Equity report;
• No need to apply demographics to disabled black people in terms of
Gazette 38765 dated 06 May 2015
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Skills Development
Weighting
points
(Old Codes)
Compliance
target
(Old Codes)
Weighting
points
(New Codes)
Compliance
target
(New Codes)
Skills Development expenditure
6
3% *
8
6%
Skills Development expenditure for black employees
with disabilities
3
0.3% *
4
0.3%
Number of black employees participating in
Learnerships, apprenticeships or internships
6
5% *
4
2.5%
Number of unemployed black people participating in
training per the matrix
0
0%
4
2.5%
Bonus point for number of Black People absorbed at
the end of the learnership
0
0%
5
100%
Total
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Criteria/Indicator
Skills Development Spend on Learning Programmes
Learnerships:
20 + 5 Bonus
Points
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Skills Development
• Priority element subminimum of 40% of target applies,
• No need to apply demographics to disabled black people or when
calculating the bonus
• Category F and G training are both recognisable but capped at 15%
of the total value of skills expenditure;
• A 15% cap on non-core training expenses has been introduced. This
will be applied to expenditure such as accommodation and travel;
• 6% compliance target for Skills Development includes external
training for unemployed black people;
• Mandatory Sectoral training doesn’t qualify as skills development, eg
health and safety in the construction sector;
• Learnerships absorbed bonus points can be pro-rated if employ less
than 100% of learners;
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Skills Development
• Absorption points scored if company or another company in the same
industry employ learners.
• Absorption will also happen if learners move onto another learnership
• International training can be recognised provided meets SAQA
standards. If accredited or approved overseas likely to be approved in
South Africa
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Learning programme matrix
• Category Classifications – Informal definitions
• Category A – Theoretical Tertiary studies, in most cases part-time
with the signing of a study assistance/loan agreement with no
requirement for practical course work
• B.Comm, Diploma in Labour Law etc.
• Category B – As per Category A but with the addition of a practical
course requirement – i.e. onsite work experience to gain a credit
toward the completion of the course
• Category C – Any structured workplace experiential
training
provided to an employee after completion of a formal qualification
with the purpose of such training to enable the employee to gain
acceptance to a statutory occupational or professional body
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Learning programme matrix
• Category Classifications – Informal definitions
• Category D – Any Seta registered learnership
• Category E – Work based learning programme that does not require
a formal contract. Formally assessed by an accredited body.
• Category F – Any training initiative, not covered by the above,
including, but not limited to:
• Seminars
• Conferences
• Short Courses
• Uncertified training
• Category G – Internal Training, excluding one – on – one
performance development sessions and appraisals
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Supplier and Enterprise Development
Criteria/Indicator
Weighting
points
(Old Codes)
Compliance
target
(Old Codes)
Weighting
points
(New Codes)
Compliance
target
(New Codes)
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70%
5
80%
3
15%
3
15%
4
15%
2.1 Preferential Procurement
Broad-based BEE Procurement Spend from all Empowering Suppliers based
on the broad-based BEE Procurement Recognition levels as a percentage of
Total Measured Procurement Spend of the enterprise
Broad-based BEE Procurement Spend from all QSE Empowering Suppliers
based on the applicable broad-based BEE Procurement Recognition levels as
a percentage of Total Measured Procurement Spend for the enterprise
Broad-based BEE Procurement Spend from all EME based on the applicable
broad-based BEE Procurement Recognition levels as a percentage of Total
Measured Procurement Spend for the enterprise
B-BBEE Procurement Spend from Empowering Suppliers based on the
applicable B-BBEE Procurement Recognition Levels as a percentage of Total
Measured Procurement Spend:
a. suppliers that are 51% black owned;
b. suppliers that are 30% black women owned
3
12%
9
40%
2
8%
4
12%
0
0%
2
2%
Bonus Points
Procurement Spend from Designated group suppliers that are at least 51%
black owned
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Supplier and Enterprise Development
Criteria/Indicator
2.2 & 2.3
Weighting
points
(Old Codes)
Compliance
target
(Old Codes)
Weighting
points
(New Codes)
Compliance
target
(New Codes)
0%
10
3% of NPAT
for year 1 to 4
2% of NPAT
3%
5
1.5% of NPAT
Enterprise and Supplier Development
Annual Value of all Supplier Development contributions as a % of Target
Annual Value of all Enterprise Development contributions as a % of Target
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Bonus Points
1
Graduation from Enterprise Development to Supplier Development Beneficiary
1
Jobs created by a supported supplier
Total
35
40 + 4 bonus
points
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Supplier and Enterprise Development
• Priority element sub-minimum of 40% of target applies for each
of the Preferential Procurement and Enterprise and Supplier
Development elements;
• The imports exclusion can still be applied, but it will not be applicable
to sectors designated by the Department of Trade and Industry;
• If imports are excluded as there is no local production, this is subject
to the development and implementation of an Enterprise
Development and Supplier Development plan for imported goods and
services;
• 51% black owned and 30% black women owned definitions especially
regarding Net Value;
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Supplier and Enterprise Development
• Enterprise and Supplier Development must also calculate industry
norm even though not mentioned in the codes.
• In the first year of the amended codes, valid certificates issued under
the old codes are acceptable and will be treated as Empowering
Suppliers
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Supplier and Enterprise Development
• The Value Adding Supplier has been replaced with an Empowering
Supplier (ES);
• Suppliers must be ES to be claimed for B-BBEE procurement;
• An ES is a BEE compliant entity which demonstrates that it is a
“good citizen South African entity” complying “with all regulatory
requirements of the country”.
• Regulatory requirements in terms of:
• Employment Equity Act
• Skills Development Act
• Skills Development Levies Act
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Supplier and Enterprise Development
• A large enterprise must comply with 3 of the following criteria, or 1 if a
QSE:
• 25% of Cost of Sales excluding Labour and Depreciation, must be
procured from local suppliers or local producers. For the service
industry labour costs are included but capped at 15%;
• 50% of the jobs created must be for black people provided the
number of Black employees since the immediate prior B-BBEE
certificate is maintained;
• At least 25% transformation of raw material/beneficiation including
local manufacturing,
packaging;
production,
and/or
assembly,
and/or
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Supplier and Enterprise Development
• At least 12 days a year of productivity must be spent on skills
transfer to assist Black EME & QSE to increase their operations or
financial expertise.
• At least 85% of labour costs should be paid to South African
employees by service industry entities.
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Supplier and Enterprise Development
• EME and start-ups are automatically Empowering Suppliers;
• Empowering Supplier status of QSE which are >51% black owned;
• The following multipliers are available:
• Procurement from a Supplier Development beneficiary under a
contract of at least 3 years duration can be multiplied by 1.2;
• Procurement from black owned EME or QSE which are not supplier
development beneficiaries but have a contract of at least 3 years
duration can be multiplied by 1.2; and
• Procurement from a first time supplier can be multiplied by 1.2.
• There can be no “double dipping” – if procurement is claimed under
preferential procurement it can not also qualify under SD & ED
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Supplier and Enterprise Development
• You can not get recognition for the same activities under SD and ED;
• SD for suppliers & ED for other black owned entities
• SD and ED beneficiaries are EME or QSE which are at least 51%
black owned or at least 51% black women owned.
• SD and ED contributions are measured on an annual basis.
• SD will be made to Value Adding Suppliers to the ME. Value Adding
Supplier is not defined.
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Supplier Development
• Requirement to build profitable, sustainable business
• In line with existing business
• Measurable in terms of Rand value and efficacy
• Must the beneficiary be an existing supplier?
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Supplier Development - Examples
• Investments (minority)
• Loans or other forms of finance such as:
• provision of finance at lower than commercial rates of interest;
• relaxed security requirements or no security requirements
• guarantees given or security provided
• credit facilities made available
• Early settlement of accounts (limited to 15% of the 10 points available
•
•
•
•
•
for Supplier Development)
grants
direct costs incurred in assisting and hastening their development
overhead costs directly attributable to Supplier Development
preferential terms granted in respect of its supply of goods or services
settling service costs relating to beneficiaries’ operational or financial
capacity or efficiency levels
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Supplier Development - Examples
• Discounts above the normal course of business
• Developing capacity and expertise to manufacture or produce goods
•
•
•
•
•
or services not manufactured, produced or provided in SA
provision of training or mentoring by suitably qualified entities or
individuals
the maintenance of a Supplier Development unit
new projects promoting beneficiation for the benefit of Supplier
Development Beneficiaries
providing training or mentoring to beneficiary
Payments made by the Measured Entity to suitably qualified and
experienced third parties to perform Supplier Development
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Socio-Economic Development
Criteria/Indicator
Value of all Socio-Economic Development
and Approved Socio-Economic
Development Contributions made
Total
Weighting
points
(Old Codes)
Compliance
target
(Old Codes)
Weighting
points
(New Codes)
Compliance
target
(New Codes)
5
1% NPAT
5
1% NPAT
5
5
• Annual Value of SED contributions
• Rand value of contributions will be the same for less points for QSE.
• Otherwise no Change
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