B-BBEE: The 5 frequently asked questions

B-BBEE can become complicated, but don’t allow that to prevent you from embracing transformation in the workplace. Before you start your B-BBEE journey, it is important to know the answers to these 5 most frequently asked questions.

1. Who qualifies as a black person within the B-BBEE Codes of Good Practise?

Africans, Colored’s, Indian or Chinese persons who are South African citizens by birth or by descent or who were naturalized prior to the commencement of the interim constitution in 1993, or was naturalized after the commencement date of the constitution of the Republic of South Africa Act of 1993, but who, without the Apartheid policy would have qualified for naturalization before then.

2. How do I know in which B-BBEE category my entity falls?

B-BBEE classify entities based on annual turnover, namely:

• Start-up Enterprise. This is a recently formed or incorporated entity that has been in operation for less than one (1) year. A start-up enterprise does not include any newly constituted enterprise which is merely a continuation of a pre-existing enterprise;
• Exempted Micro-Enterprises (EMEs). This are entities that generate an annual turnover of R0 and less R10 million.
• Qualifying Small Enterprises (QSEs). These entities have an annual turnover of above R10 million and less R50 million.
• Large Enterprises, are entities with an annual turnover of above R50 million.

Kindly note that these turnover bands vary in the Industry Sector Codes, so refer to the relevant Code for further detail.

3. How do I know I belong to a sector code?

There are various Industry Sector Codes that are either already finalised or in process. These Sector Codes have been formulated through an in-depth process by a committee of industry representatives to customise the general DTI Codes for the specific needs or challenges of major industry sectors.

BEE verification agencies ensure that companies are rated on the correct Code once they embark on the verification process, which ultimately is listed on the certificate.  It is best to either read the definition of the Sector Code or contact us to clarify which one pertains to you. Each sector code differs in its targets and turnover thresholds, thus it is important to establish if your entity falls with a specific sector code

4. How can a measured entity obtain a B-BBEE certificate?

EMEs:

• All EMEs are exempted from B-BBEE compliance and receive automatic B-BBEE Recognition Level 4.
• An EME which is at least 51% black owned automatically receive level 2 status and those which are 100% black owned receive level 1.
• EMEs only have to obtain a sworn affidavit or CIPC certificate.
• The sworn affidavit must be signed by a Commissioners of Oaths.

QSEs:

• QSEs which are at least 51% black owned or 100% black owned are treated the same as EMEs, they receive automatic B-BBEE Recognition Levels 2 and 1 respectively and also have to only obtain a sworn affidavit.
• The rest of the QSEs (less 51% black shareholding) must be verified through an accredited verification professional.

Large Enterprises:

• Large companies must be verified by an accredited verification professional. (Currently only SANAS approved agencies)

Kindly note that these rules vary in the Industry Sector Codes, so refer to the relevant Code for further detail

5. What is fronting?

An entity or structure established to circumvent Black Economic Empowerment For example: The creation of an entity which has no capability (staff or assets) merely to provide a good BEE level, splitting a company into smaller entities to fall into EME or QSE categories, and so forth.

Fronting is now a criminal offence with harsh penalties.  It can be reported to the BEE Commission for investigation and further action.

*Thank you to  Mazars for providing this interesting source of information.