If you want to apply for funding or grants from the South African Government you need to have in some cases a B-BBEE level 4 in other instances the shareholding of a Black shareholder determines if you qualify or not.
What is BBBEE?
The BBBEE Act, or Broad-Based Black Economic Empowerment Act, is a South African law that aims to fix the unfair economic situation left behind by apartheid. It does this by encouraging companies to include more Black people in ownership, management, skills development, and other areas of their business. With the persistence of racial inequality in South African society, B-BBEE is a step towards a fairer economy for all.
How does it work?
BBBEE certificates are awarded to businesses based on how well they include Black people throughout the organization. Companies get points for things like Black ownership, hiring Black managers, training Black employees, and buying from Black-owned businesses. The more points you get, the better your “grade” and the more benefits you’ll get. These benefits include things such as easier access to government contracts.
Why was B-BBEE introduced?
Apartheid left deep economic inequalities throughout society and B-BBEE has been an important act to address this issue.
Under apartheid, Black South Africans were denied equal opportunities and wealth creation. They were excluded from owning businesses, holding high-paying jobs, and accessing quality education and training. This created a huge economic gap between Black and White citizens with long-term consequences.
BBBEE aims to bridge this gap by promoting the inclusion of Black people in the economy. It encourages companies to share ownership, invest in skills development, and create opportunities for Black South Africans in various aspects of their businesses.
B-BBEE is an important form of affirmative action to level the playing field and help Black communities build wealth and participate meaningfully in the economy. This is achieved by creating more job opportunities and skills development for Black South Africans.
The ultimate aim is for B-BBEE to contribute to the overall social development of Black South Africans and reduce systemic poverty.
How does it benefit Black-owned businesses?
BBBEE encourages larger companies to prioritize Black-owned businesses as suppliers and partners, giving them a chance to compete and secure valuable contracts. This boosts their sales and growth, allowing them to hire more employees and contribute more to the economy.
B-BBEE also unlocks funding opportunities such as business grants as well as skills development programs, helping Black businesses become more competitive and sustainable and creating a vital leveling-up opportunity for Black-owned businesses to thrive in the South African market.
Who qualifies as Black for BBBEE?
In the context of B-BBEE, the definition of “Black” has a specific legal meaning that encompasses the following groups:
Africans: Individuals of African descent who are South African citizens by birth or descent.
Coloureds: A historically defined and diverse group in South Africa, typically including individuals with mixed ancestry that wouldn’t be classified as African or White.
Indians: Since 2008, South African citizens of Indian descent are also considered “Black” for B-BBEE purposes, following a court ruling.
IMPORTANT: Only South African citizens qualify, regardless of their background. Foreign nationals and South Africans who acquired citizenship after April 27, 1994, don’t fall under this definition.
Do Indians qualify?
South African citizens of Indian descent are considered “Black” for B-BBEE purposes.
B-BEEE vs BEE - is there a difference?
No, there’s no difference. You may see “BEE” used in a similar context to “BBEEE”. BEE stands for “Black Economic Empowerment” and BBBEE is the government’s implementation of the BEE policy. The two terms can be used interchangeably.
Is B-BEEE certification compulsory?
B-BEEE certification is compulsory under the following circumstances:
JSE-listed entities: Publicly traded companies must submit annual compliance reports on their B-BEEE status and undergo verification by a SANAS-accredited agency.
For entities doing business with the government, a valid B-BEEE certificate is often mandatory.
While there are some exemptions (see below), businesses should consider their specific business context and consult with legal professionals or official B-BEEE resources for tailored advice on certification requirements.
Who is exempt from needing certification?
Certain organizations are exempt from B-BBEE certification:
Exempted Micro Enterprises (EME): Businesses with an annual turnover below R10 million can use a sworn affidavit instead of formal certification.
Non-profit organizations are generally exempt from mandatory BBEEE requirements.
Qualifying Small Enterprises (QSE): Businesses with a turnover between R10 million and R50 million have simplified B-BBEE measurement requirements.
Certification is still something you should consider, however, even if your business is firmly within these exemptions: Holding a good B-BEEE rating opens doors to various opportunities, including access to financing, preferential procurement, and partnerships with larger companies. All businesses are encouraged to demonstrate their commitment to B-BEEE principles and report their non-compliance reasons if they’re exempt.
Who issues certificates?
There is no central authority that issues B-BBEE certificates; they can be obtained through an accredited verification professional who will ensure that your company’s BBBEE compliance accurately reflects the requirements outlined in the Broad-Based Black Economic Empowerment Act.
There are two main routes for accreditation:
South African National Accreditation Systems (SANAS): This is the government-appointed accreditation body for various professions, including BBBEE verification. Verification professionals accredited by SANAS are recognized for their expertise and adherence to international standards.
Independent Regulatory Body of Auditors (IRBA): This body primarily regulates auditors and registered accountants but also offers accreditation for B-BBEE verification as an additional service.
It’s important to note that only accredited verification professionals can issue valid B-BBEE certificates; unverified individuals could jeopardize your compliance and lead to penalties. The choice of a verification professional depends on your company’s needs and preferences. Factors to consider include their experience, expertise in your specific industry, and fees. You can find a list of accredited verification professionals on the websites of SANAS and IRBA.
B-BBEE levels explained
Points are awarded for your company’s performance across five key elements (ownership, management, skills development, enterprise development, and socio-economic development). Your total score will put you in one of nine B-BBEE levels:
Businesses should strive for higher levels as these indicate stronger BBBEE practices and more significant recognition benefits: Level 4 and above are considered fully BBBEE compliant for most tendering processes. The higher levels give greater access to government contracts and tenders, there is potential for preferential procurement from other companies and better access to funding and other development opportunities.
To learn more, consult the B-BBEE Commission website.
The B-BBEE scorecard and scoring criteria explained
The B-BBEE scorecard evaluates a company’s performance across five key elements:
Ownership measures the level of ownership by Black people, including Black women, youth, and people with disabilities, within the company.
Management control assesses the representation of Black people in senior management positions and their decision-making power.
Skills development evaluates the company’s efforts to train and develop Black employees, especially in critical skills areas.
Enterprise and supplier development measures the company’s support for Black-owned businesses through procurement, joint ventures, and other initiatives.
Socio-economic development
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