BEE for SMME's

Last week 6 more verification agents were accredited which means that there are now 11 BEE Verification agencies in South Africa. What are BEE verification agencies you ask? Well theyíre the companies that Ďaudití your BEE Scorecards and the information that you have provided in calculating your organisationís BEE Rating. Now that these verification agencies are in place, I think that there are going to far more demands on organisations of all sizes throughout South Africa to have BEE ratings. So I thought Iíd base my next few articles on BEE and how it affects SMMEís.

BEE Scorecards are made up of 7 pillars:

  • Ownership
  • Management
  • Employment Equity
  • Skills Development
  • Preferential Procurement
  • Enterprise Development
  • Corporate Social Investment

Preferential Procurement is the pillar that is driving BEE in the South African economy. It has become a tendering requirement to have a good BEE rating and since Preferential Procurement is a relatively Ďeasyí way to obtain points on a BEE Scorecard, organisations are increasingly requiring their suppliers to have a good rating which they can then use when calculation their Scorecard.

So how do you apply BEE to your business? Well the Codes of Good Practice that govern the application of the BEE Act, divide organisations into 3 types:

  • Organisations with a gross annual turnover of less than R5 million are called Exempted Micro Enterprises (EMEís)
  • Organisations with a gross annual turnover between R5-R35 million are called Qualifying Small Enterprises (QSEís)
  • Organisations with a gross annual turnover of above R35 million are called Generic Enterprises

What is particularly relevant for smaller enterprises is the following:

Exempted Micro Enterprises (EMEís) are exempt from BEE i.e. they donít have to have a BEE Scorecard but can get their accountant to confirm in writing that their gross annual turnover is less than R5 million and as such they are deemed to be an EME and a Level 4 BEE Contributor.

This means that organisationsí that buy goods and services from them can count 100% of the amount that they spend with them on in their own Scorecard calculation. Very nice.

Qualifying Small Enterprisesí (QSEsí) scorecard calculations are far less onerous than the Generic Scorecard calculation and furthermore, QSEís can choose the best four pillars in their calculation and omit the other 3 pillars- also very nice.

Donít think that just because your organisation is small, that big organisationís wonít care what your BEE rating is- under the Generic Scorecard Preferential Procurement calculation 3 points are specifically allocated to spend on EMEís and QSEís.

In my next article, Iím going to explore the various pillars in more detail, how they are made up and what organisations need to do to achieve good scores within each pillar.

In the meantime, if youíre madly curious, check out BEE on the Department of Trade and Industries website www.dti.gov.za or give me a shout.

Cheers for now,