Whilst most business owners are scared off by BEE terminology, BEE is a rather simple government policy, which is mostly referred to as Black Economic Empowerment. With the implementation of the newly Amended BEE Codes, companies will have to be proactive in their approach to transformation in order to maintain a good BEE score.
It is important to know that BEE is not forced upon any entity by law. HOWEVER, any entity wanting to do business with the Government or any Organs of State must be BEE Compliant first. The process of becoming BEE Compliant is known as the BEE Verification process.
This is a process where the entity needs to come into contact with a SANAS Accredited BEE Verification Agency. Together with the Verification Agency, the entity needs to undergo a partial or full audit to determine its BEE Compliance Levels.
Benefits of being BEE verified:
Your business will have to be 100% compliant if you want to engage with any kind of Government Body to:
- Apply for a tender
- Purchase a state-owned asset or
- Enter a public-private partnership
- Private companies that engage in business with each other may also reap the benefits of being BEE compliant through preferential procurement. Larger businesses are incentivised to do business with you because it improves their own B-BBEE score.
- Being BEE compliant means, you will not miss out on prospective business from companies wanting to deal only with BEE compliant companies. It could also mean you gain business from non-compliant competitors.
And lastly, if you have a B-BBEE Certificate you become eligible for obtaining grants and finance. You can also be a beneficiary of corporate supplier development initiatives.
General BEE regulations
All start-up enterprises are Exempt Micro-Enterprises for the first year following their formation or incorporation, regardless of their expected revenue.
Following the first year: an Enterprise may continue as an Exempt Micro-Enterprise (EME). Evidence required for such qualification is a certificate from an auditor’s or similar accounting officer or verification agency.
An EME is any business that has an annual turnover of less than R10 million and it has nothing to do with ethnicity. In the case of a Real Estate Enterprise, the annual turnover amount is R2.5 million.
EMEs automatically qualify for a level FOUR scorecard and 100% procurement.
Every EME is required to have their certificate, which acts as an affidavit, issued and signed by their accounting officer or auditor, in their bookkeeping system.
There is no submission of this certificate required to be sent to any organisation.
The certificate needs to be renewed annually.
Amended Property Charter
The Amended Property Charter applies to the residential and commercial property industry and to property services such as property management, broking companies, estate agents, and property valuation professionals.
The EME turnover threshold has remained at R2,5 million for estate agencies, broking companies, and valuation companies. The QSE (Qualifying Small Enterprise) maximum thresholds have been adjusted to R400 million for asset-based companies, R50 million for service-based companies, and R35 million for estate agencies, broking companies, and valuation companies.
An estate agency with an annual turnover of less than R2., procurement.
An estate agency with an annual turnover of R2,5 to R35 million qualifies as a QSE. A QSE must obtain a certificate and must select any 4 of the available 8 elements of the Property Scorecard when being verified. Should you reach this threshold, contact your accounting officer and have them upgrade your B-BBEE status accordingly.
A QSE needs to submit its verified BEE certificate to the Property Sector Council annually. This report will be made publicly accessible.
Remember, BEE compliance is NOT a legal requirement under the Act. However, it is necessary if you want to profit from its benefits.
The Amended Property Sector Code does not dictate the level of B-BBEE compliance an entity needs to have in order to be compliant. As such a level 8, being the lowest level at 31 points can also be attained and is beneficial. Black ownership is only one of the areas in which compliance is based as a fully black-owned entity automatically achieves level 1 and a 51% owned entity level 2.
Other areas of assessment to qualify are:
- Employment Equity – management and/or employees.
- Preferential Procurement – securing the services of B-BBEE compliant companies.
- Enterprise Development – developing the professional and managerial skills of black employees.
Socio-Economic Investment – Company’s spend on the development of previously underprivileged communities which can be done through a Portfolio Trust Fund or some other reliable BEE social development company or non-profit organisation.
How is BEE Compliance Expressed and what level is considered Compliant
Level 4 is considered fully compliant.
A QSE is not expected to be at level 4 when it begins and they have 5 years in which to reach that level, should the entity owner wish to do so.
The cost of obtaining a BEE verified certificate varies in accordance with annual turnover, number of employees, and the area in which the business is situated. Based on an annual turnover of R2.5 – R35 million, 20 employees, and operating in Johannesburg, the cost will be approximately R11 460 excluding VAT, and it needs to be renewed annually.