A BEE (Black Economic Empowerment) Certificate is an independent and credible verification of an organisation’s Broad-Based Black Economic Empowerment (B-BBEE) status. A compliance audit by an accredited body recognised under South African law must be done before a BEE certificate can be issued. B-BBEE is still a relatively new field and has seen a number of recent legislative amendments. For this reason it could be most advisable to consult an organisation like Strategic Accounting Services to do a BEE audit and to issue a certificate or update its BEE status.
What is Economic Empowerment?
Many countries practise Economic empowerment. Its purpose is to ensure the rights of minorities so that they can have equal access to business opportunities. It is practised in both the developed (e.g. Germany) and developing countries.
In South Africa BEE is a system through which people that were previously blocked from profitable economic activity in pre-1994 SA are afforded opportunities for economic betterment. South Africa has one of the most diverse populations per geographic distribution in the world. Thus BEE has to take into account factors such as race, gender, disability, and sexual orientation
Who Needs BEE Certificates?
The short answer to this is that all companies in South Africa, white- and black-owned need B-BBEE certification. It is such an integral part of South African business that the BEE status of one company also impacts on its client organisations. In order for any organisation to do business with the South African government B-BBEE certification is required. Corporates have Preferential Procurement policies that put companies which have BEE certification at an advantage.
Types Companies and B-BBEE certification
Companies are divided into three categories:
- Generic Enterprises: – turnover greater than R35 Million p.a.
- Qualifying Small Enterprises (QSE): – turnover between R5 Million and R35 Million p.a.
- Exempted Micro Enterprises (EME): – Turnover Less than R5 Million p.a. This includes a recently incorporated entity that has been in operation for less than one year or a start up enterprise.
How B-BBEE is Measured
Weighted measurement is applied to different areas to calculate a B-BBEE score. Each section contributes a certain percentage to the total. The measures include:
- Equity Ownership – 20%
- Management – 10%
- Employment Equity – 15%
- Skills Development – 15%
- Preferential Procurement – 20%
- Enterprise Development – 15%
- Socio-economic Development – 5%
Levels of B-BBEE Compliance
The level of B-BBEE compliance is determined by the B-BBEE score. This level is important because it allows another organisation to claim procurement recognition for doing business with your company. The levels can be summarised thus:
- Level 8 – with a score of below 30: Non-compliant with 0% procurement recognition
- Levels 7 – 5; scores between 30 and 64.99: Partially compliant with up to 80% procurement recognition.
- Level 4; scores between 65 and 74.99: This is the watershed level because these companies are regarded as sufficiently compliant with 100% procurement recognition. All EMEs have a minimum level four status. Exemption in this case does not mean no BEE certificate is required. It simply means that they automatically qualify for full procurement recognition
- Levels 3 – 1; scores between 75 and 100 or above: Procurement recognition for the three levels is 110%, 125% & 135% respectively.
Legal Requirements and Accreditation for B-BBEE Certification
B-BBEE certification must be done by an accredited body to verify the degree to which an organisation applies the legal principles of B-BBEE. These principles are legislated in the Broad-Based Black Economic Empowerment Act (Act No. 53 of 2003), commonly referred to as the BEE Act or the B-BBEE Act. As an organisation registered with the South African Institute of Chartered Accountants (SAICA), a BEE certificate issued by Strategic Accounting Services is valid.
Who may issue BEE Certificates?
In recent years there has been a debate as to who may issue BEE certificates. Both approved auditors of the IRBA (Independent Regulatory Board of Auditors) and SANAS (South African National Accreditation System) are authorised by the Department of Trade and Industry (DTI) to accredit organisations that audit and issue BEE Certificates. Neither IRBA nor SANAS themselves issue B-BBEEE certificates.
It should be clear that B-BBEE has become much more of a formalised issue for business. It requires time and a care to apply and make a fair evaluation. What is critical about a BEE certificate is that it must be independently verified by an accredited organisation such as Strategic Accounting Services to ensure the validity of the BEE certificate.