Practice Management

Making Business Sense of BEE

By the beginning of 2004 when the BEE Act was promulgated, numerous sectors of the economy had drafted Industry Charters on BEE and transformation. While some contained scorecards loosely based on the broad-based scorecard contained in the Strategy, others were merely written undertakings of commitment to transformation.

It became evident that other pertinent issues surrounding the measurement of BEE needed to be addressed to further accelerate the transformation process.

When the shortcomings of narrow-based black economic empowerment became apparent, a need emerged for a more inclusive approach to empowerment that would begin to narrow the divide between the first and second economies by putting mechanisms in place to accelerate the entry of black people into the first economy. This approach became known as broad-based black economic empowerment (B-BBEE).

What is BEE?
Black Economic Empowerment (BEE) is a process of helping and educating black people to enable them to contribute to the economy. Most companies are already doing that, not to obtain points, but to educate their employees.


'Good' News
BEE is not about selling 51% of your company

'Bad' News
In order to become BEE, a company will require a proper understanding of the BEE requirements. It is a process that will require time, effort and effectively directing your resources towards obtaining a proper BEE score.

Who do the codes apply to?
Once gazetted, the Codes of Good Practice will be binding on all organs of state and public enterprises. This means that, as per section 10 of the BEE Act, government must apply the Codes when entering into decisions affecting the above areas.

By deduction, private sector enterprises must apply the Codes should they wish to interact with organs of state and public entities.

How will the Codes be applied?

The Codes of Good Practice will be important for decision-makers when making and reporting on economic decisions. The following examples will demonstrate how the Codes will be implemented by such decision-makers when:

- reporting BEE spend and initiatives,

- making economic decisions based on BEE criteria,

- selecting and implementing BEE initiatives.

In summary, it means that all public enterprises and state organs will require an accreditation certificate to verify the BEE status of their suppliers. This will be used to calculate their procurement efficiency and for reporting purposes on spend with BEE-compliant entities versus non-BEE-compliant entities.

Government recognises the difference in BEEmeasurability between large companies and small/medium enterprises. A separate QSE scorecard (Qualifying Small Enterprise Scorecard) has been developed based on turnover and staff criteria.

What is a QSE?
In order to be classified as a QSE, an enterprise must meet the qualifying criteria as listed in the codes. Finance and business services will qualify as QSEs when the annual turnover is less than R10 million and less than 50 people are employed. In this case, the enterprise will be measured in accordance with statements 1000 to 1700.

Thresholds set are based on Turnover and Number of Employees as per Sector. It is widely expected that the existing turnover thresholds will be reviewed and the Employee Number omitted in the final phase two BEE Codes.

Differences between the GENERIC and the QSE scorecards
Element Generic QSE
Ownership 20 points Code 100 20 points Code 1100
Management & Control 10 points Code 200 20 points Code 1200
Employment equity 10 points Code 300 20 points Code 1300
Skills development 20 points Code 400 20 points Code 1400
Preferential procurement 20 points Code 500 20 points Code 1500
Enterprise development 10 points Code 600 20 points Code 1600
Residual 10 points Code 700 20 points Code 1700

  • A Qualifying Small Enterprise may elect to be measured using five of the seven elements.
  • Should there be no employees in the employ of the measured enterprise, the enterprise cannot include the employment equity elements.
  • Each indicator will have a weighting of 20 percent, resulting in a total of 140 available BEE points.
  • When electing to be measured using more than five of the seven elements, the BEE Status must be determined using a total of 125 BEE points.
  • A Qualifying Small Enterprise which elects to include the ownership element in their measurement, will have its ownership score (including bonus points) multiplied by 1.25, provided that the enterprise scores a minimum of 20 points (including bonus points) for ownership, before the application of this multiple.

BEE Procurement
The BEE points scored will determine the BEE procurement recognition level of that enterprise for purposes of Preferential Procurement.
Contribution levels Qualification pts BEE recognition level
One 100+ 135%
Two 85+ 125%
Three 75+ 110%
Four 65+ 100%
Five 55+ 80%
Six 45+ 60%
Seven 40+ 50%
Eight 30+ 10%
Nine <30 0%

Benefits of being a BEE Enterprise
Having a BEE status will be a reality of doing business in South Africa. Many traditional businesses view this as being negative, but let us consider some of the benefits:
  • Access to business contracts
  • Increasing market share through obtaining early compliance status
  • Targeted for Enterprise Development Contributions
  • Fulfilling social responsibilities
  • Utilizing BEE Scorecard to improve business operations and policies through

    • Skills Development
    • Employing people to reflect the new South African economy
    • Staff incentive schemes

  • While some consider BEE, others are already tapping into the opportunities created!

    For further information on Broad Based BEE and BEE Verifications, visit, or email Obed de Swart or phone him at 0861 947 826 or cell 0824453451.

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