Must I Be BBBEE Compliant?

After a lengthy review process, the BBBEE Amendment Bill was signed into law by President Jacob Zuma in January 2014. Here’s what South African business owners – including franchisees and franchisors – need to know…

What is BBBEE?

BBBEE stands for Broad-Based Black Economic Empowerment and it’s an initiative designed to redress the economic inequalities created by Apartheid. Explains the Department of Trade and Industry, the Broad-Based Black Economic Empowerment Act (BBBEE) Act No. 53 of 2003 has as its fundamental objectives the advancement of economic transformation and enhancement of economic participation of black people in the South African economy. The Act provides a legislative framework for the promotion of black economic empowerment (BEE) and empowers the Minister of Trade and Industry to issue Codes of Good Practice and publish Transformation Charters and provides for the establishment of the BBBEE Advisory Council (which has been in place since 2009).

What is the BBBEE Amendment Bill?

The BBBEE Amendment Act, No. 46 of 2013 replaces the BBBEE Act No. 52 of 2003. Reports PoliticsWeb, there are three key changes:

1. It sets out heavy penalties for so-called BEE ‘fronting’

2. It provides a very broad definition of fronting

3. It empowers the new BEE commission to investigate fronting, amongst other things

New BEE Codes

Also gazetted in October 2013, new BBBEE Codes of Good Practice – these will come into effect in October 2014. These Codes contain the so-called BEE Scorecard, according to which a business can score points in relation to certain pillars – for example, how many of the shareholders, directors and managers are previously disadvantaged individuals (PDIs), whether the business procures services from other businesses which are BEE compliant, and so on. While small businesses can currently choose on which four of the seven pillars they wish to be scored, come October 2014, the new scorecard makes three of five pillars compulsory, i.e. ownership, skills development and procurement.

Should I Get BEE Accredited?

Currently, compliance is voluntary in the private sector but businesses wishing to do business with state-owned enterprises or clients of state-owned enterprises need to be BEE certified. Going forwards, then, it makes sense to obtain certification. To do this, speak to an accredited BEE verification agency.

• Micro-enterprises turning over less than R10 million per annum are exempt (automatically accorded BBEE level 4 status)
• Exempt micro-enterprises and qualifying small enterprises (turning over between R10 and R50 million per annum) which are 51% black-owned will be recognised as BBEEE level 2 contributors.