Compliance with BBBEE is a turnover- based consideration. Businesses are categorised into 3 levels for this purpose, namely: Exempt Micro Enterprises (“EME”), Qualifying Small Enterprises (“QSE”) and Generic Enterprises (“GENERIC”). EME’s compliance is much more lenient than the other levels. QSE’s on the other hand, have relieved compliance in terms of the scorecard while GENERIC businesses require full scorecard compliance (without any relief).
Entities are measured on turnover as set out below:
EME - Annual Turnover less than R10 million
QSE - Annual Turnover of R10-50 Million
GENERIC - Annual Turnover over 50 Million
The scorecard elements are: Ownership, Skills development, Enterprise and Supplier Development, Socio Economic Development and Management Control.
What about Multinationals?
The BBBEE Codes of Good Practice recognise that compliance with BBBEE is a challenge for Multinationals and have made provision for the equity equivalent programme (EEP). In order for the Multinational to apply for any EEP, they would need to prove that they have not concluded an ownership transaction elsewhere in the world, as it is global policy not to do so, and they believe they may be prejudiced by doing so. EEP contributions count towards the ownership element of BBBEE made by Multinationals.
According to the DTI:
“The value of these EE contributions may be measured against 25% of the value of the Multinational’s South African operations or may be measured against 4% of the Total Revenue from its South African operations annually over the period of continued measurement.” 1 EEP would entail a public programme/scheme and/or private programme/scheme designed to fulfil the requirements of BBBEE ownership. 2 It may also entail a programme targeting investment or any other programme that promotes Socio-Economic advancement/ development within the South African Economy. It needs to be approved by the Minister of Trade and Industry in order to qualify for ownership points on the scorecard.
It is important that Companies that must comply with these Codes are properly advised from planning to implementation. For Multinationals compliance can be a daunting task, we therefore recommend reaching out to an expert at SchoemanLaw.
- Post written by SchoemanLaw, a partner of Workshop17
SchoemanLaw offers Workshop17 members access to their SME Self-Service Desk with access to legal documents ideal for SME’s, entrepreneurs and freelancers.