articles does your small business need a b bbee certificate

A B-BBEE certificate may not be the first thing on your business’s to-do list – and the good news is that it doesn’t have to be.

However, while BEE compliance isn’t an obligation on your part, as a private business owner a valid B-BBEE certification could open up more opportunities for you.

Here’s what you need to know to make BEE work for your business.

1. Why is a B-BBEE certificate important?

Some of the best opportunities available to your business involve doing work for government, state-owned enterprises and large corporates.

A valid B-BBEE certificate from an accredited – with either IRBA or SANAS – BEE Verification Agency helps you correctly implement BEE, get a good score and grow your business’s bottom line.

"Complying from the get-go and allowing BEE compliance to form part of your overall business strategy creates a positive image from the out-set and reduces your admin in the long run.” -
Louis Pulzone
LFP Group CEO

Pulzone’s advice is for companies to align their initiatives from the early business stages, laying the foundation for success later on.

2. Do small businesses require a B-BBEE certificate?

Yes, you need BEE verification to do business with government and corporates because they, in turn, have to be compliant with BEE in their supply chain.

Top Tip
According to Louis Pulzone from LFP Training, the more empowered a corporate’s suppliers, the more points they can earn on their scorecard. This is almost a super-power for your small business. You can leverage Preferential Procurement, otherwise known as the BEE status of suppliers, by ticking the boxes your customers need from you.

Ensuring your entire supply chain is BEE compliant can be admin-intensive, but preferential procurement is a relatively easy way to score B-BBEE points. Large corporates boost their BEE status through working with SMEs. Tap into the need for big businesses to have BEE-compliant small suppliers by getting ahead of the competition with BEE certification.

3. Can a small business get a QSE affidavit instead of a B-BBEE certificate?

BEE for small business considers SMEs with an annual turnover of under R10 million as Exempt Micro Enterprises (EMEs). In this case, when applying for tenders, contracts and CSD registration, you’ll need to submit an Official BEE Affidavit by law. The Official BEE Affidavit serves as your BEE certificate and it is compulsory for your EME to qualify as BEE compliant.

4. What is the BEE scorecard?

The pillars for your SMME BEE scorecard each hold a specific ‘weight’ in their respective contribution to B-BBEE compliance. Overall compliance is calculated as follows:

  • Ownership - 25%
  • Management - 19%
  • Skills Development - 20%
  • Enterprise Development - 40%
  • Socio-Economic Development - 5%

On 31 May 2019, the Department of Trade and Industry (dti) released gazetted changes to the BBBEE codes. The dti’s new BEE scorecard covers updated versions of:

  • Preferential Procurement
  • Enterprise and Supplier Development
  • Skills Development
  • General Principles
  • Interpretations and definitions.

EMEs are exempt from the above, but automatically move to a level associated with their percentage of black ownership, as below:

Black ownershipBEE (B_BBEE) Status levelProcurement Recognition
100% Black Owned EMELevel 1135%
>50% Black Owned EMELevel 2125%
<50% Black Owned EMELevel 3100%

Remember that to qualify your small business as an EME, your annual turnover must be confirmed by an auditor, accountant or rating agency.

5. What is a Qualifying Small Enterprise in terms of BEE level scoring?

If your annual turnover exceeds R5 million, but is less than R35 million, your small business is known as a Qualifying Small Enterprise (QSE). In terms of BEE for small business regulation, your SMME is partially audited on five of the seven elements below:

  • Ownership
  • Management
  • Employment equity
  • Skills development
  • Procurement
  • Enterprise development
  • Socio-economic development.

Before 2014, QSEs could earn points by choosing only four out of the seven BEE Scorecard elements, but the revised BEE (B-BBEE) Scorecard requires compliance of at least five after an on-site audit.

6. What are the options for family-owned businesses when it comes to BEE compliance?

Employee share ownership is a good way to ensure your business’s BEE status is compliant. If you’re looking to boost your BEE status, before you set up an Employee Share Ownership Plan, your first step should be to consult with your rating agency to find the best way to structure your plan.

Skills development training is another aspect that can benefit your business in terms of SMME BEE. While skills development doesn’t give you quite as many points as it used to – as of May 2019 – it’s still a very cost-effective way to earn points while also upskilling your employees.

More Skills Development changes in BEE for small business can be found on Seta’s website, or by speaking to an expert.

7. What are the options to obtain a B-BBEE certificate for Joint Venture partnerships?

Instead of starting a special purpose vehicle or incorporated joint venture, consider creating an unincorporated joint venture (UJV) instead. Not only is it less admin-intensive, but UJVs are also included in and accepted under the provisions of most government tenders and the B-BBEE codes.

“A UJV is required to have its own consolidated B-BBEE certificate; with the UJV’s B-BBEE status being determined by combining the scores of each entity that is party to the agreement according to the UJV revenue / control split,” say Tyron Fourie and Grant Williams, partners at Eversheds and Sutherland.

Ensure that each company in the UJV has a valid B-BBEE certificate. According to legal firm Eversheds Sutherland, this is because all parties involved in the UJV are responsible for:

  • Making sure the structure’s ‘ownership’, compliance and control arrangements are compliant with the provisions of the agreement
  • That the customer’s requirements are met
  • What has been committed by the UJV participants to the customer as well as the provisions of B-BBEE legislation are met.