Brush Up on Your BEE Knowledge [Updated]

Updated on 3 July 2020

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[UPDATE – 03 July 2020]

Brush up on your BEE knowledge
What is BEE?

South Africa’s policy of Black Economic Empowerment (BEE) is not simply a moral initiative to redress the wrongs of the past. It is a pragmatic growth strategy that aims to realise the country’s full economic potential, while helping to bring the black majority (African, Indian and Coloured) into the economic mainstream, many of whom were systematically excluded from meaningful participation in the country’s economy .

What is the purpose of BEE in South Africa?

Black economic empowerment – or broad-based black economic empowerment, as it is technically known – is not affirmative action, although employment equity forms part of it. Nor does it aim to take wealth from one group and give it to another.

It is essentially a growth strategy, targeting the South African economy’s weakest point: inequality. No economy can grow by excluding any part of its people, and an economy that is not growing cannot integrate all of its citizens in a meaningful way.

As such, this strategy stresses a BEE process that is associated with growth, development and enterprise development, and not merely the redistribution of existing wealth.

“Black economic empowerment is an important policy instrument aimed at broadening the economic base of the country – and through this, at stimulating further economic growth and creating employment. The strategy is broad-based so it reflects the government’s approach, which is to “situate black economic empowerment within the context of a broader national empowerment strategy.”

What is the difference between BEE and B-BBEE?

BEE refers to the government’s policy,  B-BBEE is the implementation of the policy. Both refer to the same strategic framework that seeks to right the wrongs of the past and to distribute the wealth of nation across all races and genders.  

What are the main objectives of BEE?

Through its BEE policy, the government aims to achieve the following objectives:

  • Empower more black people to own and manage enterprises. Enterprises are regarded as black-owned if 51% of the enterprise is owned by black people, and black people have substantial management control of the business.
  • Achieve a substantial change in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises.
  • Promote access to finance for black economic empowerment.
  • Empower rural and local communities by enabling their access to economic activities, land, infrastructure, ownership and skills.
  • Promote human resource development of black people through, for example, mentorships, learnerships and internships.
  • Increase the extent to which communities, workers, co-operatives and other collective enterprises own and manage existing and new enterprises, and increase their access to economic activities, infrastructure and skills.
  • Ensure that black-owned enterprises benefit from the government’s preferential procurement policies.
  • Assist in the development of the operational and financial capacity of BEE enterprises, especially small, medium and micro enterprises (SMMEs) and black- owned enterprises.
  • Increase the extent to which black women own and manage existing and new enterprises, and facilitate their access to economic activities, infrastructure and skills training.

How do the BEE codes and scorecard work?

The Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice emerged in 2007 to provide a standard framework for the measurement of BEE across all sectors of the economy.

The codes require that all entities operating in the South African economy make a contribution towards the objectives of BEE. The first phase of the codes encourages all entities, public and private, to implement proper BEE initiatives through the issuing of licences, concessions, sale of assets and preferential procurement.

The second phase of the codes covers the seven components of the B-BBEE scorecard, namely: ownership; management control; employment equity; skills development; preferential procurement; enterprise development; and socioeconomic development (including industry-specific and corporate social investment initiatives).

The Strategy on B-BBEE, released in 2003, assigns points values to the seven elements of the B-BBEE scorecard as follows:

Management control10
Employment equity10
Skills development20
Preferential procurement20
Enterprise development10
Residual (sector determined)10
Source: Strategy on B- BBEE

The B-BBEE Act of 2003 makes the codes binding on all state bodies and public companies, and the government is required to apply them when making economic decisions on:

  • procurement,
  • licensing and concessions,
  • public-private partnerships, and
  • the sale of state-owned assets or businesses.

What does it take to become B-BBEE compliant?

LFP Group’s CEO, Louis Pulzone shares, in an interview with SME South Africa, 10 steps to becoming B-BBEE compliant. Click here for more details on each step. 

  1. Understand the Scorecard and Industry.
  2. Identify Where You Are Affected.
  3. Find Out if You Can Earn Points.
  4. Collect Documents and Start Earning Points.
  5. Calculate an Initial BEE Scorecard.
  6. Create a Strategy Report.
  7. Earn Points Based on Strategy.
  8. Get a B-BBEE Consultant or Company on Board.
  9. Find Additional Points Through Rechecking.
  10. Complete a Scorecard Audit. 

Why is it important to comply with the legislation? 

Private companies must apply the codes if they want to do business with any government enterprise or organ of state – that is, to tender for business, apply for licences and concessions, enter into public-private partnerships, or buy state-owned assets.

Companies are also encouraged to apply the codes in their interactions with one another, since preferential procurement will affect most private companies throughout the supply chain.

Download: The Broad Based Black Economic Empowerment Act of 2003 and the Amendment Bill of 2011.
Read more: Black economic empowerment [SouthAfrica.Info]

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