A Guide to B-BBEE in South Africa

Broad-Based Black Economic Empowerment is a framework measuring how a business contributes to economic transformation. It is not a tax and it is not, for most companies, a legal obligation. It is a score, and the score determines who will do business with you.

That distinction matters. Nobody will fine you for a poor B-BBEE level. But large companies, government departments and state-owned entities weight it heavily when choosing suppliers, and many will not contract with a supplier who cannot produce a certificate or affidavit at all.

The most useful thing for a small business owner to know is this: if your annual turnover is below the exempt micro enterprise threshold, you qualify automatically at a good level and the only document you need is a free affidavit. Many owners pay consultants for something they could have signed themselves.

The framework comes from the Broad-Based Black Economic Empowerment Act and the Codes of Good Practice made under it, which set out how businesses are measured and scored.

The generic codes apply by default. A number of industries have their own sector codes instead, including tourism, agriculture, construction, property, information and communication technology, financial services and others. If a sector code covers your industry, it applies to you rather than the generic codes, and the targets differ. Check which applies before measuring anything.

Businesses are scored and placed on a level from one to eight, with level one the strongest. Each level carries a recognition percentage that determines how much of your invoice value counts towards your customer’s own procurement score, which is precisely why your level affects whether they buy from you.

The earlier BEE framework focused narrowly on black ownership. B-BBEE, introduced to replace it, is broad-based: ownership is only one element among several, alongside management control, skills development, enterprise and supplier development, and socio-economic development.

The practical implication is that a business with no black ownership can still score meaningfully by performing well on the other elements, and a business with black ownership still has to attend to the rest to reach a strong level.

People still use the two terms interchangeably in conversation. When it matters, such as in a contract or a tender document, the framework being referred to is B-BBEE.

Two thresholds do most of the work for small businesses.

Exempt Micro Enterprises are businesses below the lower annual turnover threshold. They qualify automatically at a strong level without being measured against the scorecard, and where the business is majority black owned, at a stronger level still. The only document required is a sworn affidavit confirming turnover and ownership. It is free, and templates are available from the Department of Trade, Industry and Competition.

Qualifying Small Enterprises sit between the lower and upper turnover thresholds. They are measured, but on a reduced scorecard. A majority black owned QSE can also use an affidavit rather than a full verification.

Above the upper threshold, a business is a Generic Enterprise, measured on the full scorecard and requiring verification by an accredited agency. Because the thresholds are periodically revised, confirm the current figures before assuming which category you fall into.

Ownership measures black ownership of the business, including voting rights and economic interest.

Management control measures black representation among directors and in management.

Skills development measures spending on training and development of black employees, including learnerships and bursaries.

Enterprise and supplier development measures procurement from B-BBEE compliant suppliers, and support given to developing black-owned businesses.

Socio-economic development measures contributions to community initiatives benefiting black South Africans.

Some elements are designated priority elements, and failing to meet the minimum on a priority element results in being discounted a level regardless of your total points. That is the trap for larger businesses: a strong overall score undone by neglecting one element.

No business is legally required to have a B-BBEE certificate simply for existing. What compels it is commerce.

You need it if you want to supply government or state-owned entities, tender for public contracts, supply large corporates who are themselves measured, or participate in supplier development programmes. In those contexts a certificate or affidavit is usually a threshold requirement, not a tiebreaker.

You do not need it to trade with consumers or with other small businesses that are not measured.

The sensible approach for a small business is to obtain the affidavit anyway. It is free, it takes an afternoon, and it removes a reason for a larger buyer to decline you. Being asked for it and not having it is how small suppliers lose contracts they had already won on merit.

For a small black-owned business, enterprise and supplier development is the most directly useful part of the whole framework, because large companies are required to spend on it and they need beneficiaries.

ESD funding frequently comes as grants rather than loans, and often arrives with mentorship, business development support and, most valuably, a supply contract. A development programme that includes a purchase order is worth considerably more than one that only provides cash, because it creates revenue that continues after the programme ends.

Finding these programmes means looking at the large companies in your sector and approaching their procurement, transformation or enterprise development teams directly. They are rarely advertised the way public funding is, which is exactly why they are less contested.

If you are a small supplier: get the affidavit, keep it current, and make sure your company registration and annual returns at the Companies and Intellectual Property Commission are in order, because a buyer verifying your affidavit will check the company too. Then target the companies whose supply needs you can actually meet, rather than applying to every programme you find.

If you are a corporate: the programmes that score well and work commercially are the ones that develop suppliers you genuinely buy from, with a contract attached and support that continues long enough to matter. Once-off cash contributions score points and change nothing.

For either side, free business development support is available through the Small Enterprise Development and Finance Agency, which can help get a small supplier to the standard a corporate programme requires.