There has been a huge amount of pressure on organisations to not only become BEE compliant, but to have a certain rating on their B-BBEE certificate. Many companies are also putting pressure on their suppliers to improve levels of black ownership. Failing to comply can result in the organisation losing much needed revenue through the securing of contracts.
We have found many instances where companies are trying to ensure that their suppliers are attaining a certain B-BBEE level and ignoring the impact of black ownership. In many cases this happens when the procuring company is still measured under an unamended sector code, is scoring a good level underthought sector code and see no reason why their suppliers cannot achieve the same BEE level.
By way of an example, your organisation is currently a level 5 with 51% black ownership and 30% black women ownership. As a Supplier to the Measured Entity, you bring significant benefits to the preferential procurement scorecard as:
- Companies are scored on their procurement from companies which are black owned.
- You are 51% black Owned and 30% Black women owned.
- This means that Procurement from your organisation can be included in a minimum of 3 areas on the preferential procurement Scorecard for your customer. These areas are Total Procurement, procurement from companies that are 51% black owned and procurement from companies that are 30% black women owned.
- If you are an EME or QSE, you will also be scored under procurement from an EME or QSE in addition to the above.
- A company that is a level 4 with no black ownership will only be scored on 1 line on their BEE scorecard.
To show this by way of example assume procurement of R50 million from:
- A Level 5 company with 51% Black Ownership and 30% Black Woman Ownership.
- A Level 4 company with no black Ownership.
- A level 2 company with no black ownership.
- In all cases the companies are Empowering Suppliers with valid B-BBEE certificates and are scored on the Generic Scorecard.
| Level 5 Supplier | Level 4 Supplier | Level 2 Supplier | |
| Can be claimed for procurement – Empowering Supplier | Y | Y | Y |
| Can be claimed for procurement – Valid B-BBEE Certificate | Y | Y | Y |
| B-BBEE Procurement Spend from all Empowering Suppliers as % of Measured Spend | 40,000,000
(R50 x 80% (level 5)) |
50,000,000
(R50 x 100% (level 4)) |
62,500,000
(R50 x 125% (Level 2)) |
| BEE Procurement Spend from Empowering QSE Suppliers | – | – | – |
| BEE Procurement Spend from EME Suppliers | – | – | – |
| BEE Procurement Spend from Empowering 51% Black Owned Suppliers | 40,000,000 | – | – |
| BEE Procurement Spend from Empowering 30% Black Woman Owned Suppliers | 40,000,000 | – | – |
| Total B-BBEE claim | 120,000,000 | 50,000,000 | 62,500,000 |
Many companies are struggling to find suppliers with 51% Black Ownership and 30% Black Women Ownership, and many are discounted a B-BBEE level due to this struggle.
It may give you a strategic advantage over your competitors to have 51% black ownership which includes 30% black women ownership. You will then assist customers to a better scorecard, even when scored against a company with a better BEE score, as shown by the example above. Your organisation can assist them as spend with your organisation will result in a claim of R120 million under the above scenario, opposed to a spend of R50 million for the Level 4 supplier, or R62,500,000 for the level 2 supplier.
If you have any B-BBEE consulting needs, please contact either Charlene Skipp on [email protected] (083 780 7209) or me on [email protected] (083 440 2130).
Kind regards
Richard