What small businesses need to know about BEE
by Claire Stewart on 27/02/08 at 9:36 am
9 comments
I was chatting to a friend a few days ago who mentioned that one of the factors stopping her from taking the plunge and going into business for herself was BEE. It struck me once again that so many people don’t realise that BEE really doesn’t affect small businesses until you get to a reasonable size.
Here’s why…
If your business grosses less than R5 million per annum, its exempt from BEE and deemed a Level 4 Contributor. This means that other businesses that buy goods and services from you can count 100% of their spend with you on their BEE Scorecard.
If your business grosses between R5-R35 million, it would fall into the Qualifying Small Enterprises category. Here you can choose to use your best 4 out of the 7 pillars of BEE when calculating your Scorecard (each of the 4 pillars comprising of 25 points).
It’s pretty easy to get a good BEE Scorecard even if you have no black ownership at all. (Please note that by ‘black’ the Act refers all South African citizens of colour.) The BEE Scorecard is made up of 7 pillars: Ownership, Management, Employment Equity, Skills Development, Enterprise Development, Residual Element (charity) and Preferential Procurement (the driver of BEE).
Many QSE’s have a problem when it comes to Ownership and Management, so how do you get a good rating when you don’t have enough black owners or managers? Well, here are some ways that you can get an awesome rating:
Employment Equity: obviously employ as many people of colour (particularly women) as possible and upskill them towards promotion.
Skills Development: spend time and money training black employees. In house training counts towards this- you just have to keep the appropriate records and work it out as a percentage of the trainer’s salary.
Enterprise Development: find one of your suppliers or a business that you know that is black owned and either spend a bit of time training them how to give you great service or give them your old computers, telephone systems etc.
Residual Element: give money or old equipment to charities where the beneficiaries are black.
Preferential Procurement: choose suppliers that give you both good service and have a good BEE rating.
Organisations only need to get a score of between 65-75% to be recognised as Level 4 Contributors which is really achievable if you do some work on your pillars.
Business that gross more than R35 million per annum use the Generic Scorecard to calculate the organisation’s BEE Scorecard (all 7 pillars). This is more onerous and complicated but at this stage, the organisation is not a struggling small business so should have the resources to address the challenge.
In summary: BEE really isn’t as bad as it looks for SMME’s. Do a bit of work, get a good Scorecard and you can really use it as a competitive advantage.
Claire Stewart is the founder of PeopleWise, an HR and Employment consulting service. Like Neo in the Matrix, Claire sees through the convoluted mess of SA employment law and makes sense of it for you, loyal Ideate reader. View more articles by Claire Stewart.
JC
Feb 27th, 2008
Your website is broken in Firefox… The TV is out of it’s intended place floating over the title. Not very professional IMHO.
Fred
Feb 27th, 2008
Hi Jan Carel, we’re aware of the bug in FF3. Most people are using FF2 and variations thereof. We haven’t scheduled the time to update it, taking the risk mainly because FF3 is still in Beta. You’re a legend for pointing it out – thanks for your support, and your humble opinion is well taken. Love, the Ideate team.
Alan Levin
Feb 28th, 2008
Hi,
Great article, well written, easy to understand and says all the right things. Many thanks.
Is there a simple formula that’s freely available. I mean does one need to spend a few thousands going to a SEESA or something like that or can one apply internal resources to create a scorecard or cert. Where is your cert from? Can you make it available in a readable format (ie a bit bigger)?
I use FF exclusively, I think a beta is just that so the bug may not be with your website. A beta is by definition, buggy.
warm regards.
Claire
Mar 4th, 2008
Hi Alan, thanks for the kind comments- I’m pleased you found the article informative. Unfortunately I haven’t come across a free BEE Scorecard calculator- it would be fantastic if the Department of Trade and Industry produced one. But having a Qualifying Small Enterprise Scorecard calculated should not cost a lot- the average is about R1,500.
Warm regards,
Claire
Natalie
Mar 27th, 2008
Hi Claire,
Thanks for your article, I have been searching the net for information about BEE and it can really scare you what is out there, I have been doing most of the things you discussed, not even knowing I could get points, your article helped me alot.
Natalie
Delene Koekemoer
Nov 26th, 2009
Hi Claire,
Is there a time limit or any penalty for non conformance?
Claire
Nov 27th, 2009
Hi Delene,
No,there’s no time limit or penalties. BEE is purely driven by organisation’s needing good BEE rating for tenders.
Apart from that there are no legal requirements to get a BEE rating.
Dani
Jan 6th, 2010
Hi, I am new to this whole BEE business so please excuse my stupidity. How does a company find out what it needs to have in place in order to go for their BEE scorecard. For example for the employment equity, does each employee have to have their own job description, yearly assessments etc? Does the whole Human Resource structure have to be in place and is there a check list that a company could use to make sure that these things were indeed in place before starting the whole BEE process.
Claire
Jan 18th, 2010
Hi Dani,
There are a number of prerequisites for each pillar but an organisation does not have to have a comprehensive HR Structure in place. The best thing to do would be to get a BEE Consultants in to give you some advice- it is fairly complicated.
Try BEESA or DRG Siyaya,
Kind regards,
Claire