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BEE for SME’s

by Claire Stewart on 23/02/09 at 7:59 pm
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Last week 6 more verification agents were accredited which means that there are now 11 BEE Verification agencies in South Africa. What are BEE verification agencies you ask? Well they’re the companies that ‘audit’ your BEE Scorecards and the information that you have provided in calculating your organisation’s BEE Rating. Now that these verification agencies are in place, I think that there are going to far more demands on organisations of all sizes throughout South Africa to have BEE ratings. So I thought I’d base my next few posts on BEE and how it affects SMME’s.

Firstly to reiterate an article that I wrote a while ago - BEE Scorecards are made up of 7 pillars:

1. Ownership
2. Management
3. Employment Equity
4. Skills Development
5. Preferential Procurement
6. Enterprise Development
7. Corporate Social Investment

Preferential Procurement is the pillar that is driving BEE in the South African economy. It has become a tendering requirement to have a good BEE rating and since Preferential Procurement is a relatively ‘easy’ way to obtain points on a BEE Scorecard, organisations are increasingly requiring their suppliers to have a good rating which they can then use when calculation their Scorecard.

So how do you apply BEE to your business? Well the Codes of Good Practice that govern the application of the BEE Act, divide organisations into 3 types:

• Organisations with a gross annual turnover of less than R5 million are called Exempted Micro Enterprises (EME’s)
• Organisations with a gross annual turnover between R5-R35 million are called Qualifying Small Enterprises (QSE’s)
• Organisations with a gross annual turnover of above R35 million are called Generic Enterprises

What is particularly relevant for smaller enterprises is the following:

Exempted Micro Enterprises (EME) are exempt from BEE i.e. they don’t have to have a BEE Scorecard but can get their accountant to confirm in writing that their gross annual turnover is less than R5 million and as such they are deemed to be an EME and a Level 4 BEE Contributor. This means that organisation’s that buy goods and services from them can count 100% of the amount that they spend with them on in their own Scorecard calculation. Very nice.

Qualifying Small Enterprises (QSE’s)’s scorecard calculation is far less onerous than the Generic Scorecard calculation and furthermore, QSE’s can choose the best four pillars in their calculation and omit the other 3 pillars- also very nice.

Don’t think that just because your organisation is small, that big organisation’s won’t care what your BEE rating is- under the Generic Scorecard Preferential Procurement calculation 3 points are specifically allocated to spend on EME’s and QSE’s.

In my next article, I’m going to explore the various pillars in more detail, how they are made up and what organisations need to do to achieve good scores within each pillar.

In the meantime, if you’re madly curious, check out BEE on the Department of Trade and Industries website www.dti.gov.za or give me a shout.

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.

Tags: BEE, HR, small business, South Africa

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