by Claire Stewart on 06/04/09 at 3:15 pm
In my last post, I wrote about BEE Scorecards and how they apply to businesses of all sizes. In this blog I’ll explore how its possible to get a good BEE Scorecard even if you have no black ownership at all. I’m going to focus on Qualifying Small Enterprises (QSE’s) who have a gross annual turnover of between R5-R35 million. QSE’s are allowed to choose the best 4 out of the 7 pillars of BEE and use those pillars to calculate their BEE Rating.
So how does an organisation achieve points towards their rating? I’ll break it down pillar by pillar:
The ownership pillar is the most complex of the QSE BEE Scorecard- in essence to achieve maximum points an organisation should have a 25% black shareholding which results in a economic benefit (i.e. dividend stream) of the same amount.
(Remember ‘black’ means all people of colour that were RSA citizens before 1994).
There also shouldn’t be any restrictions involved in the ownership scheme. There are bonus points for black women owners and black group ownership schemes such as employee ownership schemes.
The management pillar measures black top management within an organisation and has a target of 50.1% of top management to be black.. Examples of black top management would be the CEO, COO, CFO, Head of Marketing/Sales/PR/HR etc.
There are bonus points for black women top managers.
The employment equity pillar is made up of 2 components:
• firstly black managers as a percentage of all managers with a target of 40%
• secondly black employees as a percentage of all employees with a target of 60%.
There are bonus points for exceeding each component’s target.
It must be noted that if the organisation gets a score of less 40% for each component, they automatically get a zero for that component. Furthermore, the scores are adjusted by a formula that encourages equal participation of women.
The skills development pillar encourages organisations to spend money on training their black employees. The target is to spend 2% of the organisation’s gross annual payroll on expenses related to training. Expenses include the cost of courses, internal training (if appropriate records are kept), Skills Development Facilitators, accommodation and transport etc. Remember that if the organisation submits a Workplace Skills Plan to their SETA they can receive grants of up to 0.75% of their payroll back.
The preferential procurement pillar encourages organisations to purchase goods and services from organisation’s with good BEE ratings. In essence the preferential procurement target is that the organisation purchases 40% of its total purchases from organisations with good BEE ratings. The BEE Procurement Recognition Table is utilised when calculating the spend on each supplier according to their BEE rating (see table below).
The purpose of the Enterprise Development pillar is to encourage organisations to develop and support small black owned businesses.
SalesForce has an interesting take on social enterprise services development.
The target for the Enterprise Development pillar is 2% of Net Profit after tax per annum.
Contributions towards Enterprise Development comprise of both financial contributions and non-monetary support such as mentoring and counselling, donation of equipment, spare office space, etc. It is a good idea to support initiatives that relate to the organisation’s business, e.g. its suppliers. Contributions towards both individual enterprises and Enterprise Development Funds count, as long as:
- QSE’s & EME’s are 50% black owned or 50% black women owned.
- Any size entities are 50% black owned or 50% black women owned
- OR 25% black owned or 25% black women owned if they also have a BEE Status Level of one to six.
- They are part of a Sector specific programme.
Socio-Economic Development Pillar
The Socio-Economic Development pillar encourages organisations to donate goods, services and money to qualifying NGO’s, charities etc.
The target for the Socio-Economic Development is 1% of Net Profit after tax per annum.
Contributions towards SED initiatives can comprise both financial contributions and non-monetary support such as mentoring and counselling, donation of equipment, spare office space, etc. SED initiatives must focus on enhancing the ability of black people who remain non-participants in the economic mainstream to be included in participating in the economy in a sustainable manner.
QSE’s can achieve a total of 25 points for each of the BEE pillars. The organisation will choose its top 4 pillars and as such will calculate a score out of 100. They then are rated according to the BEE Procurement Recognition Table set out below:
In order: Contribution Level, BEE Score, Percentage of Procurement Spend
- Level 1 > 100% 135%
- Level 2 85-100% 125%
- Level 3 75-85% 110%
- Level 4 65-75% 100%
- Level 5 55-65% 80%
- Level 6 45-55% 60%
- Level 7 40-45% 50%
- Level 8 30-40% 10%
- Non Compliant 0-30% 0%
Anything above a Level 5 is considered to be a good rating.
This has been quite a long post (thanks for reading this far!) so give me a shout if you’re confused or need more info.
Cheers for now,
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.