Achieving a good BEE scorecard (2)
by Claire Stewart on 06/04/09 at 3:15 pm
21 comments
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:
Ownership:
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.
Management:
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.
Employment Equity:
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.
Skills Development:
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.
Preferential Procurement:
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).
Enterprise Development:
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.
Summary:
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
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.
Mashwabathe
Apr 14th, 2009
I have already statered my business and want to join your score card
Claire
Apr 14th, 2009
Hi Mashwabathe,
Could you clarify what you want exactly.
Thanks,
Claire
Rochelle
Apr 30th, 2009
Good day
If the company is owned 100% by a white person how much persentage must the black person get?
Richard Rangiah
Apr 30th, 2009
Dear Claire,
Thank you for this informative blog. I am the Executive Director of a NPO Trust. Details of who we are and what we do can be gathered from our webpage. I’m exploring how an entity such as ourselves can be proactive in helping businesses achieve better ratings on their BEE scorecard with particular respect to the socio-economic development pillar as this will be a win-win situation for the business and for us. Any thoughts/suggestions on how we can take this forward? Are there any specific things/procedures/documents we must have in place for a business to partner with us that the business will need as evidence when audited? We are a registered trust; an accredited service provider; have PBO status as well. Look forward to your comment. Thanks.
Claire
May 4th, 2009
Dear Richard,
Thanks for the mail. Your NPO Trust would be able to qualify as a Socio Economic Development beneficiary in terms of the BEE requirements as long as 85% of your beneficiaries are black. You have everything in place in terms of evidence so the only thing you need to do is let businesses know the above- why don’t you contact the Dept of Trade and Industry http://www.dti.gov.za to see if they have any initiatives in place. If any other ideas come to mind I’ll let you know.
Kind regards, Claire
Ndumiso
Sep 11th, 2009
I’d like to get a bee rating for my company
Claire Stewart
Sep 14th, 2009
Dear Ndumiso. Is your organisation’s gross annual turnover great than R5 million?
Elmarie
Oct 2nd, 2009
I need to pay my 2% for the Enterprise Development. My problem is, who do we pay that to. I don’t know any Black owned buisinesses. Isn’t there a directory I can use?
Thanks
Claire Stewart
Oct 5th, 2009
Hi Elmarie,
BEESA Enterprise Development Services has a fund that is managed through Investec which provides contributors with full BEE points for enterprise development. You can check out their website for further details and contact info http://www.beesa.co.za.
Cheers,
Claire
Neels
Oct 6th, 2009
My organisation’s gross annual turnover is less than R5 million. Do i still need a rating.and if organisation’s stil demand rating what do i do?
Ginady
Nov 5th, 2009
If a company is environmentally compliant. i.e. recycles all its waste correctely etc. Does this affect the scorecard rating, if so which pillar of the BEE structure does this fall under
Claire
Nov 6th, 2009
That’s an interesting question. The organisation would probably be able to count costs associated with the recycling under the Socio Economic Development pillar.
Shonah Marks
Nov 19th, 2009
I read about Rochelle’s dilema (02 Oct 09) re their Enterprise Dev spend – and who do they spend on?
I run an organisation that represents NPO’s (in line with Socio Economic Spend) and my portfolio includes Enterprise Development opportunities as well. I ensure that correct evidence and documentation is submitted timeously to the donor-businesses for their audit.
To sum up: we facilitate the r/ship between the NPO and Company … less hassles, more reward. How can I get this information out to companies that are in need of this ‘go-between’?
How can I get into contact with Rochelle?
With thanks.
Shonah Marks
Nov 19th, 2009
My apologies – I meant Elmarie… Oct 02 2009
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Lofty Ayer
Nov 1st, 2010
How is prefential procurement calculated if you have many suppliers
from a level 1 supplier to a noncompliant suppler
Yumna
Mar 6th, 2012
Hi, we are just a rep office in South Africa, and as a rep office we receive no turnover directly. our office is seen as a cost-centre and therefore we have no audited financials. how do we achieve a BEE scorecard based on zero turnover.
Ryan
Apr 4th, 2012
Hi,
We are a relatively small company who would like to take advantage of companies wanting to spend on ED. We have a 26% black woman partner. Would we qualify as per above? I see EME’s need 50% black partner, but we would be a Level 4 , any size company as well.
Also can NPO’s qualify for Enterprise Development?
Thanks!
Paul
May 16th, 2012
Hi claire,
I have recently registered a NPO to raise funds for an educational music production I want to take to schools to help protect the family unit and to warn children against drugs.
I now have a potential sponsor who requires our BEE certificate (which of coarse we don’t have!) Our little NPO has no funding and we are two people at the help of it all.
How do I go about this?
Kind regards,
Paul-jay
Claire Stewart
May 21st, 2012
Hi Paul-Jay,
A letter from your accountant stating that the NPO’s gross annual turnover was less than R5 million and as such is an Exempt Micro Enterprise will be sufficient.
Kind regards,
Claire
Ramon Thomas
Oct 22nd, 2012
How has this changed with the 2012 amendments of the BEE legislation and policies? I know several corporates who’s ratings have dropped in the last 6 months.