Preferential Procurement is a sub-element that falls under the Enterprise and Supplier Development element on the Amended Broad-Based Black Economic Empowerment (B-BBEE) scorecard and can no longer be dealt with indifferently. Not only does it form part of the Priority Elements, but the 40% sub-minimum is also applicable to the Procurement indicator on the scorecard. This implies that at least 10 out of the 25 points available on a Generic Scorecard needs to be obtained to ensure that your entity is not discounted a level. A decent score for Preferential Procurement can make the difference between compliance and non-compliance.
Unlike Skills Development, Enterprise Development, Supplier Development and Socio-Economic Development, no additional expenses needs to be incurred to claim points for Preferential Procurement – the entity only needs to monitor the amounts spent with suppliers as well as monitor their suppliers’ B-BBEE compliance to ensure that they also adhere to B-BBEE legislation. This will ensure that the entity obtains as many points as possible for Preferential Procurement. If the supplier has a high B-BBEE level, it will result in more points for the measured entity.
Important aspects to note when perusing a B-BBEE Certificate:
- Currently SANAS accredited verification agencies and IRBA approved auditors can issue valid certificates (as per Government Gazette 34612 published on 23 September 2011). When perusing a certificate, you should thus ensure that the certificate either includes the SANAS logo, or the auditors IRBA registration number. As of 31 December 2016, IRBA approved auditors will however not be allowed to issue B-BBEE certificates anymore and all certificates issued after 31 December 2016 should include the SANAS logo in order to be valid.
- In terms of the Amended Codes of Good Practice, only certificates of suppliers who is indicated as an Empowering Supplier may be taken into consideration. You should ensure that your suppliers will qualify as an Empowering Supplier.
- The certificate should be valid for a period within the financial year you are being measured on, or alternatively still be valid on date of verification.
- The procurement recognition level of the supplier should always be taken into consideration. The better their recognition level, the easier for you to maximise your procurement points. The recognition levels linked to each B-BBEE certificate level are as follows:
|B-BBEE Status Level||B-BBEE Procurement Recognition Level|
By monitoring spend on suppliers during the course of the financial period and by aiming to only procure from Empowering Suppliers with a favourable B-BBEE procurement recognition level, a company will certainly improve their overall rating.
ABOUT THE AUTHOR
Lize Bester is an admitted attorney who obtained her LLB degree from the University of Stellenbosch. She is a currently a SEESA BEE Senior Legal Advisor.