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TO BE(E) OR NOT TO BE(E)

TO BE(E) OR NOT TO BE(E)

The main aim of a Broad-Based Black Economic Empowerment (B-BBEE) verification is to obtaining a rating for your business’s compliance, usually for a mark out of 100. In order to rate a business, the correct scorecard needs to be applied.

There are approximately 32 scorecards available (excluding the Mining Sector). So how do you know what is the correct scorecard to use?

There are two main factors that need to be taken into consideration while determining which scorecard is applicable to your business:

The first is the industry in which your business falls; and the second the turnover of the business.

Industry

It is surprising how many business owners do not know under which industry their business falls. The Department of Trade and Industry (DTI) has, over the years, recognised certain industries for which specific BEE scorecards were introduced. This is known as Sector Codes, with each Sector Code having their own scorecard.

The following Sector Codes have been published: Transport; Agriculture; Property; Tourism; Forestry; Information and Communication Technology; Finance and Media Advertising and Communication.

If more than 50% of the business’s turnover is derived from activities related to the above sectors, you will apply this specific scorecard when doing your BEE verification.

If your business does not fall within these industries, for example Manufacturing, then the General Codes of Good Practice scorecard will be applicable to your business.

The Construction and Chartered Accountancy Sector Codes have been repealed by the DTI. If your business falls within one of these industries, you will now be rated on the General Codes of Good Practice.

Determining your industry

If it is still unclear which industry your business falls into, we can look at the industry classification by the Department of Labour for Employment Equity purposes as a guideline:

Industry Thresholds:

  1. Agriculture
  2. Mining & Quarrying
  3. Manufacturing
  4. Electricity, Gas and Water
  5. Construction
  6. Retail, Motor Trade and Repair Services
  7. Wholesale Trade and Commercial Agents
  8. Catering, Accommodation and Other Trade
  9. Transport, Storage and Communications
  10. Finance & Business Services
  11. Community, Special & Personal Services

You can also look at what Sectoral Education Training Authority (SETA) your business is registered with.

Turnover

This indicator will determine if you are rated in terms of the Qualifying Small Enterprise (QSE) scorecard, the Generic scorecard or if your business is exempt from a BEE scorecard.

The turnover will usually be from the latest available signed off financials. In general, if the turnover threshold is more than R10million but less than R50million, you will apply the QSE scorecard. If the turnover is more than R50million, you will apply the Generic scorecard. If the turnover is less than R10million, the business will be exempted from BEE compliance.

You need to keep in mind that each Sector Code has its own thresholds when determining whether it is a QSE, Generic or Exempted Micro Enterprise (EME).

ABOUT THE AUTHOR

Herman le Roux obtained his LLB degree from the University of Stellenbosch. He is a legal advisor in the BEE department at our Cape Town branch.

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