The amended Broad-based Black Economic Empowerment (B-BBEE) Construction Codes have been gazetted on 1 December 2017 by the Department of Trade and Industry and will be implemented with immediate effect.
Let’s have a look at the amended Construction Codes, especially the new regulations regarding Exempted Micro Enterprises (EMEs) and Qualifying Small Enterprises (QSEs) with 51% or more Black Ownership.
The table below indicates the B-BBEE level that will be allocated to entities with the required turnover as well as % Black Ownership required for these levels:
| Entity Type | Turnover | Black Ownership | LEVEL |
| BEP | Below R6 million | Below 30% | 5 |
| BEP | Below R6 million | 30% – 50% | 4 |
| BEP | Below R6 million | 51% or more | 2 |
| BEP | Below R6 million | 100% | 1 |
| Contractor | Below R10 million | Below 30% | 5 |
| Contractor | Below R10 million | 30% | 4 |
| Contractor | Below R10 million | 51% or more | 2 |
| Contractor | Below R10 million | 100% | 1 |
An EME that qualifies for an automatic level 1, 2, 4 or 5, is required to comply with 40% of the QSE Skills Development Expenditure Target as a compulsory priority element to avoid discounting.
However, if an EME have a turnover of less than R1.8 million (for BEPs) or R3 million (for Contractors) they don’t have to comply with the Skills Development sub-minimum requirement as above. These entities will be issued with an affidavit confirming the turnover as well as the percentage black shareholding, if any.
This falls away if the EME elects to enhance its B-BBEE level by way of the following:
- Obtain measurement in terms of QSE Scorecard as a whole and apply the B-BBEE status level so determined.
- Obtain measurement in terms of Skills Development expenditure as per QSE Scorecard and only if full points are achieved the B-BBEE level will be enhanced with by 1 level.
- Obtain measurement in terms of Supplier Development expenditure category as per QSE Scorecard and only if full points are achieved will the B-BBEE level be enhanced by 1 level.
- If the EME use both the Skills and Supplier Development elements will be able to enhance their compliance by 2 levels, but only if full points are achieved on both these elements.
Qualifying Small Enterprises
A QSE that qualifies for an automatic level 1 or 2 certificate must comply with the QSE Skills Development element as a compulsory priority element to avoid discounting. The turnover threshold for a QSE is as follows:
- Revenue between R10 – R50 million for Contractors
- Revenue between R6 – R25 million for BEPs
If the QSE have 100% Black Ownership they will qualify as a level 1 certificate, but they still need to comply with Skills sub-minimum or they will be discounted a level. Where the QSE have 51% or more Black Ownership they will qualify for a level 2 certificate. These entities are also required to comply with Skills sub-minimum to avoid being discounted a level.
51% or 100% Black Owned QSEs can be enhanced by 1 level if they receive full points for Skills Development or Preferential Procurement and Supplier Development. These QSEs will not be able to be issued with affidavits and they will have to obtain a B-BBEE certificate.
Important: there is no automatic level 5 or 4 certificate available for QSEs. All other QSEs (less than 51% Black Ownership) must be measured on the QSE Scorecard.
It is very important to contact your legal advisor to enable them advise you in terms of the new amended Construction Sector Codes to ensure your compliance.