The significance of early engagement with BBBEE (Broad-Based Black Economic Empowerment) compliance efforts cannot be overstated. By acting promptly and efficiently to structure empowerment initiatives in alignment with BBBEE codes and scorecards, you not only mitigate compliance risks but also unlock strategic advantages and growth opportunities.
Delaying such endeavours compromises the ability to leverage empowerment as a competitive differentiator and impedes the realisation of long-term organisational objectives.
The scorecard explained
The BBBEE codes delineate multifaceted criteria, each carrying distinct weightings that collectively shape your company’s empowerment rating. Strategic alignment with these criteria demands meticulous planning and execution, ensuring enterprises maximise empowerment outcomes while enhancing their competitive standing.
The BBBEE Scorecard serves as a comprehensive framework for evaluating and measuring a company’s level of compliance and commitment to economic transformation in South Africa. It comprises various elements, each designed to assess different facets of empowerment and inclusion.
Some elements are considered priority elements, which means that one would need to achieve at least 40% of the score set out in the scorecard for the element. Failure to accomplish the subminimum of one of these priority elements leads to being discounted a level. It should be noted that should you fail to meet two or more of these subminimums, the discount shall only be applied once.
Exploring each aspect of the BBBEE Scorecard
1. Ownership:
This is considered a priority element. It assesses the extent to which black individuals own and control the company. It considers both direct and indirect ownership and the voting rights associated with such ownership.
Various ownership vehicles can be utilised, such as direct shareholding by previously disadvantaged, shares can be held in a trust fund of which either previously disadvantaged employees or previously disadvantaged individuals are the beneficiaries, or a company with majority black shares can also hold shares in a measured entity.
2. Management control:
Management Control evaluates the representation of black people in management positions within the company. It looks at the composition of the board and executive leadership, as well as the decision-making authority held by black individuals, and the composition of the senior management, middle management, and junior management. This is measured against the economically active statics and measured against the guidelines as set out in the Employment Equity Act.
3. Skills development:
Skills Development is considered a priority element that measures the company’s investment in training and development initiatives to improve black employees’ skills and qualifications. This includes formal training programs, mentorship opportunities, leadership opportunities, apprenticeship opportunities and support for further education.
The target is calculated at 3 – 6 % of a measured entity’s annual payroll. This would depend on whether a measured entity is considered a qualifying small enterprise (3%) or a generic enterprise (6%) according to its turnover and the sector thresholds set out in the various sectors’ BEE codes of good practices.
4. Enterprise and supplier development:
This element drives B-BBEE compliance; a measured entity is required to spend 80% of their cost of sales on B-BEE compliant companies, and cost can be allocated towards this 80% according to a supplier B-BBEE compliance rating between a level 1 to 8 for a level 8 supplier, one can allocate 10% of the total spent with the supplier towards the 80% spent target and a 135% total paid for a level 1 supplier. A measured entity can force a supplier to become B-BBEE compliant for this element or risk losing the business relationship with the measured entity.
The element also focuses on the company’s efforts to support and develop black-owned businesses. It includes initiatives such as supplier development programs and enterprise development programs. Measured entities must assist a 51% black-owned company on the supplier’s list, equivalent to 1% of the measured entity’s net profit after tax. Additionally, they must offer further assistance of 1% of their net profit after tax to any 51% black-owned company with an annual turnover of less than R50M.
5. Socio-economic development:
Socio-economic development evaluates the company’s contributions to socio-economic initiatives that benefit black communities. These could include donations to charitable organisations, community development projects, and infrastructure or social programs investments.
6. Sector-specific scorecard:
Certain industries or sectors may have additional requirements or specific scorecards tailored to their unique characteristics. These sector-specific scorecards ensure that the BBBEE framework remains relevant and adaptable across different sectors of the economy.
Each aspect of the BBBEE Scorecard contributes to a company’s overall empowerment rating. By addressing these elements comprehensively and strategically, businesses can enhance their BBBEE compliance, foster economic transformation, and contribute to a more inclusive and equitable society in South Africa.
Don’t wait until submission day to reach out! We’re here to assist you throughout the entire financial year to ensure compliance is as effortless as possible. Speak to Invictus Group now and ensure that your initiatives are strategically aligned and effectively implemented from the start.
Visit our website: https://invictusgroup.co.za or contact our call centre at 086 173 7263.
