As per the Amended Construction Sector Code, gazetted on 1 December 2017 under Gazette no. 41287, a measured entity that qualifies for measurement under the Construction Sector Code, is measured either as a BEP (Built Environment Professional) of Contractor in respect of targets, weightings and methodology.
The qualification criteria for an Exempt Micro Enterprise (EME) and a Qualifying Small Enterprise (QSE) are different for BEP’s and Contractors:
Contractors:
EME – Enterprise with a total annual revenue of R 10 million or less.
QSE – Enterprise with a total annual revenue of more than R 10 million but less than R 50 million.
BEP (Built Environment Professionals):
EME – Enterprise with a total annual revenue of R 6 million or less.
QSE – Enterprise with a total annual revenue of more than R 6 million but less than R 25 million.
Only EME’s with an annual revenue of less than R 3 million (for Contractors) and less than R 1.8 million (for BEP’s) are not required to have a SANAS accredited B-BBEE Verification Certificate and may present an Affidavit or Certificate issued by CIPC in respect of their Ownership & Annual Revenue.
A company must ensure that they use the correct Affidavit template when completing an Affidavit, as there are numerous templates for each sector.
The entity must identify where more than 50% of their revenue is generated and according to the outcome, they can determine whether they qualify as a BEP (Built environment Professional) or Contractor.
The EME’s as mentioned above are not subject to the discounting principle and therefore do not have to comply with the 40% sub-minimum requirements for the QSE Skills Development element.
EME’s with an annual turnover of more than R 3 million but less than R 10 million (for Contractors) and more than R 1.8 million but less than R 6 million (for BEPs) must obtain a SANAS Accredited B-BBEE Rating Certificate and are subject to the QSE Skills Development element (40% sub-minimum requirement).
An Entity that qualifies as an EME, with the Black Ownership percentages as indicated below, is deemed to have the following B-BBEE Status Levels:
If less than 30% Black Owned, Level 5 B-BBEE Status.
At least 30% Black Owned but less than 51% Black Owned, Level 4 B-BBEE Status.
At least 51% Black Owned but less than 100% Black Owned, Level 2 B-BBEE Status.
If 100% Black Owned, Level 1 B-BBEE Status.
EME’s with less than 100% Black Ownership can enhance their B-BBEE Status by way of one of the following three criteria:
Obtain measurement in terms of the QSE Scorecard.
Obtain measurement in terms of the Skills Development expenditure category of the QSE Scorecard and only if full points (excluding the bonus points) are achieved, the B-BBEE status level will be enhanced by one Level.
Obtain measurement in terms of the Supplier Development expenditure category of the QSE Scorecard and only if full points are achieved, the B-BBEE status level will be enhanced by one Level.
If an EME achieved full points for both Skills Development & Supplier Development as mentioned above, the company can be enhanced by two B-BBEE status levels.
An Entity that qualifies as a QSE, must be rated on all 5 elements as per the Amended Construction Sector QSE Scorecard.
A QSE can qualify for enhanced recognition if the following Ownership percentages are achieved (calculated by applying the flow-through principle):
At least 51% Black Owned but less than 100% Black Owned, Level 2 B-BBEE Status.
If 100% Black Owned, Level 1 B-BBEE Status.
A QSE entity that is at least 51% Black Owned or 100% Black Owned must comply with the QSE Skills Development element (40% sub-minimum) or that company will be discounted by one Level.
It is important to note that the Black Ownership as stated above, must be calculated by applying the Flow-Through Principle to qualify for the automatic B-BBEE status levels as indicated above.
As for the EME’s, a QSE Entity with at least 51% Black Ownership can be enhanced by one level if they achieve full points (excluding bonus points) for Skills Development as per the QSE Scorecard or achieves full points for the Preferential Procurement & Supplier Development element as per the QSE scorecard.
Article by Brendan Aiken
Executive Consultant