QUALIFYING SMALL ENTERPRISE: WHAT YOU NEED TO KNOW?

Numerous EME’S have successfully grown their business over their last financial calendar year, exceeding the R 10 million threshold, from being an EME, and now needing to be rated as a Qualifying Small Enterprise with a turnover of between R10 million to R 50 million.

WHAT AND HOW?

Statement 600 of the Codes of Good Practice deals with the framework for the Qualifying Small Enterprise Scorecard. In terms of the statement, a Qualifying Small Enterprise (QSE) is an Enterprise with an annual turnover between R10m -R50m where the annual turnover amounts exceed R50m per annum it will be classified as a Generic Enterprise.

QSE’s are scored on all five the B-BBEE elements being, Ownership**, Skills Development, Management Control, Enterprise, and Supplier Development (that includes Procurement) and Socio-Economic Development. The weighting points in the table in respect of each element represent the maximum number of points possible to obtain for each criteria. As a QSE, an Entity must meet the sub-minimum score of 40% of the maximum number of points available under two of the three priority elements (Ownership. Skills Development and Enterprise and Supplier Development) of which Ownership is compulsory and any one of the other two elements can be chosen, otherwise the ultimate score will be discounted by one level after the verification has been completed.


Unless the company has at least a 51% Black shareholding they will have to be verified and rated against the scorecard.

** Where a company has at least 51% Black shareholding and has a turnover of between R 0 and R 50 mill in their financial period they automatically qualify for a level 2 rating and can simply complete an approved affidavit. Where a company has 100% Black shareholding, they qualify for a level 1 affidavit with no verification.

QUALIFYING SMALL ENTERPRISES (QSE SCORECARD)


Ownership

Ownership counts for twenty-five points on the scorecard. Full points under Ownership are obtained firstly based on 25,1% of a company’s exercisable voting rights being in the hands of Black people (5 points), of which 10% (2 points) must be owned by a Black woman. Voting rights add up to 7/25 points. Economic Interest adds another 7/25 points based on five points attributed to 25% of the economic interest (dividends being paid) to Black people, of which 10% must be paid to Black woman, contributing another two points and the final three points for 2% Black ownership being in the hands of New Entrant of members of a Black Designated Group.


Black Designated Groups are defined as Black Youth, Black People with Disabilities, Unemployed Black People, Black People from rural areas and War Veterans. New Entrants are individuals who have not previously benefited more than R50m from B-BBEE transactions.

The last 8/25 is obtained under Net Value that requires the shares in the hands of Black people to have vested according to a predetermined sliding scale.


Management Control

This element adds fifteen points to the scorecard and is based on the number of Black people, Black woman, and disabled Black people in a company’s management structure as a percentage of all employees. The first 7/15 points is allocated based on a sliding scale on which maximum points are earned for 50% Black representation at Executive Management level (5 points) of which 25% (2 points) must be a Black woman.


Full points for the outstanding 8/15 points are scored for 60% of Senior, Middle or Junior Management being Black people (6 points) and 30% (2 points) are a Black woman.


Skills Development

To qualify for any points under Skills Development and Enterprise must submit an annual Workplace Skills Plan, an Annual Training Report and a Pivotal Report which is approved by their SETA as well as the implementation of a Priority Skills program, generally and more specifically for Black people. Points are scored as per the learning program matrix under code series three hundred linked to this statement.


There is twenty-five points available under skills development for which 15/25 point are scored for specific learning programs for Black people based on three times the Entities leviable amount. Another 7/25 points are scored for spending one times the leviable amount for training Black woman and 3/25 points for spending, fifteen times the leviable amount on the training of disabled Black people. If all the Learners on Learnership programs are absorbed into permanent employment after completing their Learnerships another five bonus points can be obtained.


Enterprise and Supplier Development

Procurement: The element of Enterprise and Supplier Development includes procurement. The compliance target for procurement, called Total Measured Procurement Spend is based on 60% of the total of all qualifying annual procurement. This element adds 21/33 points based on 60% of Total Procurement Measure Spend.


Under Procurement 15/21 points are scored for procuring 60% of the Total Procurement Measure Spend from suppliers based on their B-BBEE scorecard levels and 15% of the spend (5 points) based on procurement from suppliers that are at least 51% Black.


A bonus point can be obtained by spending 1% of Total Measured Procurement Spend with a Designated Group Supplier.


Enterprise Development:

The 5/33 points available are based on a 1% of Net Profit after Tax grant contribution to Entities that are at least 51% Black-owned with an annual turnover of less than R50m per annum or Sector-Specific Programs. The entity cannot provide the grantor with any product or service.


Supplier Development:

The 5/33 points available are based on a 1% of Net Profit after Tax grant contribution to Entities that are at least 51% Black-owned with an annual turnover of less than R50m per annum. The entity must provide the grantor with a product or a service.


There are 2/33 bonus points available, one under either of these categories if a new job is created in a beneficiary entity, or if the Enterprise Development Entity Beneficiary has been graduated to a Supplier Development beneficiary in the following year.


Socio-Economic Development

Under Socio-Economic Development, five points are available based on a grant-based contribution of 1% of Net Profit after Tax to a qualifying Black beneficiary of the institution where at least 75% of the beneficiaries are Black.

THE PROCESS

A portfolio of evidence (Verification File) will need to be compiled by you to present to the SANAS approved verification Company to enable you to be able to earn the points under each element on the date of verification. A consulting company that is well trained will prepare this portfolio for the verification analyst who independently checks the portfolio and then presents this to the verification agencies technical signatory. Based on this a scorecard is issued along with a verification certificate to the company. The certificate is valid from date of issue for one year.

The process is not dissimilar to your annual financial audit process where you prepare your financials hand them over to your auditor who then submits to SARS.

Based on this a scorecard is issued along with a verification certificate to the company. The certificate is valid from date of issue for one year.

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