FREQUENTLY ASKED QUESTIONS: B-BBEE

"How long can an entity continue to benefit from the continued consequence because of loss/sale of shares by the black participant?"


The continued consequences are allowed for the same number of years the black shareholder held his/her/ provided the shares were held for a minimum period of 3 years, and the ownership transaction was legitimate.


Can 51% black owned entity because of the modified flow through principle qualify as an enterprise and supplier development beneficiary?


In terms of Code Series 100, an entity may apply the modified-flow principle to determine the black ownership, where in the chain of ownership structure black people have a flow-through level of participation of at least 51%, then only once in that entire ownership structure of the entity such black participation may be treated as though it were 100%.


The Codes have defined a 51% black owned entity as an entity where a) black people hold at least 51% of the exercisable voting rights as determined under Code Series 100; b) black people hold at least 51% of the economic interest as determined under Code Series 100; and c) has earned all the points for Net Value under Code Series 100.


The Department of Trade and Industry as the custodian of the B-BBEE Policy in its efforts to reduce the cost of compliance on micro and qualifying small businesses in South Africa has relieved black owned and controlled EME and QSE from B-BBEE verification. Such entities are only required to obtain an affidavit on an annual basis or a CIPC certificate in the case of an EME proving their B-BBEE Status.


Thus, the introduction of this intervention brought about an exception to the extent to which entities can rely on the modified flow through principle. The intention of the drafter was to limit the calculation of 51% and 100% black ownership for EMEs and QSEs only through the application of the flow through principle, and a different interpretation would be contrary to the spirit and purpose of this intervention, and would require that such entities be subjected to verification to determine compliance with the 40% sub-minimum on Net Value.


What is a designated group?

  • Unemployed black people not attending and not required by law to attend an educational institution and not awaiting admission to an educational institution.

  • Black people who are youth as defined in the National Youth Commission Act of 1996. or

  • Black people who are persons with disabilities as defined in the Code of Good Practice on employment of people with disabilities issued under the Employment Equity Act; or

  • Black people living in rural and underdeveloped areas; or

  • Black military veterans who qualifies to be called a military veteran in terms of the Military Veterans Act 18 of 2011.

Can entities operate with a consolidated affidavit for Joint Venture purposes?


No, the codes do not recognize consolidated sworn affidavits. A joint venture certificate must be obtained.


What is the valid period of an affidavit on EME’S / QSE’S?


An affidavit is valid for 12 months from date of signature. Remember the Deponent signature and commissioner signature MUST match. The period must also match the company’s financial period and not any random 12-month period. Should your status e.g. ownership change in a period a new affidavit should be issued but it must match your financial period of 12 months, in other words the expiry date will remain the same as your financial period.


Who qualifies as an Executive manager?


Executive Management' is defined in paragraph 3.4.1 Code Series 200 "Executive Management positions include the following: Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and other Executive Managers that serve on the Board of Directors".


Which Economically Active Populations Targets (EAP) are to be considered, and how are they applied?


The EAP targets used are those released by the Department of Labour from time to time.


If an entity operates only at a provincial level, the provincial EAPs will apply. However, if it operates nationally, the national EAP are applicable.


What happens if an entity does not distinguish between other Executive Management and Senior Management?


According to Para3.3 Code Series 200, the entity will measure both categories as a single indicator with a weighing of 6 points.


Can EAP targets be applied to the disabled person’s target?


EAP apply to all categories except board participation and disabled persons.


How do you calculate the 15% early payment period on procurement?


The Codes were amended, and the recognition of early payment was capped. This means that if payment is at least made within the first fifteen (15) days from the date of invoice by the qualifying supplier, then the amount that can be claimed is a percentage of the invoice amount which is equal to 15 minus the number of days from invoice to payment date. For example: If invoice is R100 and paid in 5 days it means:

R100 x (15-5) % = R100 x 10% = R10 Therefore, the contribution claimed will be limited to 15% of the 10 points allocated.


What happens if an entity did not make a profit during the measurement period?


In a case where a measured entity did not generate profit for that particular year, the Codes have provided for the use of industry norms applying the Indicative Profit Margin formula to determine the actual contribution.

The Net Profit After Tax (NPAT) or average target applies unless the company does not make a profit last year or on average over the last five years must be used.

The net profit margin is less than a quarter of the norm in the industry.

If the Turnover is to be used, the target will be set at 1% x Indicative Profit Margin (NPAT/Turnover) x Turnover. Indicative profit margin is the profit margin in the last year where the company’s profit margin is at least one quarter of the industry norm.


How can a measured entity recognize outstanding loan amount for enterprise and supplier development points?


There are four (4) types of loans recognized under the matrix, which are recognizable at a certain percentage. However, what is important to note, is that during a verification process, the full loan amount cannot be recognized for B-BBEE points where the recipient still owes a portion of the loan. What it means is that, where there is an outstanding loan amount, the measured entity will only claim B-BBEE points for the average period during which the loan amount has been outstanding and not the full outstanding loan amount.


A measured entity’s financial year-end is 31 December 2017 and they also measure their B-BBEE scorecard as at that date. If the measured entity provided an interest free loan of R10,000 to a supplier or enterprise development beneficiary on 30 June 2017, the formula to be used in determining the supplier or enterprise development points for the measured entity is as follow:


Supplier/Enterprise Development points = R10,000 (loan amount outstanding) x 70% or 50% (the benefit factor percentage set in the matrix depending on the type of loan) x 6/12 (the average period during which the loan amount has been outstanding) = RX


The measured entity will therefore only claim RX amount of the R10,000 outstanding loan, irrespective of whether an interest rate is attached or not. But if the loan was provided at the beginning of the year, being 1 January 2017, the measured entity would be able to claim the full R10,000 at the end of the financial year because the average duration the loan was outstanding was twelve (12) months.


It must further be noted that a measured entity will be able to claim supplier or enterprise development points for the duration of the period that those amounts remain outstanding. For instance, in the above example, if the same loan amount of R10,000 is still outstanding on 31 December 2018, then the measured entity would be able to claim the full R10,000 (R10,000 x 12/12) as supplier or enterprise development.


Important to note that, the term of the loan agreement does not mean that the measured entity will be able to claim the full outstanding loan amount, because B-BBEE compliance is measured over a particular period and only the amount that was outstanding during that measurement period will be claimed. This means that if a loan was only outstanding for two (2) months during a measurement period, only the average duration the loan was outstanding, which is 2/12 will be claimable.


However, if the loan amount is fully repaid by 31 December 2017, the measured entity will not recognize the particular spend by applying the outstanding loan amount formula, but through application of the standard formula provided in Annexure 400 (B), provided the contribution is aligned to the principles of Code Series 400


Definition of unemployed leaner?


Unemployed learner as per the Codes ‘means a learner that was not in the employment of the employer and party to the learnership agreement concerned when the agreement was concluded. The employer and learner must therefore enter a contract of employment.


Can the entity count black people under black unemployed?


The objectives of Code Series 300 are to increase investments for human resource and skills development for black people, as part of the broader government objective. In keeping with this objective, the Codes have provided for the training of both black employed and black unemployed.


Therefore, black unemployed people trained under Para 2.1.2.1 of the scorecard cannot be recounted again under 2.1.2.2. This will amount to misrepresentation of B-BBEE.


Are imports still excluded from total measured procurement spent (TMPS)?


Imports are still excluded provided it is based on brand specifications or there are no local suppliers, or it is for further value adding in South Africa.


Would an entity that maintains the same staff complement qualify with the least 50% of jobs created are for Black people requirements for purposes of empowering supplier?


The % jobs created: means new jobs created and not maintaining or filling existing vacancies. For example, if an entity operates with 100 jobs, for purpose of satisfying this requirement, the measured entity must first maintain the same staff complement, and 50% of newly created jobs must be for black. Simple maintenance of the 100 jobs would not qualify.

Can the entity outsource the 12 days skills transfer for black owned EMEs and QSEs?" The measured entity may facilitate the skills transfer directly or indirectly through professional services 12 days irrespective of how many beneficiary entities are trained per day.


What is the definition of service industry?

The Codes are silent on a definition of a service industry, and we recommend that you engage the Services Sectoral Training Authority which is amongst others responsible for the management of a list of entities within the services sector.


What does procurement from designated group supplier mean?


This means procuring from entities that are 51% owned by the following "Black Designated Group" as defined in the Codes:

  • Unemployed black people not attending and not required by law to attend an educational institution and not awaiting admission to an educational institution.

  • Black people who are youth as defined in the National Youth Commission Act of 1996.

  • Black people who are persons with disabilities as defined in the Code of Good Practice on employment of people with disabilities issued under the Employment Equity Act.

  • Black people living in rural and underdeveloped areas.

  • Black military veterans who qualify to be called a military veteran in terms of the Military Veteran Act 18 of 2011

Are inter-company/group purchases excluded from TMPS?" According to Para 5.12 Code Series 400 intra-group procurement is included in calculating the TMPS.


Who qualify as beneficiaries of supplier development and enterprise development?" 51% black owned EMEs and QSEs or 51% black women owned EMEs and QSEs.


Can black employees of the Measured Entity qualify as beneficiaries of Socio-Economic Development Contributions if the contributions are in line with Annex 500(A)?" No, such would not qualify because it is not aligned to the objectives of Socio-Economic Development (SED). SED consist of monetary or non-monetary contributions, with the specific objective of promoting access to the economy for black people. SED is not the same as Corporate Social Investment or fringe benefits to the employee by the employer. The Benefit Factor matrix provides guidance as to what qualifies as an SED initiative. This is measured on an annual basis, meaning that the measured entity will contribute 1% NPAT annually towards SED initiative.

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