BEE Codes

The Broad Based Black Economic Empowerment Bill (February 2007) sets targets for South African companies in terms of the degree to which they empower “black” South Africans (where “black” corresponds to historically disadvantaged, or all non-white South African citizens born before 1994).

1.   Codes Index
2.   Codes Series 000
3.   Codes Series 100
4.   Codes Series 200
5.   Codes Series 300
6.   Codes Series 400
7.   Codes Series 500
8.   Codes Series 600
9.   Codes Series 700
10. Codes Series 800
11. Interpretation and definitions
12. Interpretative Guide

Companies will be rated by certified verification agencies, on their progress against set targets in each of the 7 areas. They will receive a total “empowerment rating” (score) out of 100, comprising the sum of the scores in each of the 7 categories:

• Ownership (20 points), measures the effective ownership of enterprises by black people: >25% black* ownership 
• Management Control (10 points), measures the effective control of enterprises by black people: > 50% black management and control 
• Employment Equity (15 points), measures initiatives intended to achieve equity in the workplace under the Act, and the Employment Equity Act: Have black employees across all levels of the organisation (60% - 80%, depending on level);
• Skills Development (15 points), measures the extent to which employers carry out initiatives designed to develop the competencies of black employees: Spend >3% of profits on developing skills of black people
• Preferential Procurement (20 points), measures the extent to which enterprises buy goods and services from suppliers with strong B-BBEE procurement recognition levels: Spend >70% of procurement spend (money spent on supplies) on black suppliers (preferential procurement)
• Enterprise Development (15 points), measures the extent to which Enterprises carry out initiatives intended to assist and accelerate the development and sustainability of other Enterprises: Spend >3% of profits on making other “black” enterprises more sustainable or to help them grow (enterprise development) 
• The Socio-Economic Development and Sector Specific Contributions (5 points), measures extent to which enterprises carry out initiatives that contribute towards Socio-Economic Development or Sector Specific initiatives that promote access to the economy for black people: Spend >1%  of net profits on social investments

  

 
There is no legal requirement to become “empowered” (except for the mining sector, where mineral rights will not be re-awarded by Government through the Department of Mining and the Department of Energy to un-empowered companies). However, eventually, any significant business (>R5m turnover) with South African customers will be forced to become empowered as a basic prerequisite to doing business in SA. The following economic structure drives this outcome:

• Government is the single largest “customer” in the country, and they will purchase from the “most empowered” companies
• Therefore all businesses competing for Government business will be forced to become “empowered” 
• They will thus be forced to maximise the percentage of their procurement spend going towards black empowered companies, since “Preferential procurement” – the amount of procurement spend spent on “black” suppliers – is with Ownership  the highest weighted scorecard element
• These businesses will, in turn, therefore put pressure on their own suppliers to become empowered (since this will improve their own empowerment rating), propagating the pressure through the system  

In addition to being about real transformation, ED is arguably the most efficient, effective tool to improve your overall BEE score. Read more to understand why.