You are on page 1of 6

Module 2: The B-BBEE Act and Codes of Good Practice

1. Introduction
It is important to have a basic understanding of both The B-BBEE Act and The Codes
of Good Practice to see how they can impact on your business and to better
understand the various elements of the BEE scorecard that are used to rate
businesses.

The significance of possessing a BEE certificate will be outlined, with reference to
how Empowerdex can help your business gain a competitive advantage.

In this module, you will:

• Understand the basic principles of The B-BBEE Act;

• Be able to identify the seven pillars of measurement (part of The Codes of
Good Practice) that are used for BEE rating purposes;

• Understand the importance of having a BEE certificate.

1.1 The B-BBEE Act
The Broad-Based Black Economic Empowerment Act No. 53 of 2003 (The B-BBEE Act)
was signed into law in 2004. This Act provides a framework for the BEE regulations
known as The Codes of Good Practice (or the “Codes”). These Codes take their
meaning from various other Acts, such as The Employment Equity Act, The Skills
Development Act and The Preferential Procurement Framework Act.

1.2 Important aspects of The B-BBEE Act
The objectives of the Act are to promote economic transformation and provide for
the meaningful participation of black people in the economy.

The Act defines “black people” as Africans, Coloureds and Indians (the beneficiaries);
and B- BBEE as being concerned with the economic empowerment of women,
workers, youth, people with disabilities and people living in rural areas. The BEE
Advisory Council fulfills the role of continually advising on the direction of B-BBEE.

Page 1 of 6
This course is presented by Shanduka Blackpages | Tel: +27 21 276 0300 |
Email: info@shandukablackpageseducation.co.za | Website: www.shandukablackpages.co.za

co.za | Website: www. known as The Codes of Good Practice. • Facilitating ownership and management of enterprises and productive assets by communities. Ownership 2. workers and other collective enterprises. to put the practicalities of B-BBEE into effect.co. there is no need to distinguish between narrow-based BEE and broad-based BEE and so any mention of BEE will refer to broad- based BEE unless otherwise indicated The Codes of Good Practice address the definitions of BEE and are the measurement system for rating BEE to ensure that a business is BEE compliant. Employment equity Page 2 of 6 This course is presented by Shanduka Blackpages | Tel: +27 21 276 0300 | Email: info@shandukablackpageseducation. Management 3. The seven pillars/elements of measurement are: 1. Empowerdex formed part of the team that was responsible for developing the Codes. • Applying preferential procurement. own and control enterprises and assets. • Implementing human resource and skills development. The Act granted authority to a regulation document.za . The Codes provide guidelines for the various economic sectors to comply with. • Investing in enterprises that are owned or managed by black people. The Codes of Good Practice Note: In analysing the Codes. While this does not apply to the private sector. The strategies for enforcing economic empowerment include: • Increasing the number of black people who manage. and going forward. it will become clear when unpacking the Codes in the following modules that there is a necessity for private businesses to comply with them as well.shandukablackpages. • Achieving equal representation in all occupational levels and categories. Organs of state and public entities are legally obligated to apply them. 2.

the generic scorecard allows a business to track its progress and continually reassess its empowerment objectives.za | Website: www. The scorecards contain indicators that have different weightings and target levels.co.co. There is a separate measurement system (the QSE scorecard) for entities that qualify as Qualifying Small Enterprises (QSE). Skills development 5.shandukablackpages. Each element on the generic scorecard has a weighting and these weightings are made up of points. Enterprise development 7. The generic scorecard Made up of the seven elements discussed above. There is a separate scorecard for each of the elements. Socio-economic development These elements form the generic scorecard. Element Code Series Weighting Ownership 100 20 Management 200 10 Employment equity 300 15 Skills development 400 15 Preferential procurement 500 20 Enterprise development 600 15 Socio-economic development 700 5 Table 1: The generic scorecard. but this will be discussed in more detail in Module 8. 3.za . Preferential procurement 6. 4. Page 3 of 6 This course is presented by Shanduka Blackpages | Tel: +27 21 276 0300 | Email: info@shandukablackpageseducation.

Accumulating high points will allow your business to have a greater score than your competitors. Certain indicators are grouped into categories called indicator groupings.za | Website: www. While the law does not impose penalties on private businesses. as the name suggests.za . These do not have targets or points – they merely provide structure to the indicators.co. The collective score of all elements produces the BEE points of the entity.shandukablackpages. for black employees with disabilities. specified in the learning programme matrix. carried out by companies like Empowerdex. as a percentage of the leviable amount using the adjusted recognition of gender Adjusted skills development spend on learning programmes.co. For example. The process for recognising priority groups is known as enhanced recognition and. specified in the learning programme matrix. The table below provides an example of an element scorecard. for black 6 3% employees. as a 3 0.3% percentage of the leviable amount using the adjusted recognition for gender Table 2: Example extract from an element scorecard (skills development scorecard). which can give you a competitive advantage and help you to generate more business in the future. if a private company wants to do business with a public business it needs to provide a BEE score. makes sure that all entities are measured on an equal basis. 4. Government Page 4 of 6 This course is presented by Shanduka Blackpages | Tel: +27 21 276 0300 | Email: info@shandukablackpageseducation. which can result in a score of greater than 100%. companies can earn more points or higher recognition for focusing on these areas. Weighting Compliance Category and skills development element points target Skills development spend on learning programmes. This includes black women and black people with disabilities. It is also possible to achieve bonus points. these companies can lose business by not complying with BEE. Companies cannot score full points without including priority groups in these elements. This is an extract taken from the skills development scorecard. BEE verification The verification process.

The BEE certificate will outline your company’s status and procurement recognition level. directs spending to suppliers according to their contribution to BEE or their BEE rating. 5. Level One is the highest-ranking level and it means that the company has more than 100 points on the generic scorecard. When a company has its score verified by a rating agency. they need to know that your business is a high-level contributor to ensure that their own BEE status is upheld. For this reason. 5. Empowerdex was founded in 2001 and has done over 6000 ratings to date.co. you need to do business with other companies that have a good score.2 Procurement recognition levels Companies need to buy from BEE-compliant suppliers to collect points in the preferential procurement section of their own BEE scorecard.shandukablackpages. A business’ BEE score is converted into a BEE status level and a procurement recognition level. The company is a market leader in the field of BEE rating and was party to the creation of the BEE elements. The ninth level.co. To uphold your own preferential procurement score. To gain competitive advantage. which other companies will use to assess whether they will do business with you. 5. companies should aim to be as close to Level One as possible.za .1 BEE status level The BEE status level is broken down into nine levels.za | Website: www. 6. The BEE certificate is proof to other companies of what your BEE status is and whether you are fit to do business with them. it will receive a BEE verification certificate. Empowerdex A rating agency can offer you support in acquiring your BEE certificate. Page 5 of 6 This course is presented by Shanduka Blackpages | Tel: +27 21 276 0300 | Email: info@shandukablackpageseducation. “non-contributor” is the lowest level and it means that the company has less than 30 points on the generic scorecard and has not contributed to BEE. The BEE certificate Your company needs a certificate to verify its BEE status.

Summary In this module. while understanding exactly what is required of your company. The process for obtaining your certificate will be discussed in more detail in Module 8. 7. • Learnt about the seven elements that make up the generic scorecard. • Learnt about the importance of having a BEE certificate.za .shandukablackpages. Empowerdex can help to guide you through the legislation and decipher the Codes. you: • Learnt about the basic principles of The B-BBEE Act.za | Website: www.co. Page 6 of 6 This course is presented by Shanduka Blackpages | Tel: +27 21 276 0300 | Email: info@shandukablackpageseducation.co.