FUNDAMENTALS OF B-BBEE

FOR SMMES
LORNA ERNST
Understanding the fundamentals of B-BBEE
(benefits and disadvantages)

Sector Specific Requirements & Thresholds

The Danger(s) of Fronting

Using B-BBEE to your Benefit

B-BBEE BASICS: Elements of the Generic Scorecard

Ownership
25

19 Management Control

20 Skills Development

42 Enterprise and Supplier

Development

5
Socio-Economic Development

51%
BWO

51% MINING CHARTER FOCUS AREAS

BYO
B-BBEE BASICS: Elements of the Generic Scorecard

25

19

ELEMENT % Target
20
EMPOWERING 80% 5
EME 15% 4
42 Preferential Procurement and ESD QSE 15% 3
27+15=42 BLACK OWNED 50% 11
BLACK WOMAN OWNED 12% 4
BDG (2 bonus points) 2% 2
5
PREFERENTIAL SUB TOTAL 27
ED = 1% of NPAT 1% 5
51% SD = 2% of NPAT 2% 10
BWO 2 bonus points 2
TOTAL 46
51% MINING CHARTER FOCUS AREAS
BYO
B-BBEE BASICS: Elements of the Generic Scorecard

25

19

20

42

51%
BWO

51%
BYO
B-BBEE BASICS: Company Sizes & Ownership

Exempt Micro Enterprises (EMEs):

EMEs are exempt from compliance with certain B-BBEE requirements if their
annual turnover is less than R10 million.
Implication: EMEs may have reduced compliance burdens compared to larger
businesses, but they should still be aware of their obligations under B-BBEE,
especially if they aim to grow and surpass the exemption threshold.

Qualifying Small Enterprises (QSEs):

QSEs are businesses with an annual turnover between R10 million and R50 million.
QSEs ownership dictates compliance requirements.
Implication: QSEs need to carefully manage their B-BBEE compliance to ensure they meet the
requirements while balancing limited resources and operational constraints.
NB: THESE EME & QSE THRESHOLDS DO NOT APPLY TO
CONSTRUCTION, LOGISTICS AND SOME OTHERS
B-BBEE BASICS: Generic Affidavit (EME/ QSE)
Needs to be completed correctly
B-BBEE BASICS: Generic Affidavit (EME/ QSE)
Needs to be completed correctly
B-BBEE BASICS: Sectoral Requirements, Company
Sizes and Ownership
Sectors with their own affidavits (belonging to different Sector Charters)
Property sector

Construction (electrical, plumbing, plant hire) – R3M

B-BBEE BASICS: Sectoral Requirements, Company
Sizes and Ownership

Sectors with their own affidavits (belonging to different Sector Charters)

Logistics/ Transport - up to R5M Transport Letter template
Tourism (Hospitality, Catering, etc.)- EME R5M and QSE R45M

Agriculture – R10M EME/ R50M QSE

ICT Sector - R10M EME/ R50M QSE

NPO - R10M EME/ R50M QSE

B-BBEE BASICS: Going from Affidavit to SANAS Certificate

I DO DIFFERENT THINGS WHERE DO I FALL?

WHY CAN I NOT JUST HAVE A GENERIC AFFIDAVIT?

Certificates costs money and time to submit paperwork

Learning about your sector’s requirements
Planning for compliance and the costs to comply
BENEFITS: Ownership

FRONTING:
RequestWhere
for youran company
enterpriseto enters
be theanfront
agreement
man
with Different
a newly created,
situations
100%
in which
blackthis
owned
is either
business to
Tokenism
secure
acceptable
a tender,orwhere
not the black-owned business acts
solely
Contractual
as a pass-through
agreement vehicle to supply the products Lack of Genuine

25 of the first enterprise

JV’s
Empowerment

Falsification of Records
Contractual agreement Lack of transparency
Can take time – requires the correct BBBEE
documentation
BENEFITS: HRD & ESD

CORPORATES CAN EARN POINTS

FOR EXTERNAL TRAINING:
Black women, youth, disabled
Black people living in rural areas
Black unemployed people

20 OR
PAYING AND CLAIMING AGAINST
YOUR OWN SKILLS DEVELOPMENT
LEVIES

42
CORPORATES CAN EARN POINTS FOR
PREFERENTIAL PROCUREMENT AND ESD

Also consider what you need to do before you

require a scorecard due to your industries’
thresholds
BENEFITS: Socio-Economic Development

Corporates can engage in initiatives that contribute to the socio-

economic development of local communities can enhance BBBEE
compliance. This might involve supporting education, healthcare, or
other community development projects.

Opportunity for NPOs, section 18A Certificate

5 Mining operations who invest into income generation
projects as part of their Local Economic Development
commitments.
B-BBEE BASICS: FRONTING
Black-owned Exempt Micro Enterprises (EMEs) and
Qualifying Small Enterprises (QSEs) may believe they are
exempt from BBBEE requirements due to misconceptions
or lack of understanding of the regulations.

Misinterpretation of Exemption
Lack of awareness of Sector-Specific Requirements
Limited Resources for Compliance
Confusion Regarding Fronting Practices
Token Black Ownership
Abuse of Enterprise & Supplier Development
False Representation (ownership/ skills development/ management
control, etc.)
B-BBEE BASICS: FRONTING PENALTIES

Legal Penalties: Fronting is illegal under South African law, and

companies found guilty of fronting may face fines, loss of contracts, or
imprisonment.
Reputational Damage: Engaging in fronting practices can damage a
company's reputation and credibility, leading to loss of trust from
customers, partners, and stakeholders.

Exclusion from Opportunities: Companies involved in fronting may be excluded

from government tenders, corporate supply chains, or industry associations,
limiting their growth and sustainability.
B-BBEE BASICS: FRONTING

SMMEs can become unwittingly involved in fronting practices if

they lack awareness of BBBEE requirements, feel pressured to
demonstrate compliance without fully understanding the principles,
or receive misleading advice from unscrupulous consultants or
partners.
It's crucial for SMMEs to prioritize genuine empowerment
initiatives, educate themselves on BBBEE regulations, seek
reputable guidance, and avoid engaging in practices that
undermine the integrity of economic empowerment efforts.
This ensures compliance, fosters sustainable growth and
contributes to meaningful transformation in the business landscape.