How your BEE Status is determined

In South Africa, your BEE (Broad-Based Black Economic Empowerment) status plays a critical role in how your business is perceived, particularly in industries where government contracts, tenders, and supply chains demand compliance with BEE principles. But how exactly is your BEE status determined? This blog will explore the factors that influence your BEE rating, what each status level means, and how you can improve your score to achieve better opportunities for your business.

What is BEE Status?

BEE status refers to a company’s compliance level with the B-BBEE framework, which measures various aspects of black economic empowerment. These include ownership, management control, skills development, enterprise and supplier development, and socio-economic development. Each of these elements is allocated a percentage or score, which then determines the company’s overall BEE level. The higher the level, the more compliant the company is deemed to be with BEE regulations.

The Five Elements of the B-BBEE Scorecard

1. Ownership: This measures the extent to which black South Africans own equity in the company. A high level of black ownership boosts your BEE score considerably.
2. Management Control: This evaluates the participation of black people in management roles, including the composition of the board and senior executive roles.
3. Skills Development: Companies are rewarded for investing in the education and training of black employees, especially for programs that provide formal qualifications and workplace learning opportunities.
4. Enterprise and Supplier Development: This element assesses how much support businesses give to black-owned suppliers and enterprises, whether through financial aid or mentoring.
5. Socio-Economic Development: This measures contributions to the economic upliftment of black communities, which can include education, healthcare, and infrastructure projects.

Each of these five components contributes to a company’s total score, which is then used to calculate the final BEE status.

BEE Status Levels

Your BEE status level is determined based on the total points your business earns across the five elements of the B-BBEE scorecard. The levels range from Level 1 (the highest) to Level 8 (the lowest), with the points thresholds as follows:

• Level 1: 100 points or more
• Level 2: 95 to 99 points
• Level 3: 90 to 94 points
• Level 4: 80 to 89 points
• Level 5: 75 to 79 points
• Level 6: 70 to 74 points
• Level 7: 55 to 69 points
• Level 8: 40 to 54 points

If a business scores less than 40 points, it is classified as “Non-Compliant” and cannot benefit from preferential procurement or other BEE advantages.

What Does Level 1 BEE Status Mean?

A Level 1 BEE status is the highest ranking a company can achieve, indicating that it has scored 100 points or more on the BEE scorecard. This status is highly desirable because it allows businesses to benefit from a 135% procurement recognition, which means other companies can claim 135% of any expenditure with a Level 1 company as part of their BEE scorecard.

What is the Best BEE Status?

Level 1 is considered the best BEE status. Companies at this level have achieved maximum compliance and enjoy significant advantages when bidding for government tenders, securing contracts, and building relationships with other businesses committed to BEE. Moreover, Level 1 businesses are seen as leaders in promoting transformation and empowerment.

How to Improve Your BEE Status

Improving your BEE status involves focusing on the different elements of the B-BBEE scorecard and strategically increasing your compliance in each area. Here are some steps to consider:

1.  Increase Black Ownership: By bringing in black investors or shareholders, you can significantly improve your ownership score, which has a large impact on your overall BEE status.
2. Improve Management Control: Promote more black employees into senior management positions or recruit black board members. Ensuring black women are represented can also contribute to better scores.
3. Invest in Skills Development: Set up internal or external training programs focused on upskilling black employees. Consider allocating at least 6% of your payroll to skills development initiatives.
4. Focus on Enterprise and Supplier Development: Partner with black-owned small businesses, offer mentorship, or provide financial support to empower them. This can drastically improve your ESD score.
5. Contribute to Socio-Economic Development: Invest at least 1% of your net profit after tax (NPAT) into socio-economic development initiatives that benefit black communities.
6. Get a BEE Consultant: A BEE consultant like Pioneer Consulting can help you identify weaknesses in your current BEE score and provide solutions tailored to your business needs.

How Do I Check My BEE Status?

Your BEE status can be determined by conducting a BEE verification through an accredited verification agency. These agencies will assess your performance across the scorecard elements and issue you a certificate indicating your BEE level. Many businesses utilise the services of a BEE consultant to get an initial idea of where they stand, but a formal verification is necessary for official purposes.

Conclusion

Understanding and improving your BEE status is crucial for businesses aiming to thrive in South Africa’s transformative economy. Whether you are aiming to improve your level or maintain a high score, focusing on ownership, management control, skills development, enterprise development, and socio-economic development will ensure compliance and open doors to greater opportunities. For tailored advice and a clear strategy, consider working with Pioneer Consulting to navigate the complexities of the BEE scorecard and maximize your business potential.