B-BBEE Code Series information for Generic Enterprises

Small and emerging enterprises often appear to have more attention on them for B-BBEE purposes as the number of small businesses outnumber larger enterprises by far. For this article, we will focus on larger enterprises, better known as “Generic” enterprises in B-BBEE terminology.

Generic companies with a turnover above R 50 million per annum undergo a generic B-BBEE scorecard audit and the following elements will be measured:

Ownership – this measures the percentage of black ownership shareholding in the business. This is regarded as a priority element and failure to comply with the minimum target (40% of Net Value) will result in the Level as obtained being discounted;

Management Control – this measures the directorship, executive management, other executive management, senior management, middle management, junior management and disabled staff in the business;

Skills development – this measures the amount of money spent on training of black employees and black people. This is regarded as a priority element and failure to comply with the minimum target of 40% will result in the Level as obtained being discounted;

Enterprise and Supplier development – this measures your spend on helping other black owned enterprises grow, both suppliers to you and non-suppliers. This is regarded as a priority element and failure to comply with the minimum target 40% in all categories will result in the Level as obtained being discounted;

Socio-Economic Development – this measures your spend on assisting charitable organisations.

The priority elements are ownership, skills development and enterprise and supplier development and have additional targets, which are as follows:

The sub-minimum requirement for Ownership is 40% of the net value targets (40% of the 8 points) based on the Time Based Graduation Factor.
The sub-minimum requirement for Skills Development is 40% of the total weighting points for skills development. The sub-minimum requirement for Enterprise and Supplier Development is 40% of each of the three categories within this element, namely preferential procurement, supplier development and enterprise development.

A generic enterprise is required to comply with all the priority elements.

If a large enterprise does not achieve these three targets, they will be subject to a “discounting” of one level down. Only the discounted levels of Measured Entities may appear on the B-BBEE Certificate.

Below is a list of important factors to note when dealing with elements other than Ownership as these are vital for maximising your B-BBEE Scorecard’s points.

  • Total Measured Procurement Spend
  • Preferential Procurement
  • Net Profit After Tax
  • Enterprise Development
  • Supplier Development
  • Socio-Economic Development
  • Payroll (Leviable Amount)
  • Skills Development spend on Black people
  • Spend on bursaries for Black people
  • Skills Development spend on Black employees with disabilities
  • Staff Complement (also used in the Workplace Skills Plan, Annual Training Report and Employment Equity Reports)
  • Number of Learnerships
  • Number of disabled Black people employed

Socio-Economic Development is a crucial element in B-BBEE. In a previous article dated 05 March 2020 titled “Industry Norms, the NPAT calculation, SED and how to deal with the numbers” aspects of the Net Profit after Tax calculation was discussed. The reader should consult this article too for further information.

The full value of the Socio Economic Development contributions is recognisable if at least 75% of the value of the contribution directly benefit black people. If less than 75% of the value of the Socio Economic contributions directly benefit black people, the value of the contribution made is multiplied by the percentage that benefit black people.

A typical target for contributions of a Generic entity is as follows: the annual value of all Socio-Economic Development Contributions made by the Measured Entity as a percentage of the target equates to a 1% contribution of Net Profit after Tax (NPAT). Whilst this seems simple to understand, the criteria varies within certain industry sectors.

To assist with these NPAT criteria, businesses may also utilise the statistics published by STATSSA on quarterly basis in the report “P0044-Quarterly Financial Statistics”. This report summarises the South African industry’s overall performance and then per sector (mining and quarrying, manufacturing, electricity-gas-and water, construction, trade, transport, storage, communication, real estate and lastly community, social and personal services).

A situation may arise whereby the Generic entity does not post a net profit after tax therefore the previous article dated 05 March 2020 referred to above is of benefit.

Other important factors are Total Measured Procurement Spend and Total Expenditure.

Total Expenditure: This is the sum of Cost of Sales, Operational Expenditure and Capital Expenditure but excludes the Total Measured Procurement Spend.

Total Measured Procurement Spend is: Taxation and levies (municipal and national), Salaries, Wages, Remunerations and Emoluments, Pass-Through Third-Party Procurement, Empowerment Related Procurement such as investments, loans and applicable donations qualifying for recognition under any statement under Code Series 400 (Enterprise and Supplier Development) or 500 (Socio-Economic Development) and certain types of imports.

Such imports are:

Imported capital goods or components for value-added production in South Africa provided that:

There is no existing local production of such capital goods or components; and Importing those capital goods or components promotes further value-added production within South Africa.

Imported goods and services other than those listed above if there is no local production of those goods or services including, but not limited to, imported goods or services that:

Carry a brand different to the locally produced goods or services; or
Have different technical specifications to the locally produced goods or services The Measured Entity produce an Enterprise Development plan.

Businesses should consult with a B-BBEE professional to obtain the most up-to-date information and advice as a means to improve their B-BBEE Scorecard.

Author Craig Tonkin

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