Written by Werner van Rooyen
B-BBEE and Enterprise development is one of the most current buzz phrases in South Africa. Everybody from Government to Large Corporates to SMME’s must either perform Enterprise Development or must be the beneficiaries of Enterprise Development.
According to the Stellenbosch Business School Enterprise Development is defined as “the act of investing time and capital in helping people establish, expand or improve businesses. Enterprise development helps people to earn a living; it helps them out of poverty; and it leads to long-term economic growth for themselves, their families, and their communities”.
B-BBEE and tenders
Fortunately there are many ways to comply with Enterprise development and because it is very easy to calculate how much your business have to spend (1% of Net Profit After Tax or NPAT for short), it is fairly easy to score the maximum available points on your B-BBEE Score Card. Just remember that there needs to be proper recordkeeping of all the Enterprise Development spend that you do.
Also, particularly important to remember is that both Large Businesses as well as Qualifying Small Enterprises (QSE’s) must comply with this element.
10 ways to spend Enterprise Development are:
- Provision of training or mentoring by suitably qualified entities or individuals to SMME’s which will assist the SMME’s to increase their operational or financial capacity.
- Investments in beneficiary entities (SMME’s).
- Loans made to beneficiary entities.
- Guarantees given or security provided on behalf of beneficiaries.
- Direct costs incurred by a measured entity in assisting and hastening development of beneficiary entities;
- Contributions made to settling service costs relating to the operational or financial capacity or efficiency levels of beneficiary entities;
- Having a good B-BBEE status level is VERY IMPORTANT in the tender process!
- All tender documents will have the NEW Standard Bidding Document 6.2, which is used to claim your Preference Points for B-BBEE. The higher your B-BBEE status level, the more points you will score on the Preference Points System. Ultimately the bidder or bidders scoring the highest points will be awarded the tender.
- One of the major changes in the Preferential Procurement Regulations 2017, is the increase in the threshold value on the 80/20 and 90/10 Preference Point Systems.
- The following Preference Point Systems are applicable from 1 April 2017, to all Organ of State bids:
- the 80/20 Preference Point System for bids with a Rand value of more than R30,000-00 but not exceeding R50,000,000-00 (all applicable taxes included); and
- the 90/10 Preference Point System for bids with a Rand value above R50,000,000-00 (all applicable taxes included).
- This means that on the 80/20 system, your B-BBEE status level will earn you a point out of 20, and on the 90/10 system your B-BBEE status level will earn you a point out of 10.
- To earn these points a potential bidder must have a B-BBEE certificate that has been issued by a verification agency accredited by the South African Accreditation System (SANAS) or the bidder must submit an affidavit stating its B-BBEE status level.
- Exempt Micro Enterprises (EME’s) must acquire an affidavit regarding their B-BBEE status level – no verification is required. This is also applicable to Qualifying Small Enterprises (QSE’s) with 51% or more black ownership.
- The various B-BBEE status levels that an EME can achieve, through an affidavit, are:
- EME’s that are not Black-owned automatically qualify as a Level 4 contributor to B-BBEE,
- EME’s that have 51% or more (but not 100%) black ownership qualifies as a Level 2 contributor to B-BBEE and
- EME’s that have 100% black ownership qualifies as a Level 1 contributor to B-BBEE.
- A 100% Black-owned EME will therefore earn maximum points (either 20 or 10, depending on the value of the tender) on the Preference Point System.
- A valid B-BBEE certificate or B-BBEE affidavit is especially important in the Tender Process. Ensure your business scores the highest possible score on its B-BBEE certificate or B-BBEE affidavit.
- Settlement of accounts with beneficiary entities over a shorter period in relation to the measured entity’s normal payment period provided the shorter period is no longer than 15 days.
- Providing training or mentoring to beneficiary communities by a measured entity;
- Payments made by the measured entity to suitably qualified and experienced third parties to perform Enterprise Development on the measured entity’s behalf.
Enterprise Development must not be confused with Supplier Development. Any money spent on Enterprise Development cannot be claimed as Supplier Development as well.
Consider attending our “Become a Tender Expert” two-day workshops and webinars. You can register online at www.howtotender.co.za/workshops/. If you need further information, please reach out to us and contact us at info@howtotender.co.za.