Is your Company an Empowering Supplier?

With the Revised Codes of Good Practice of October 2013 now in force, many companies will be measured on their Empowering Supplier status. It is imperative that your company is recognised as an Empowering Supplier otherwise if your company does not comply with the criteria, your clients will not recognise any B-BBEE spend with you, irrespective of what BEE level of compliance you may have achieved.

Measured entities are obliged to firstly understand the requirements and then ensure that they fulfil these requirements, on an annual basis. According to Gazette No 36928 of 11 October 2013, the definition of an Empowering Supplier is:

“A B-BBEE compliant entity, which is a good citizen of South Africa, who complies with all regulatory requirements of the country and should meet at least 3 (if it is a large enterprise with an annual turnover over R50 million) or 1 (if it is a Qualifying Small Enterprise with an annual turnover of between R10 million and R50 million) of certain criteria”.

The following list below, are the 5 criteria to which the definition above refers:
1)    At least 25% of cost of sales, excluding labour costs and depreciation, must be procured from local producers or local suppliers in RSA. For Service industry, labour costs are included but capped to 15%.
2)    50% of jobs created are for Black people provided that the number of Black employees, since the immediate prior verified B-BBEE measurement, is maintained.
3)    At least 25% transformation of raw material / beneficiation, which include local manufacturing, production and/or assembly and/or packaging.
4)    Spend at least 12 days per annum of productivity deployed in assisting Black EME and QSE beneficiaries to increase their operational or financial capacity.
5)    At least 85% of labour costs are paid to South African employees by the Service industry.

It must be noted that all Exempted Micro Enterprises and Start-ups are automatically recognised as Empowering Suppliers. Greater than 50% Black owned entities will have to fill in an affidavit to confirm that they fulfil one the the criteria above, in order to be recognised as an Empowering Supplier. All other entities would need to be measured by the verification agent.
The exclusion of Imports for Procurement
The Automotive Industry is faced with some challenges when it comes to whether or not they may exclude imported products or services from the measurement of their Procurement spend. While some importers have the choice of whether or not to procure from a local supplier, some are contractually obliged to procure from foreign suppliers. While the Department of Trade and Industry are trying to encourage the sourcing of products and services locally, in some cases this not possible. Under the Revised Codes, the criteria for allowing any imports to be excluded, now requires further evidence in order to exclude certain imports.
As per the B-BBEE Codes of October 2013, the following imported goods and services may be excluded:
1.         Imported capital goods or components for value-added production in South Africa provided that:
a.         There is no existing local production of such capital goods or components; and
b.         Importing those capital goods or components promotes further value-added production within South Africa
2.         Imported goods and services, other than those listed above, if there is no local production of those goods and services including, but not limited to, imported goods or services that:
a.         Carry a brand different to the locally produced goods or services; or
b.         Have a different technical specification to the locally produced goods or services.
The exclusion of imports listed under point 2 above are subject to them having developed and implemented an Enterprise Development and Supplier Development plan for imported goods and services. This plan should include:
• Clear objectives
• Priority interventions
• Key performance indicators and
• A concise implementation plan with clearly articulated milestones
If your business therefore falls under point 2 above, it is suggested that you develop and implement a plan in order to avoid the inclusion all your imported products in your total measured procurement spend, as no foreign business would be able to supply you with a B-BBEE certificate. This means that your company will be penalised under your procurement spend.
For more information or assistance on B-BBEE please contact SAB&T BEE Services, as we are an IRBA approved Registered Auditor, a full member of ABP (Association of BEE Professionals) as well as an associate member of NAACAM. SAB&T BEE Services can offer our clients solutions to their B-BBEE needs, which include:
•          BEE Verifications / Certificates
•          Gap Analysis (Old vs Revised codes)
•          Strategy Planning
•          BEE Training
•          Consulting
We service all 9 provinces within South Africa and may be contacted on 0860 233 669 or via email: sales@sabtbee.co.za