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Black Economic Empowerment as a business strategy

What is BEE

BEE, or Black Economic Empowerment is an economic development strategy implemented by the South African Government in response to, at that time, the unique South African situation. 

Seen initially as a mechanism to address the historic imbalances in the South African economy it can now be viewed as an economic and social growth instrument with global relevance. 

BEE in its truest form encourages Business Start up, Business Growth, Effective People Management, Local Efficient Supply Chain Management, Local Community Development and Upliftment and increased market exposure due to an accredited and annually reviewed BEE status.

A Generic BEE scorecard consists of 7 Elements, with each element contributing to a total rating out of 100 points. 

The 7 elements and their rating can be seen in the table below:

Description Weighting

Overall

100%

Direct Empowerment

35%

Equity Ownership

20%

Management & Control

10%

Human Resource Development

25%

Employment Equity

10%

Skills Development

15%

Indirect Empowerment

40%

Preferential Procurement

20%

Enterprise Development

15%

Socio-Economic Development

5%

The Rating Level and BEE Status is also listed below.

BEE Status

Qualification
(in terms of Generic Scorecard)

BEE Procurement Recognition Level

Level 1  Contributor

> 100 points

135%

Level 2  Contributor

≥ 85 but < 100

125%

Level 3  Contributor

> 75 but < 85

110%

Level 4  Contributor

> 65 but < 75

100%

Level 5  Contributor

> 55 but < 65

80%

Level 6  Contributor

> 45 but < 55

60%

Level 7  Contributor

> 40 but < 45

50%

Level 8  Contributor

>30 but < 40

10%

Non-Compliant

 <30

0%

Over and above the Generic Scorecard a number of Industry Sectors in South Africa have their own 'Sector Charter' which has different weightings for each element aligned with the capacity of that industry sector to comply. 

Examples of these include Mining, Tourism and ICT.  The minimum criterion for most industries is to achieve a Level 4 Contributor or 65 points on the scorecard.

Companies investing in South Africa are exempt from BEE in their first year but must provide Development plans in most instances.

There remains much criticism from some sectors of the community on whether the model has achieved what it set out to achieve however, accordingly to the statistics available, transformation in equal opportunity employment has shifted by 6% per year since the introduction of the Codes of Good Practise in 2007 against an average of 3% in the years preceding this.

Procurement with SMME's has increased from less than 3% to more than 25% in some sectors substantially lowering the barriers to entry for smaller suppliers.

The average Ownership by qualifying South Africans or South African businesses in key sectors such as Mining, Construction and Financial Services is at 25% however there remains several challenges to the policy.

The adjudication of tenders remains a challenge with varying formulae used for the award of preference points and many companies in South Africa have attempted to circumvent the intention of the Codes through incorrect application or the appointment of advisors who have specifically worked to identify the loopholes to applying the legislation.

The DTI,  who are the custodians of the Policy,  are currently reviewing the legislation to remove the loopholes and provide more clarity on the legislation in order to address these issues.