Start-ups and small businesses with an annual turnover of R 10 million or less (being an Exempted Micro Enterprises or “EME”) automatically qualify for a Level 4 B-BBEE rating.
Businesses with an annual turnover of between R 10 million and R 50 million (being a Qualifying Small Enterprises or “QSE”) have the benefit of enhanced B-BBEE recognition levels to the extent they are black-owned and controlled, much in the same way as EME’s.
An EME or a QSE with 51% black-ownership automatically qualifies for a Level 2 B-BBEE rating (with a B-BBEE recognition level of 125%) and an EME or a QSE that is 100% black-owned, a Level 1 B-BBEE rating (with a B-BBEE recognition level of 135%).
Changes are now being proposed. So, what are they?
- The abovementioned benefit is only available where the modification flow-through principle was not applied.
- On the same basis large/generic enterprises (being businesses with an annual turnover over R50 million or more) could in future also qualify for enhanced B-BBEE recognition levels in the same way as QSE or EMEs without having to comply with the remaining elements of the B-BBEE Codes.
Do these changes predict a problem?
This would bring down compliance costs and potentially more transformed business. That is a good thing. However, the great downside to this is that there would be less focus on the other elements of the scorecard which are equally important from a sustainability perspective.