Your guide to B-BBEE by HGG BEEadvised

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On 1 May 2015, an update to the Codes of Good Practice for Broad-based Black Economic Empowerment (B-BBEE) came into effect. The revisions to the Codes had a considerable impact on the B-BBEE compliance levels of South African companies. Previously, broad-based empowerment included seven elements, namely ownership, management control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development. The amended Codes of Good Practice reduced these elements to five, namely ownership, management control, skills development, enterprise and supplier development and socio-economic development.

"If you have not reviewed your B-BBEE status since the update, it is vital that you measure your compliance in terms of the revisions and then take steps to return to your former level of compliance," says HGG Financial Group CEO Hendrik Gerrtys.

Priority elements

In addition to the changes to the B-BBEE elements, the amended Codes also identify priority elements on which companies are expected to focus, namely ownership, skills development, and enterprise and supplier development. Companies must comply with a 40% sub-minimum in these priority elements or face an automatic reduction of one level in their B-BBEE rating. "A qualifying small enterprise (QSE) is required to comply with ownership as a compulsory element and either skills development or enterprise and supplier development," explains Hendrik.

Other changes to the Codes of Good Practice include the following:

  • Black females now have their own, separate measurement indicators.
  • Skills development now takes into account the training of employees, as well as unemployed people, who could become employable after training.
  • Procurement is heavily weighted towards procuring from black-owned businesses, as opposed to the highest-rated businesses.
  • Socio-economic development contributions now focus only on support that facilitates income-generating activities in the hands of the beneficiaries.
  • The concept of "empowering suppliers" has been introduced. Exempted micro enterprises (EMEs) and start-ups (entities in operation for less than a year) automatically qualify as empowering suppliers.

What are QSEs and EMEs?

  • Under the amended Codes of Good Practice, a qualifying small enterprise (QSE) is an enterprise with an annual turnover of between R10 million and R50 million.
  • An exempted micro enterprise (EME) is an enterprise with an annual turnover of less than R10 million.

All the terminology associated with B-BBEE compliance may seem a bit daunting, but HGG BEEadvised can help you make sense of it all. Please contact us for assistance in evaluating your compliance level. We have the necessary expertise to help ensure your compliance with the Codes of Good Practice and improve your B-BBEE level," concludes Hendrik.

Get in touch

Call Hendrik Gerryts at (021) 851 2778 or email