Understanding BEE

BBBEE Codes of Good Practice

The Codes of Good Practice specify the criteria for earning B-BBEE scorecard points and ratings for your business. They provide a standard framework for the measurement of BEE across all sectors of the economy.

The Codes of Good Practice are issued in terms of the Broad-Based Black Economic Empowerment Act of 2003. The main objective of the Act is to advance economic transformation and enable the participation of Black individuals in the South African economy.

The Minister of Trade and Industry can issue Codes of Good Practice as authorised under section 9 of the BBBEE Act. These Codes can be “generic”, meaning they apply broadly across various industries, or they can be sector-specific, tailored to particular sectors of the economy as developed by stakeholders within those sectors. The current generic Codes of Good Practice were published on 11 October 2013 and became effective on 1 May 2015.

The Codes do not legally require businesses to meet specific BBBEE targets. Instead, they offer a framework for assessing your B-BBEE status. Companies can still earn B-BBEE points on a proportional basis, even if they do not fully meet these targets. Nevertheless, a company’s status is crucial for its success in securing government and public entity tenders, and for obtaining licenses in certain sectors such as mining.

B-BBEE Codes 000 to 500 cover various aspects of a company’s BEE status as outlined below.

Generic Codes of Good Practice

Code	Measurement Scope	Key Outcome
Code 000: B-BBEE General Principles and Framework	Measures BEE status, including the generic B-BBEE scorecard which gives a general points weighting.	Serves as a guide for organisations to assess their B-BBEE levels and develop strategies for achieving compliance targets within the broader Codes.
Code 100: Ownership	Measures effective Black ownership within a business in relation to voting rights and net share value.	Increased Black entity ownership which is essential for advancing economic empowerment and transformation.
Code 200: Management Control	Measures the level of Black management and control in a business.	Broader representation of Black people holding executive and higher level positions, enabling them as decision-makers and promoting employment equity .
Code 300: Skills Development	Measures skills development and training among Black individuals in the business.	Increase the skills and capabilities of the workforce, particularly among Black employees, through various training and development initiatives.
Code 400: Enterprise and Supplier Development	Measures a company’s level of contribution to Black-owned and Black-empowered enterprises. This includes preferential procurement which measures the level of goods and services procured from B-BBEE compliant suppliers.	Growth and sustainability of Black-owned and Black-empowered enterprises through support, mentorship, and investment.
Code 500: Socio-Economic Development (SED)	Measures the extent of an enterprise’s contribution to socio-economic development and how the measured entity enables access to the economy for Black people.	Upliftment in rural areas, job creation and improved access to essential services such as healthcare and education. This ultimately contributes to sustainable economic development and poverty alleviation.

Importance of meeting B-BBEE targets and priority elements

If a business fails to meet the targets outlined in the Codes of Good Practice, the primary consequence is that it will not earn the maximum available B-BBEE points. However, some points can still be earned on a pro-rata basis, even if the target is not fully achieved.

In the Codes, certain elements are identified as “priority elements”, specifically:

Ownership
Skills Development
Enterprise and Supplier Development

These priority elements are crucial for improving and maintaining an organisation’s B-BBEE status.

How are multinational companies treated by the Codes?

Foreign businesses and their local subsidiaries are assessed under the B-BBEE Codes in the same manner as local companies. They are also subject to an automatic downgrade in B-BBEE status if they do not meet the sub-minimum requirements.

However, foreign multinationals have the option to use the “equity equivalent programme” to earn B-BBEE ownership points without having a B-BBEE shareholder or partner. This programme, which must be approved by the Department of Trade and Industry, typically involves the multinational funding an approved initiative, such as training for Black people.

How are multinational companies treated by the Codes? — original illustration

Amended Codes of Good Practice 2013

In 2013, amendments were made to the generic scorecard that is governed by B-BBEE legislation and the Codes. The most notable change was the consolidation of the generic scorecard into five elements, aligning them with the government’s priority programmes. These five elements are ownership, management control, skills development, enterprise and supplier development, and socio-economic development. This restructuring aimed to streamline the B-BBEE assessment process and enhance the focus on key areas of transformation: ownership, skills development and enterprise/supplier development.

The biggest change was adjusting the turnover thresholds for Qualifying Small Enterprises (QSEs), Exempted Micro Enterprises (EMEs) and Generic Enterprises (GEs):

EME threshold: annual turnover of under R10 million
QSE threshold: annual turnover of between R10 million and R50 million
GE threshold: annual turnover above R50 million

EMEs can transact with an affidavit and 51% or more black ownership. QSEs may also use an affidavit.

Revised Codes of Good Practice 2019

The Department of Trade and Industry published the revised Codes of Good Practice on 31 May 2019 for implementation within 6 months from the date of the Gazette. Among the changes was the requirement for bursaries under skills development, which meant that the spend for skills development was now split between bursaries (2.5%) and learnerships (3.5%). Absorption was also defined as being ‘long-term’ employment.

Industry Sector Codes

Alongside the generic Codes of Good Practice, there are specific B-BEEE sector codes that cater to major industries in South Africa:

Agriculture
Construction
Defence
Finance
Forestry
Computers and Information Technology (ICT)
Marketing, Advertising and Communications (MAC)
Property
Tourism
Transport

Private businesses are not legally required by the B-BBEE Act or Codes to comply with B-BBEE policies. However, state and public entities are required to comply and choose to do business with private organisations that have high levels of BEE compliance . A major factor in measuring BEE compliance is the procurement of goods and services from other compliant entities.

Organisations that are not directly dependent on the state for business are still likely to face commercial pressure to conform to BEE Codes. High levels of compliance expand procurement and licensing opportunities, meaning businesses across all sectors can stay competitive in the South African market.