Page 10 - Q&A

Understanding the Procurement element of
your BEE scorecard BEE

March 2020
“Our company will probably go over the R50 million mark this year. This will
require us to verify as a Generic enterprise under the DTI BEE Codes of Good
Practice. I am very concerned about the impact this will have on our BEE
level, as I have heard that the procurement element in particular can lead to
getting a lower BEE level. Is there anything I can prepare for with our company’s
procurement to avoid such a situation?”
The Procurement Element forms part of the Enterprise and Supplier Development
Element (“ESD”) under the Generic BEE Codes of Good Practice (“the Codes”)
and is a Priority Element. This means that if you fail to meet certain sub-minimum
targets, you can be discounted by a full level on your B-BBEE scorecard. If your
company has to report as a Generic enterprise, it will have to pay attention to
all the Priority Elements, but specifically also the Procurement element, which is
substantially more complex under the Generic scorecard. With proper planning
and management of your company’s procurement one can still achieve the
necessary points and meet the sub-minimum requirements.
The key with procurement is timeous planning as procurement points are built
up over time through your company’s procurement. There is no quick fix for
procurement points and preparation is therefore vital.
The first step in your planning is to establish what your total procurement spend
will be. This will involve an estimate based on your previous figures extrapolated
to the current year, taking into account any increases in expenditure.
Remember to exclude VAT and to only look at purchases and not payments.
Secondly, you have to look at the BEE recognition levels of your suppliers. The
better the BEE levels of a supplier, the better for your procurement, particularly
if it is a large supplier to you. Obtain the B-BBEE certificates of your suppliers
and ensure that they are valid. Generally, BEE verification agencies will allow a
certificate if such was valid for at least a day in the financial period under which
you are reporting.

Being a Priority Element, at least 40% of the total available points under the ESD
element must be obtained. Procurement alone accounts for 27 points excluding
the 2 bonus points on offer. However, focusing only on B-BBEE compliant
companies will not fully address your procurement as this sub-target only
accounts for roughly 18% of the total points available under the Procurement
element. A further 15 points can be scored for spending on Empowering
Suppliers that are at least 51% Black Owned and 30% Black Women owned.
A further 7 points are also available for spending on EME and QSE companies.

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