The B-BBEE Generic Scorecard: Elements, Scoring and costs

This article summarises the overall approach to BEE scorecards and levels. For more detail on each scorecard, please see the specific industry sector code applicable to your business.

The Generic Scorecard measures B-BBEE compliance for larger businesses. It has five elements, each with a weighting and specific targets; and each has a cost – whether dividends/capital growth “lost” in the case of ownership, to the salary bill – management control, leviable amount – effectively the salary bill (skills development), or even a share of NPAT (ESD and SED).

1. Ownership (25 points):
   • Focus: Extent of Black ownership.
   • Key Indicators & Targets:
     • Voting Rights: Target is 25% + 1 vote held by Black people, and 10% by Black women.
     • Economic Interest: Target is 25% for Black people, 10% for Black women, and a combined 3% for specific designated groups.
     • Net Value: Target is based on a time-based graduation factor, starting at 10% of the value of the business in the first year and increasing to 25% over ten years. This is a priority element (40% subminimum of the 8 points, i.e 3.2 points).
   • Cost/Target Basis: No direct monetary cost, but relates to the value of the company and the equity held by Black participants. The Net Value calculation considers acquisition debts.
   • Mechanics: Points are awarded based on percentages relative to targets. The “Flow-Through” and “Modified Flow-Through” principles trace ownership.
2. Management Control (19 points):
   • Focus: Effective control by Black people at board and executive levels.
   • Key Indicators & Targets:
     • Board Participation: Targets are generally aligned with demographic representation (e.g., 50% Black board members, 25% Black female board members).
     • Executive Management: Similar demographic targets apply to top management (e.g., 60% Black Executive Directors and Top Management, and specific percentages for Black women).
   • Cost/Target Basis: No direct monetary cost, but relates to the composition of the company’s leadership.
   • Mechanics: Points based on percentages relative to demographic targets.
3. Skills Development (20 points + 5 Bonus):
   • Focus: Investment in skills development for Black people.
   • Key Indicators & Targets:
     • Skills Development Expenditure: Target is 6% of the leviable amount (essentially, the company’s payroll, on which the Skills Development Levy is calculated).
     • Learnerships: Target is 5% of the total number of employees participating in learnerships, apprenticeships, or internships.
     • Absorption: Bonus points for employing learners after training. The target is 5% of the number of total employees.
   • Cost/Target Basis: 6% of the leviable amount for skills development expenditure.
   • Mechanics: Points based on spending and participant numbers relative to targets. This is a priority element (40% subminimum, i.e. 8 points).
4. Enterprise and Supplier Development (40 points + 4 Bonus):
   • Focus: Procurement from B-BBEE compliant suppliers and developing Black-owned businesses.
   • Key Indicators & Targets:
     • Preferential Procurement: Target is 80% of Total Measured Procurement Spend (TMPS) from B-BBEE compliant suppliers, with additional targets for spend with specific categories of suppliers (e.g., 51% Black-owned, 30% Black women-owned, Exempted Micro-Enterprises, and Qualifying Small Enterprises).
     • Supplier Development: Target is 2% of Net Profit After Tax (NPAT) for contributions to Black-owned supplier development.
     • Enterprise Development: Target is 1% of Net Profit After Tax (NPAT) for contributions to Black-owned enterprise development.
   • Cost/Target Basis:
     • Preferential Procurement: 80% of TMPS.
     • Supplier Development: 2% of NPAT.
     • Enterprise Development: 1% of NPAT.
   • Mechanics: Points based on spending and contributions relative to targets. This is a priority element – a 40% subminimum is required for each sub-element (1.6 points for preferential procurement, 3.2 points for supplier development and 1.6 for enterprise development).
5. Socio-Economic Development (5 points):
   • Focus: Contributions to initiatives promoting access to the economy for Black people.
   • Key Indicators & Targets:
     • Socio-Economic Development Contributions: Target is 1% of Net Profit After Tax (NPAT).
   • Cost/Target Basis: 1% of NPAT.
   • Mechanics: Points based on spending relative to the target.

Calculating B-BBEE Levels:

1. Discounting Principle: Failure to meet the 40% sub-minimum on any priority element (Ownership Net Value, Skills Development, or any of the three Enterprise and Supplier Development sub-elements) reduces the B-BBEE Status Level by one level, regardless of the total score.
2. Non-compliant? A non-compliant business is one that scores less than 40 points and/or does not submit a scorecard. It gets 0% on the ‘Qualifying Score’ measurement.
3. Score Calculation: Points are awarded for each element based on performance against targets. Points from all five elements are summed (out of 109, or 118 with bonus points). The total score determines the B-BBEE Status Level and Recognition Level – see the table below.

Key Takeaways on “Cost”:

• Ownership: No fixed monetary cost, but involves sharing equity and value. i.e. profits and capital growth.
• Management Control: No direct cost, but requires diverse leadership. Cost is the total cost to company of hiring, training, retaining and paying salaries and bonuses to black leadership.
• Skills Development: A direct cost, calculated as a percentage of payroll (leviable amount).
• Enterprise and Supplier Development: A combination of procurement targets (percentage of spend) and direct contributions based on NPAT.
• Socio-Economic Development: A direct cost based on NPAT.

This more detailed breakdown clarifies the financial implications and target bases for each element of the B-BBEE scorecard. It highlights that while some elements have direct monetary costs, others relate to structural changes within the company. The priority element subminimums are also crucial for determining the final B-BBEE level.