Empowering Supplier VS Value-Adding Supplier

Empowering Supplier VS Value-Adding Supplier

The Amended Codes of Good Practice, Gazette No.36928 introduces criteria to qualify as an Empowering Supplier and no longer includes the Value Adding status that was included in the previous Codes of Good Practice, Gazette No. 29617.

What exactly do these terms mean and what do they mean to your business?

Background

Empowering Supplier criteria drives transformation in the economy through the below pillars:

  • Increasing procurement locally;
  • Job Creation for black people and hiring locally;
  • Transforming raw materials; and
  • Transferring Skills to small enterprises.

Value adding rewards entities for exceeding a set target in relation to the Measured Entities revenue.

Measurement Principles

To be an Empowering Supplier an organisation should meet at least three of the following criteria if it is a large enterprise (turnover exceeding R50m), or at least one if it is a qualifying small enterprise – QSEs – with a (turnover between R10m and R50m). EMEs (between R10m and R50m): and start-ups are automatically recognised as Empowering Suppliers.

No. Requirement Gazette No.
1. At least 25% of the cost of sales excluding labour cost and depreciation must be procured from local producers or local suppliers in SA. For service industry labour, costs are included but capped to 15%. 36928
2. Job Creation: 50% of jobs created are for blacks, provided the number of black employees since the immediate prior verified B-BBEE measurement is maintained. 36928
3. At least 25% transformation of raw material/beneficiation which includes local manufacturing, production and/or assembly, and/or packaging. 36928
4. Skills transfer: At least spend 12 days per annum of productivity deployed in assisting black exempted micro enterprises (EMEs) and QSEs beneficiaries to increase their operation or financial capacity. 36928
5. At least 85% of labour costs should be paid to South African employees by service industries entities 38799

Value-adding Status is achieved when the sum of the Measured Entity’s Net Profit before tax and labour costs exceed 25% of revenue corresponding to the financial year under review.

What impact do these initiatives have on my B-BBEE Verification?

Empowering Supplier Status is a stand-alone assessment that is the pre-qualifying criteria before your Contributor Status may be recognized by entities which you supply. As an example, if you achieve a level 4 Contributor Status Level, entities may recognize 100% of the spend with your company in their procurement verification’s. Under the Amended Codes if you are not an Empowering Supplier, entities may recognize no spends with your entity regardless of your Contributor Status Level.

A Value Adding status allows entities procuring from your entity to recognize an additional 1.25 multiplier. For example, you spend R100 with a supplier who is a level 4 Contributor and is Value Adding. In your B-BBEE procurement calculation you may recognize R100 * 1.25 = R125. The Value Adding calculation no longer applies under the Amended Codes of Good Practice.

Nelson Sebati offers a holistic solution to B-BBEE related queries, ranging from B-BBEE Verification, Consulting and Advisory services to detailed workshops & interpretations. Contact me for credible B-BBEE assistance.

 

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