BEE Partner, South Africa Economy Watch

Targets

Achievement of the allocated points is based on the measured entity reaching the compliance targets. The compliance targets in this element are fairly ambitious because very few suppliers will have a decent BEE status level, particularly in the early stages of this policy. The Codes accounted for this by splitting the compliance targets from years 0 to 5 with a target of 40% and years 6 to 10 with a target of 50%. The QSE targets are substantially lower than those provided in the generic scorecard.

The initial targets mean that, on average, 40% of all qualifying expenditure must be made in favour of businesses with a BEE status of Level Four, giving the supplier a 100% BEE procurement recognition level. This is not actually the correct manner of expressing the target, but it serves to provide an idea of the extent of the target for the first five years.

Calculations

Calculating the BEE procurement spend A=sum (B x C)

A = the total BEE procurement spend for the measured entity

= the sum of the result of (B x C) for each supplier that is not excluded under section 6

B = the value of procurement, not excluded under the exclusion from total measured procurement spend from each supplier of the measured entity

C = the BEE procurement recognition level of each such supplier

The most effective way to work out the preferential procurement score is described below.

Step 1 Extract the total measured procurement spend from the creditors’ ledger and the cash book.

Step 2 Categorise the spend into the total spent on each supplier.

Step 3 Multiply each supplier’s total spend by that supplier’s BEE procurement recognition level to obtain the BEE procurement spend per supplier.

Step 4 Where a supplier has enhanced recognition, multiply the BEE
procurement spend of the supplier by that multiple.

Step 5 Add the combined BEE procurement spend of all the suppliers as above.

Step 6 The result of Step 5 is the BEE procurement spend.

Calculation of the preferential procurement score

The formula is: A = B/Cx D

A = the preferential procurement score

B = the total BEE procurement spend (the result of the formula above)

C = the compliance target set by the indicator (40% and 50% after year five)

D = the weighting points allocated to the indicator (25 points).

Step 7 Calculate the total measured procurement spend, which is the total actual spend on all qualifying suppliers.

Step 8 Multiply the total measured spend by the indicator’s compliance target 40%.

Step 9 Divide the result of Step 6, the BEE procurement spend, by the result of Step 8, the compliance target.

Step 10 Multiply the result of Step 9 by the weighting points for the indicator, 25. The result, to two decimal places, is taken forward to the scorecard.

Example

Azt Ltd purchases goods with a pre-VAT invoice value of R100 from Bzt (Pty) Ltd, who is a Level Two contributor. The spend is calculated as 125% x R100 = R125. Azt Ltd chose to transact with Bzt (Pty) Ltd because the only alternative supplier, Czt CC, is a Level Eight contributor. The service and price of Czt CC are comparable but the procurement would only be recognised at 10% of the total spend, that is, R10, which is not acceptable in terms of Azt Ltd’s empowerment goals.

Possibly related posts: (automatically generated)
BEE Capital Structure and Expenditure Calculation part 2

• South African BEE Spending Measure
• Do you know how to prepare for a BBBEE Rating?
• South African Bee Tax: Application of BEE to Taxation
• BEE Capital Structure and Expenditure Calculation part 1
• BEE Skills Economic Development Calculation and Practical
• BEE Capital Structure and Expenditure Calculation part 3
• Typical BEE business Partners vs Businesses
• Typical BEE Businesses
• Shaping a new breed of South African manager for the global challenge part 7