BEE Partner, South Africa Economy Watch

The procurement recognition level refers to each supplier’s BEE procurement recognition level as determined by that supplier’s BEE status level. The table below is sourced from Statement 000. Suppliers should be able to provide the purchasing business with a BEE certificate from a verification agent. The certificate will contain the BEE status level and probably the BEE procurement recognition level.

If the supplier does not have a certificate or the certificate is more than a year old, then the client must review the supplier’s BEE self- assessment to determine the acceptability of the BEE status level claimed by the supplier. Beyond the interests of perpetuating my own business, it seems logical for any business to insist that suppliers present a verified BEE certificate.

BEE spending procurement

The BEE procurement spend is the monetary value of the purchase from a supplier multiplied by the BEE procurement recognition level as above of that supplier.

The statement provides enhanced recognition to priority suppliers. This means that the purchase value is multiplied by the enhanced recognition factor and then multiplied by the BEE procurement recognition level to calculate the BEE procurement spend per supplier. Enhanced recognition is dealt with in more detail below.

It is logical to procure from Level One contributors as the BEE procurement spend will be multiplied by the supplier’s BEE procurement recognition level of 135%.

To recap on Statement 000: The table shows that the scorecard is measured out of 100 points. It is possible, however, to achieve more than 100 points because bonus points are available.

The points achieved on the scorecard equate to a BEE status level. For example, 76 points in the table equate to a Level Three contributor, which has a BEE procurement recognition level of 110%. Any client procuring from a Level Three contributor may recognise 110% of the value of the procurement as the BEE procurement spend from that supplier. For every R100 spent, the purchaser adds R110 to their BEE procurement spend.

A measured entity scoring 53 points equates to a Level Six contributor, which has a procurement recognition level of 60%. For every R100 a client spends, it may only recognise R60 on its preferential procurement scorecard.

BEE total measured spending procurement

The total measured procurement spend is the monetary value of all procurement. What constitutes “all procurement“? The difficulty i_nincluding all procurement is that some expenses are beyond the purchaser’s choice and may unfairly penalise that business. The problem is approached by including all procurement and then removing “unfair” expenses through allowable exemptions.

This is another technical section, not all of which is applicable to all business, but most QSEs will need to understand this as it forms the basis of the calculation.

Total measured procurement spend inclusions

The measurement includes all expenditure and capital expenditure. This includes purchases from organs of state, imports, salaries, cost of sales and operating expenses of everything an entity procures.

Section 5 of Statement 500 details the inclusion of the following purchases:

• goods and services included in the cost of sales
• goods and services included in operational expenditure
• capital expenditure regardless of where it is purchased from
• goods and services from organs of state and public enterprises listed in Schedules 2 and 3 (which include Telkom, Eskom, Denel, Land Bank and Rand Water)
• goods and services from monopolies
• any procurement included in the measured entity’s financial statements incurred on behalf of a third party or client.
• payment to independent contractors and labour brokers
• goods and services for the purpose of BEE implementation, including skills development
• within group structures, goods and services purchased from subsidiaries and holding companies
• pension and medical aid contributions (The capital portion of any contribution will not be included in the total measured procurement spend. However, the portion accruing to the pension fund or medical company for fees or otherwise must be included in the measurement. The pension scheme or the medical insurer must provide the measured entity with a certificate confirming the portion that is capital for the employee and other that accrues to the insurer or scheme.)
• trade commissions payable for any business purposes
• imports of all goods and services procured from a non-South African source.

Note that the inclusions are not complete without reading the exclusions, which are set out below.

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