This page addresses the questions small business owners actually ask about B-BBEE, including the ones people are reluctant to ask: whether a business with no black ownership can comply, what a white-owned small business should do, and whether any of it is compulsory.
The answers are straightforward and they are worth stating plainly.
Business Requirements at a Glance
The position, stated directly.
- B-BBEE compliance is not compulsory for a private business in the sense of a legal obligation to reach a level
- It becomes effectively necessary where you sell to customers who score procurement, or tender to the public sector
- Every business has a level, including one with no black ownership — the level simply reflects the scorecard or the deemed position
- An Exempted Micro Enterprise is generally deemed compliant at a level determined by its black ownership, whatever that ownership is
- A business with no black ownership can still improve its level through the other scorecard elements
- A sworn affidavit is the compliance document for the smallest businesses, regardless of ownership
- Compliance with any sector code applying to your industry
- A valid document renewed before expiry
Registration and Legal Requirements
B-BBEE is governed by the Broad-Based Black Economic Empowerment Act 53 of 2003 and the Codes of Good Practice issued under it, together with sector codes where a sector code applies. The B-BBEE Commission oversees compliance and the Department of Trade, Industry and Competition administers the framework.
Confirm the current thresholds, scorecard weightings and requirements with the Department of Trade, Industry and Competition, the B-BBEE Commission or a SANAS-accredited verification agency. The Codes and sector codes are amended, and third-party summaries go out of date quickly.
Nothing compels a private business to reach a level. There is no penalty for a low B-BBEE level in itself. What exists is a commercial consequence: customers who score procurement prefer suppliers with better levels, and public sector tenders apply specific goals.
A business with no black ownership is not excluded. It is measured on the same scorecard and it can improve its level through skills development, enterprise and supplier development, socio-economic development and management control. Ownership is one element among several.
An Exempted Micro Enterprise with no black ownership still obtains a sworn affidavit stating its position and is deemed compliant at the corresponding level. It is a valid document and customers accept it.
Decide commercially. If your customers do not score procurement — direct consumers, small businesses, cash trade — a B-BBEE level may make no difference to you, and spending on it would be spending for nothing. If they do, it matters directly.
Ask your customers. The most useful thing a small business can do is ask its three largest customers whether B-BBEE status affects their procurement and, if so, what level they need. That answer decides everything.
Fronting is a criminal offence. Misrepresenting ownership, control or participation to obtain or improve a B-BBEE status is prohibited under the B-BBEE Act, and it carries serious consequences for the entity, its directors and the person whose participation is misrepresented.
Documents and Ownership Information Required
What is generally required.
- CIPC registration documents and a current company profile
- A shareholders’ or members’ register with identity details
- Beneficial ownership information as filed with the CIPC
- Certified ID copies for directors, members and shareholders
- Annual financial statements or a signed turnover confirmation
- A SARS tax compliance status PIN
- Payroll records and employment equity data, where the scorecard requires them
- Records of skills development, procurement and enterprise development spend, where applicable
Tax, Licence and Compliance Requirements
The affidavit is free whatever your ownership. Do not pay an agency for a document you can produce yourself as an Exempted Micro Enterprise.
Ownership changes are a business decision, not a compliance one. Bringing in a shareholder changes the ownership of your business permanently, and it should be decided on commercial and personal grounds rather than to move a score. Take advice before doing it.
Any ownership arrangement must be genuine. Real economic interest, real voting rights, real participation. An arrangement designed to look like ownership without those is fronting, and the consequences reach the directors personally and the nominal shareholder as well.
Refuse a fronting proposal and report it to the B-BBEE Commission. Being approached to act as a nominal shareholder is common and accepting is a criminal risk to you, not only to the business.
Skills development and enterprise development are open to everyone and produce genuine business benefit alongside points — better-trained staff and stronger suppliers. Those are worth doing on their own terms.
Keep the tax compliance status PIN and CIPC filings current, since procurement processes check them alongside the B-BBEE document.
Process, Deadlines and Ongoing Obligations
Ask your largest customers first whether B-BBEE status affects their procurement from you. If it does not, the correct action may be a free affidavit and nothing more. If it does, you now know the target.
Establish your category, check for a sector code, and obtain the appropriate document.
Free support is available. The Small Enterprise Development Agency assists small businesses with B-BBEE questions at no cost, including for businesses of any ownership.
Never enter a fronting arrangement, and be sceptical of anyone offering to improve a level through a structure rather than through the scorecard. That offer is the definition of the offence.
- Ask your largest customers whether your level affects their procurement
- Understand that no private business is compelled to reach a level
- Obtain the free sworn affidavit if you are an Exempted Micro Enterprise
- Know that a business with any ownership profile can obtain a document
- Improve through skills, enterprise and socio-economic development
- Treat an ownership change as a business decision, not a score decision
- Ensure any ownership arrangement carries genuine interest and control
- Refuse and report any fronting proposal
- Keep the tax compliance status PIN and CIPC filings current
- Use free SEDA support rather than paying for basic compliance
Frequently Asked Questions
Is B-BBEE compliance compulsory?
Not as a legal obligation on a private business to reach a level. It becomes effectively necessary where you sell to customers who score procurement or tender to the public sector.
Can a business with no black ownership comply?
Yes. It is measured on the same scorecard and obtains the same documents. Ownership is one element among several, and the others are open to any business.
Should I bring in a shareholder to improve my level?
Only as a genuine business decision, taken on commercial and personal grounds with advice. An arrangement without real economic interest and control is fronting, which is criminal.
How do I know whether it matters to me?
Ask your three largest customers whether B-BBEE status affects their procurement and, if so, what level they need. That answer decides what you should do.
Thresholds, deemed levels, scorecard elements and sector codes are set in the B-BBEE Act and the Codes of Good Practice and are amended. Confirm current requirements with the Department of Trade, Industry and Competition, the B-BBEE Commission or SEDA.