B-BBEE (Broad-Based Black Economic Empowerment) is South Africa’s framework for encouraging economic participation and transformation. It can play an important role in government tendering, but it is important to understand that B-BBEE is only one part of the tender evaluation process.
Having a good B-BBEE level does not automatically win you a tender, and having a lower B-BBEE level does not necessarily prevent you from submitting one.
How does B-BBEE affect a tender?
Government tenders are generally evaluated using a combination of price and preference or specific-goal points.
Under the current preferential procurement framework, the commonly used systems are:
- 80/20 system – up to 80 points for price and 20 points for the specific goals stated in the tender.
- 90/10 system – up to 90 points for price and 10 points for specific goals.
The tender documents must tell you which system applies and how the preference points will be awarded.
B-BBEE can form part of these specific goals. For example, an organisation may award preference points based on a bidder’s B-BBEE status, black ownership, black women ownership or other transformation objectives.
This means two companies offering similar prices may ultimately receive different total scores because of the preference points available to them.
What are the B-BBEE levels?
B-BBEE status generally runs from Level 1 to Level 8, with Level 1 being the highest recognition level.
For many small businesses, obtaining B-BBEE documentation is relatively simple.
An Exempted Micro Enterprise (EME) with annual turnover of R10 million or less generally receives an automatic Level 4 status. An EME that is at least 51% black-owned generally qualifies for Level 2, while a 100% black-owned EME generally qualifies for Level 1.
Qualifying Small Enterprises (QSEs) that are at least 51% black-owned can similarly qualify for enhanced recognition.
Depending on the size and ownership of your business, proof may be provided through a valid B-BBEE sworn affidavit, CIPC B-BBEE certificate or SANAS-accredited verification certificate.
Does a better B-BBEE level guarantee that I will win?
No.
A tender normally has several stages. You may first have to satisfy mandatory requirements such as:
- Tax compliance
- CSD registration
- Correct licences or industry registrations
- CIDB grading, where applicable
- Compulsory briefing attendance
- Technical specifications
- Minimum functionality scores
- Relevant experience or references
Only bids that meet the required conditions normally proceed to the applicable price and preference evaluation.
A Level 1 company that fails a mandatory requirement can therefore still be disqualified, while a company with a lower B-BBEE level may win because it meets the requirements and achieves the highest overall score.
Can a company with no black ownership tender?
Yes, unless the specific tender contains a lawful eligibility or preference requirement that it does not meet.
It is a common misconception that only black-owned companies may apply for government tenders. Many tenders are open to businesses with different ownership structures.
However, black ownership and a stronger B-BBEE status may provide a competitive advantage through preference points or may be relevant to particular conditions contained in the tender.
You therefore need to examine each tender individually rather than assuming that your B-BBEE level either qualifies or disqualifies you.
B-BBEE can also affect private-sector opportunities
B-BBEE is not only relevant when supplying government.
Large companies are measured partly on their own procurement and supplier-development activities. They may therefore prefer purchasing from suppliers with strong B-BBEE recognition, particularly qualifying black-owned suppliers.
As a result, improving your B-BBEE status can potentially make your company more attractive to large private companies, government contractors and other businesses that are themselves measured under B-BBEE.
Never misrepresent your B-BBEE status
Your B-BBEE documentation and ownership information must accurately reflect the business.
Creating artificial ownership arrangements or misrepresenting black ownership simply to qualify for tenders may constitute B-BBEE fronting or misrepresentation and can have serious consequences.
Never restructure a company purely on paper to obtain a better B-BBEE status while the actual ownership, control and economic benefit remain elsewhere.
The tender document is always the key
Do not assume that every government tender awards B-BBEE points in exactly the same way.
Always download the complete tender documents and look for sections dealing with Preference Points, Specific Goals, SBD 6.1, B-BBEE, Ownership or Preferential Procurement.
These sections will tell you exactly how B-BBEE and other preference criteria affect that particular opportunity.
In short: a strong B-BBEE status can significantly improve your competitiveness in certain tenders, but it is only one part of a successful tender. Price, compliance, experience, technical capability and your ability to actually deliver the contract remain equally important.