The B-BBEE Codes are published under the BEE Act and detail how B-BBEE must be measured in South Africa. In assessing B-BBEE, a scorecard approach is used, with the five elements of B-BBEE (ownership, management control, skills development, enterprise and supplier development including preferential procurement, and socioeconomic development), allocated points to reach a final score.
In a nutshell, the B-BBEE scorecard assesses the structure of your business in line with the five elements of B-BBEE and the points your business earns determine its B-BBEE Level.
To achieve the best possible results for your business, it’s important to fully understand all the elements that make up the B-BBEE scorecard and how the scoring works.
| Element | Indicator | Available Points (Total of 118) |
| Ownership (Priority Element) | Measures the equity held by Black people in the entity in terms of voting rights, economic interest and realisation points | 25 |
| Management Control | Measures Black participation at board, executive level and senior, middle and junior management levels, and employment of Black people with disabilities | 19 |
| Skills Development (Priority Element) | Designed to improve skillsets and measure skills development expenditure on Black people - including participation in learnerships, internships and apprenticeship programme | 20 (+ 5 Bonus Points) |
| Enterprise and Supplier Development (Priority Element) | This is the highest contributor of all the elements and measures the entity's contributions in relation to the following sub-elements: Preferential Procurement measures the empowerment levels of the entity’s suppliers in terms of the procurement of goods and services. (25 points) Enterprise Development and Supplier Development measures the entity’s contribution towards the upliftment, development, sustainability, financial and operational independence of Enterprise and Supplier Development Beneficiaries. (15 points) | 40 (+ 4 Bonus Points) |
| Socio-Economic Development | Measures the entity’s contribution towards initiatives or organisations that enhance the ability of Black people who remain non-participants in the economic mainstream to be included in the economy in a sustainable manner | 5 |
The Preferential Procurement element of the B-BBEE Scorecard is a sub-element of Enterprise and Supplier Development and the biggest contributor to your B-BBEE scorecard when done right.
A sub-minimum of 40% of the scorecard points available on the Enterprise and Supplier Development element (10.80 out of 27 points) must be scored for a generic entity (above R50 million annual turnover), not to be discounted by one level on its overall B-BBEE scorecard.
Preferential Procurement refers to the sourcing and purchasing of goods and services from Black-owned business. A Black-owned business is defined as a business that is 50.1% owned by Black people and where there is substantial management control. Additional points are available for Black female-owned businesses.
A key advantage of the Procurement element is that it is a “no cost” element, with the only requirement to maximise points being that you’re strategic and consistent about who you spend your existing procurement budget with.
To maximise the points and benefits available to your business, you must have a deliberate and measurable Preferential Procurement plan. Consider the following parameters:
Once you are clear on these issues, you can assess how each of your suppliers impacts your Procurement score, using the below measurement categories and points:
| Measurement Category & Criteria (Based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend – TMPS*) | Weighting Points | Compliance Targets |
| B-BBEE Procurement Spend from all Empowering Suppliers | 5 | 80% |
| B-BBEE Procurement Spend from all Empowering Suppliers that are Qualifying Small Enterprises (QSE) | 3 | 15% |
| B-BBEE Procurement Spend from all Exempted Micro-Enterprises (EME) | 4 | 15% |
| B-BBEE Procurement Spend from Empowering Suppliers that are at least 51% Black-owned | 11 | 50% |
| B-BBEE Procurement Spend from Empowering Suppliers that are at least 30% Black-women-owned | 4 | 12% |
| B-BBEE Procurement Spend from Designated Group Suppliers that are at least 51% Black-owned | 2 | 2% |
* The Preferential Procurement score of an entity is measured against its Total Measured Procurement Spend (TMPS) during a specific financial year, which includes all purchases, operational and administrative expenditure, capital expenditure and finance cost, among others. Certain exclusions may be deducted from the TMPS which includes costs such as tax, depreciation, bad debt and salary costs.
Preferential Procurement scoring is further based on the B-BBEE status of the suppliers your company sources goods and services from, taking into consideration Rand value spent. Therefore, you can increase scores on this element if you procure a greater percentage of goods and services from suppliers with higher B-BBEE ratings.
For example, procuring from a supplier with a level 4 B-BBEE certificate results in 100% of the Rand value of spend with this supplier counting towards the Preferential Procurement scorecard. Procuring from a level 2 supplier will result in 125% of the Rand value and Level 1 will result in 135% of the Rand value. The higher the B-BBEE level of your supplier, the greater the recognition you get for the same amount of procurement expenditure.
Rodney Africa, Prelisha Singh, Lubumba Kamukwamba, Roxy Harrington, and Savannah Cozzi 15 Dec 2022
Here are the procurement recognition percentages for each B-BBEE scorecard level:
| B-BBEE Level | B-BBEE Procurement Recognition Level |
| Level 1 | 135% |
| Level 2 | 125% |
| Level 3 | 110% |
| Level 4 | 100% |
| Level 5 | 80% |
| Level 6 | 60% |
| Level 7 | 50% |
| Level 8 | 10% |
| Non-compliant contributor | 0% |
Understanding the Preferential Procurement category and criteria, and designing your procurement strategy around this, will go a long way to helping your company maximise its procurement points.
Prioritising Preferential Procurement is not just about compliance, however. It’s also about driving positive change and building a more equitable and inclusive society.
Preferential Procurement constitutes a big boost for small businesses, the engine room of every economy and massive employers in their own right. By prioritising Black-owned SME enterprises in your procurement strategy, your business provides access to markets that can be transformative to their growth, and in turn, their ability to create more jobs. A diversified supplier base also leads to greater innovation and healthy competition in the marketplace.
When businesses embrace sustainable Preferential Procurement practices, they contribute to economic transformation, support Black-owned businesses and enhance their own B-BBEE score. It’s win-win-win.
