What B-BBEE actually is
B-BBEE stands for broad-based black economic empowerment. In plain terms, it is a law that measures how far businesses have gone in bringing black South Africans into ownership, management, skills and the supply chain — and then attaches commercial consequences to the answer. It is a scorecard with real money riding on it, not a moral checklist.
The law itself is the Broad-Based Black Economic Empowerment Act 53 of 2003, as amended by the B-BBEE Amendment Act 46 of 2013. The Act sets the framework; the detailed rules — the actual scoring — live in the Codes of Good Practice, which the Minister issues under section 9(1) of the Act. The generic framework is the Amended Codes first gazetted in October 2013 (effective 1 May 2015), read with later notices that replaced parts of it, most importantly the 2019 replacements of Statement 000 and Schedule 1. Where a gazetted sector code applies to your industry, you are measured under that code instead (more on that below).
Who counts as a “black person”
The word “black” has a specific legal meaning here — it is not used loosely. Under Schedule 1 to the Amended Codes it means Africans, Coloureds and Indians who are South African citizens by birth or descent, or who became citizens by naturalisation before 27 April 1994, or after that date but who would have been entitled to citizenship before it. Get this definition wrong and everything built on top of it — your ownership percentage, your affidavit — is wrong too.
Where the commercial pressure comes from
If the law does not force a rating on you, why does almost every business end up caring about one? Because the pressure comes from the market, from three directions. Most businesses feel at least one of them.
1. Government work
Every organ of state and public entity must take B-BBEE into account when it buys goods and services, awards licences and concessions, sells state-owned enterprises, and enters into public-private partnerships. If you want to sell to government — or to anyone who in turn sells to government — your rating is part of the price.
2. Your customers’ own scorecards
This is the one that catches businesses with nothing to do with government. Under the preferential procurement part of the Codes, your customer earns points on its own scorecard based on what it spends with suppliers who have good B-BBEE ratings. So your rating is worth money to your customer — which is exactly why large companies push B-BBEE requirements down their supply chains. A well-rated supplier is cheaper to do business with, in scorecard terms, than a badly-rated one selling the identical product.
3. Licences and regulated sectors
In some industries a B-BBEE requirement is attached to a licence or a regulatory permission. Here the pressure is not commercial at all — it is a legal condition of being allowed to operate. If you are in a licensed or regulated sector, check the legislation governing that sector before you treat your rating as optional.
What your size means
Subject to that, how you are measured depends on your annual turnover. This matters enormously, because the smallest category is barely measured at all.
| Category | Annual turnover | How you are treated |
|---|---|---|
| Exempted Micro-Enterprise (EME) | R10 million or less | Exempt from being measured. Automatically a Level 4 contributor. Proven by a sworn affidavit or a CIPC certificate, renewed annually — not a certificate from a verification agency. |
| Qualifying Small Enterprise (QSE) | Above R10 million but below R50 million | Measured on the QSE scorecard across all five elements and verified in the ordinary way. A QSE that is at least 51% black-owned is the exception — it may use a sworn affidavit instead. |
| Generic (large) enterprise | R50 million or more | Measured on the full scorecard and must comply with all three priority elements. |
Thresholds: Statement 000 (GenN 306 of 2019), paras 3.3.2.2, 4, 5 and 6.
Here is the part small and medium businesses should sit up for. If you are an EME or a QSE, black ownership is worth a great deal. An EME or QSE that is at least 51% black-owned is elevated to a Level 2 contributor. One that is 100% black-owned is elevated to a Level 1 contributor. In both cases you prove it by sworn affidavit — no verification exercise required.
This is set by Statement 000 (General Notice 306 of 2019, paras 4.4.1, 4.4.2 and 5.3.1–5.3.3): a 51%-black-owned EME or QSE is elevated to Level 2, and a 100%-black-owned one to Level 1. It is the single highest-leverage move a small business can make — that jump, without a full scorecard exercise. But it turns entirely on the strict “51% Black Owned” definition covered below, and you can read the provisions in full on the sources.
The affidavit trap
This is the part to read twice. It is where most people get into serious trouble — not because the rules are obscure, but because a common market practice quietly ignores them. There are three things to hold onto about the affidavit route.
First — who may use it
An EME may always prove its status by sworn affidavit. A QSE may only do so if it is at least 51% black-owned; a QSE that is not is measured on the QSE scorecard and verified in the ordinary way by an accredited agency.
Second — how the percentage is worked out
For this elevation the gazette says the ownership must be measured using the flow-through principle — the ordinary look-through calculation. The 51% short-cut (the modified flow-through principle) cannot be used to turn a 51%-held company into 100% black ownership for the purpose of an EME or QSE affidavit. We explain both calculations in Net Value, flow-through and the 51% rule.
Third — the one most often missed
The gazette uses the capitalised term “51% Black Owned”, and Schedule 1 (GenN 303 of 2019) defines it by three cumulative requirements: black people must hold at least 51% of the exercisable voting rights; black people must hold at least 51% of the economic interest; and the entity must have earned all its Net Value points — in the words of the definition itself:
has earned all the points for Net Value under statement 100
Note — The sting is in the third leg. It is not enough that the share register shows 51% in black hands. The entity must also have earned all its Net Value points — which a business whose black shareholders bought in on loan account, and have not yet paid down that debt, typically has not. All three legs must be satisfied — not one, not two.
The levels, and what they are worth
If you are measured, you are scored out of 109 points across the five elements. Bonus points can take you as high as 118. Your total score puts you on a level from 1 to 8, and each level carries a “recognition percentage” — the figure your customer uses when working out what your invoices are worth on its own scorecard. A higher level literally makes your rand of turnover count for more in your customer’s hands.
| Level | Points needed | Recognition percentage |
|---|---|---|
| Level 1 | 100 or more | 135% |
| Level 2 | 95 to under 100 | 125% |
| Level 3 | 90 to under 95 | 110% |
| Level 4 | 80 to under 90 | 100% |
| Level 5 | 75 to under 80 | 80% |
| Level 6 | 70 to under 75 | 60% |
| Level 7 | 55 to under 70 | 50% |
| Level 8 | 40 to under 55 | 10% |
| Non-compliant | Under 40 | 0% |
Statement 000 (GenN 306 of 2019), paras 9.1 and 9.2.
Where does ownership sit in that 109? Ownership is 25 of the 109 points — the largest single element after enterprise and supplier development. It is also one of three “priority elements”, which means there is a minimum you have to hit on ownership: miss it, and your whole level is reduced, no matter how well you score everywhere else. That is why ownership does more work per rand of effort than almost anything else on the scorecard — and why the rest of this hub is devoted to getting it right.
From here, two next steps. To see exactly how those 25 ownership points are built and scored, read the ownership scorecard. To understand the Net Value test that decides whether your black shareholders’ stake really counts — the third leg of the affidavit trap above — read Net Value explained.
Frequently asked questions
No. There is no general law that requires you to have a B-BBEE rating. What the law does is make your rating matter commercially — government must take it into account when it buys, and your customers earn points on their own scorecards for spending with well-rated suppliers. So for most businesses it is a commercial choice: are the benefits of a better rating worth the cost of getting one? There are exceptions in some regulated sectors, where a B-BBEE requirement is attached to a licence by the legislation governing that sector — and there it is a legal requirement, not just a commercial one.
If your annual turnover is R10 million or less you are an Exempted Micro-Enterprise (EME). You are exempt from being measured and are automatically a Level 4 contributor, proven by a sworn affidavit (or a CIPC certificate), renewed annually — not a certificate from a verification agency. An EME that is at least 51% black-owned is elevated to Level 2, and one that is 100% black-owned to Level 1, again by affidavit. First check, though, whether a gazetted sector code applies to your industry — it can set different turnover thresholds.
Not necessarily. The gazette uses the capitalised term “51% Black Owned”, and Schedule 1 defines it by three cumulative requirements: black people hold at least 51% of the exercisable voting rights, at least 51% of the economic interest, and the entity has earned all the points for Net Value under Statement 100. All three must hold. A business whose black shareholders bought their shares on loan account and have not yet earned full net value points does not meet the definition, however the share register reads. Because no verification agency stands between what you say and your status, a false affidavit is a criminal offence under section 13O(1)(a) — so work out the net value position before you sign.
If you are measured, you are scored out of 109 points across the five elements (bonus points can take you to 118). Ownership is 25 of those 109 points — the largest single element after enterprise and supplier development — and it is one of three priority elements, so there is a minimum you must hit on ownership or your whole level is reduced. Your total score sets your level from 1 to 8, and each level carries a recognition percentage your customer uses to value your invoices on its own scorecard. See our ownership scorecard guide.