Prioritizing your Broad-Based Black Economic Empowerment (BBBEE or BEE for short) scorecard is highly suggested to increase your chances of success in the South African business scene. The standards for BBBEE accreditation are not the same for all businesses; they vary depending on size and, to some extent, industry. In the following article, we will clarify the differences between EME, QSE and their affidavits standards for firms of various sizes, highlighting the key distinctions to give you a better picture and understanding if you want to achieve accreditation. Feel free to follow the guide below and jump to the section that is of interest to you.
What is EME?
In short, the EME acronym stands for Exempt Micro Enterprises. Companies are classified under different acronyms based on their turnover per year, EMEs are the smallest companies with a turnover of less than R10 million per year. For BBBEE accreditation, EMEs face comparatively modest criteria. Upon disclosing their turnover, all EMEs automatically acquire Level 4 BBBEE designation (putting them in the centre of the scorecard’s eight levels). To do so, they only present an affidavit signed by a Commissioner of Oaths. The grade is then changed based on the proportion of black ownership. EMEs with 51% black ownership are promoted to Level 2, whereas EMEs with 100% black ownership is promoted to Level 1, placing them at the peak of the BBBEE rankings. EMEs are immediately designated as Empowering Suppliers, granting access to the preferred procurement channel.
BEE EME
Please note that Empowering supplier is an essential aspect of complying with BEE verification standards. An EME cannot use its BEE certification for favourable purchasing calculations until the accreditation is acquired, Regardless of the proportion of black ownership to qualify as an empowering supplier entity. It also is advisable that the EME employs the services of a certified BEE consultant to guarantee that they complete the BEE verification criteria. They can conduct partial on-site inspections to ensure that the QSE adheres to the legislation’s five categories (or assist on how to do so) and the criteria for Empowering Suppliers. It may appear to be much effort, but earning accreditation, in the end, makes it worthwhile.
EME Affidavit
With the EME Affidavit, you must, under oath, declare that the EME’s annual return is under R10 million and the percentage of black ownership.
EME and QSE
One of the main differences between an EME and a QSE is the annual returns it earns. An EME annual return is below R10 million a year while a QSE annual return is between R10 million and R50 million. QSEs that can demonstrate 51% or better black ownership, like EMEs, are categorized among Level 2 BBBEE participants, while those with 100% black ownership will be accredited with Level 1 status. Other QSEs, on the other hand, must demonstrate compliance with the five components on the BBBEE scorecard, and their grade is then calculated.
These are all the following categories: ownership, management structures, skills enhancement, business and supplier improvement, and socioeconomic improvement. Ownership is the most important of these categories, followed by either skills enhancement or business and supplier improvement. To be recognized as an Empowering Supplier, QSEs must demonstrate that they satisfy certain other conditions related to cost of sales sourcing, employment creation, ties with EMEs, and other considerations.
What is QSE?
In short, the QSE acronym stands for Qualifying Small Enterprise and in order to be categorised as a QSE, the company’s annual returns must be between R10 million and R50 million. There are three categories where QSE falls in the middle of the 3. EME companies are entities with an annual return of less than R10 million, and GEN entities have more than R50 annual return
QSE BEE
A QSE is scored on all 5 categories: ownership, management structures, skills enhancement, business and supplier improvement, and socioeconomic improvement. Ownership is the most important of these categories, followed by either skills enhancement or business and supplier improvement. As a QSE, an Entity must score at least 40% of the maximum amount of points possible in two of the three priority components. Ownership is required, and skill enhancement and business and supplier improvement can select any other two factors; otherwise, the final score will be lowered by one level when the verification is completed.
BEE QSE Affidavit
With the QSE Affidavit, you must, under oath, declare that the QSE’s annual return is between R10 million and R50 million, as well as the percentage of black ownership.
EME or QSE?
Depending on the annual returns of your entity, if your returns are less than R10 million, then the entity will automatically be classified as an EME. EMEs are subject to relatively light requirements for BBBEE accreditation due to the entity being placed in the middle of the BEE scorecard upon declaring their turnover. In conclusion, the entity will be placed according to its annual return and both the EME and QSE accreditation is similar in comparison.
*Please note all the above information is best to be discussed with one of our qualified accountants to verify all information is accurate, correct and up to date.