The Preferential Procurement element is 1 of the 3 priority elements of the generic B-BBEE scorecard. This means that a sub-minimum of 40% of the scorecard points available on this element (10,80 out of 27 points) must be scored, in order for a Generic entity not to be discounted by one level on its overall B-BBEE scorecard.
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, amongst others. Certain exclusions may be deducted from the TMPS which includes costs such as depreciation, bad debt and salary cost etc.
Points on the generic Preferential Procurement scorecard are allocated as follows:
- BEE Procurement spend from all suppliers – 5 points.
- BEE Procurement spend from QSE suppliers – 3 points.
- BEE Procurement spend from EME suppliers – 4 points.
- BEE Procurement spend from suppliers that are at least 51% black-owned – 11 points.
- BEE Procurement spend from suppliers that are at least 30% black women-owned – 4 points.
From the above it is clear that most points are awarded for procuring from B-BBEE compliant suppliers that are also 51% or more Black-owned. It is therefore not only necessary to ensure that your company procures from B-BBEE complaint suppliers, but also important to procure from majority Black-owned and/or 30% Black female-owned suppliers, for optimal points on the Preferential Procurement scorecard.
It is also important to ensure that an entity procures from B-BBEE compliant QSE suppliers (suppliers with an annual turnover between R10 and R50 million) and EME suppliers (suppliers with a turnover below R10 million per annum), as points are specifically awarded for procuring in these categories.
Preferential Procurement scoring is further based on the B-BBEE status of the suppliers an entity procures goods and services from, taking into consideration the amount of money an entity spends on these suppliers. The amount an entity spends on B-BBEE compliant suppliers with higher B-BBEE levels will result in higher points being earned by such entity on the Preferential Procurement scorecard. For instance, procuring from a supplier with a level 4 B-BBEE certificate will result in 100% of the Rand value spend from such supplier, being contributed towards the Preferential Procurement scorecard, while procuring from a level 2 supplier will result in 125% of the Rand value being contributed towards the scorecard.
The following table represents the procurement recognition percentage for each B-BBEE scorecard level:
B-BBEE STATUS 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% |
|
|
|
In light of the above it is advisable for all companies to do an in depth analysis on the B-BBEE credentials of all its suppliers. A B-BBEE specialist can assist with a Procurement Plan to ensure that an entity optimises the score on its Preferential Procurement scorecard.