How much does a level 8 BEE certificate actually cost?

Last week we demonstrated that if your turnover is between R2.5m and R35m and you have 51% black ownership then you all you need to do is sign an affidavit that shows that you have requisite ownership and you have a level 2 (100% ownership is a level 1, again with an affidavit).  This is more than acceptable to the PPRA.  PPRA’s legal manager and acting transformation manager, Deli Nkambule, explained that “the PPRA’s position is that it will not issue an FFC unless a compliant BEE certificate accompanies the application.

“The accepted level of compliance is 40 points or more (BEE Level 8). You will not be issued a BEE certificate if you score below 40 (making your BEE certificate non-compliant),” she said.

The reported quote shows a complete lack of understanding of the technical and financial considerations that are required just to get to a level 8.  We’ll discuss this in the next email. 

A BEE scorecard is made up 5 elements.   We’re only going to focus on those points that have a financial consideration to them.  The table below makes a few assumptions

1) The cost of labour in a smaller estate agency is 60% of turnover.  This is based on the 50/50 revenue split between the agent and the agency.  We’ve added on a further 10% for support staff

2) The Net Profit After Tax (NPAT) in the last financial year is 5.62% of turnover. This figure comes from StatsSA.

3) The estate agency’s revenue in this example was R10million in the last financial year.

The three elements that require a financial outlay are:

i) Skills development (spend only on black people) – 3% of payroll (if the agency does not employ any black people then this will have to be spent on training of black people outside of the organisation)

ii) Enterprise and supplier development (assisting black owned businesses to become sustainable) is 1% of NPAT each

iii) Socio-economic development (financial contributions to charities where the beneficiaries are at least 75% black) is a further 1% of NPAT

We have then added on a further R15,000 for the actual BEE certificate to be issued.

This is an annual cost of compliance and the costs increase as the turnover increases. 

Next week we’ll show you that even if you do spend this money there is no guarantee that you will arrive at a level 8.

If you would like to know more about level 2 BEE compliance that will cost you a quarter of that amount take a look here.