Small businesses should be wary of BEE verification companies that have not addressed the new codes that were announced in December last year. 


Rienzo Colpo, CEO of the Caird Group, says the new codes have been dramatically simplified with the thresholds determining Exempt Micro Enterprises (EMEs) and Qualifying Small Enterprise (QSEs) being raised substantially.
An EME is any enterprise whose annual turnover falls below R5-million a year, and a  QSE has turnover of between R5-million and R35-million.
"We note that a number of companies are still offering a variety of verification services, courses and scorecard software tools that have not been updated with the latest codes," Colpo warns. "EMEs will find themselves paying for services that are no longer applicable."
Colpo explains that the South African cabinet approved the Department of Trade and Industry’s (dti) broad-based BEE codes of good practice in early 2006 and that these are expected to be gazetted in early 2007.
The gazetting will be the beginning of the dti’s envisaged “BBBEE age”, which is expected to continue for at least 10 years.
The Small Business Review of 2003/4 found that companies that turn over less than R1-million per year only contribute 10% to the GDP.  The dti, Colpo adds, obviously felt that adding BEE compliance to the already complicated rules of doing business in South Africa would not have a positive impact on the lower echelons of the SA economy.
The threshold, therefore, was raised to R5-million, exempting about 450 000 companies from any form of BBBEE. EMEs are regarded as "Level 4" contributors which means that companies may claim a rand for every rand they spend with EMEs on their own scorecard.
Colpo is quick to point out that just because these companies are exempt, doesn’t mean that they shouldn’t have a working knowledge of the new codes and BBBEE in general.
"It is essential that EMEs understand what their BEE status means," he says. "Bigger companies (known as Generic Companies, with turnover greater than R35-million per year) are awarded points on their own preferential procurement scorecard for buying from EMEs."
Another challenge facing EMEs is convincing their clients that they are exempt and therefore don’t need to submit a scorecard, their shareholders’ details or any other BEE related information.
However, they will need to provide some form of evidence that they are EMEs.  Generally speaking, large companies will accept a signed affidavit from EMEs. Both parties will benefit as the admin and paperwork will be substantially reduced.
"There also seems to be little need for EMEs to be officially rated by a verification agency as the necessary evidence to prove their EME status is easily attainable," Colpo says. "Small business owners always have a clear idea of their annual turnover. End of year financials should be kept on hand in case their EME status is ever queried."