1. Key Inputs into Determination of Targets for Generic Enterprises
1.1. Generic Enterprises have a turnover greater than R50 million in the financial year prior to assessment. Note that the Codes do not recognise the difference between a service business and a high volume, low margin manufacturer.
1.2. The following numeric measures generate a Generic Enterprise’s targets:
(a) Total Measured Procurement Spend
(i) Preferential Procurement
(b) Net Profit After Tax
(i) Enterprise Development
(ii) Supplier Development
(iii) Socio-Economic Development
(c) Payroll (Leviable Amount)
(i) Skills Development spend on Black people
(ii) Spend on bursaries for Black people
(iii) Skills Development spend on Black employees with disabilities
(d) Staff Complement
(i) Number of Learnerships
(ii) Number of disabled Black people employed
2. What happens if a company is not profitable and has no NPAT?
2.1. In the event that the Measured Entity is not profitable and has no NPAT then the Verification Professional must impute an NPAT to be used to derive the Supplier Development, Enterprise Development and Socio-Economic Development targets.
2.2. In this regard the BEE Verification Manual states the following:
2.2.1. The Targets of 2% and 1% of NPAT for the Supplier Development and Enterprise Development indicators respectively are based on the Net Profit After Tax (NPAT) of the Measured Entity for the Measurement Period unless:
2.2.1.1. the Measured Entity did not make a profit during the Measurement Period; or
2.2.1.2. the net profit margin (NPAT/Revenue) of the Measured Entity for the Measurement Period, was less than a quarter of the industry norm during the Measurement Period.
2.2.2. Where either of the factors in 2.2.1.1. or 2.2.1.2. is present then the average NPAT of the Measured Entity over the last five years will be the basis for determining the Targets unless:
2.2.2.1. the Measured Entity did not make a profit on average over the last five years; or
2.2.2.2. the average net profit margin of the Measured Entity over the last five years was less than a quarter of the industry norm for the net profit margin during the Measurement Period.
2.2.3. Where either of the factors in 2.2.1.1. to 2.2.1.2. are present concurrently with either of the factors in 2.2.2.1. to 2.2.2.2. then the Indicative NPAT of the Measured Entity for the Measurement Period, will be the basis for determining the Targets.
2.2.3.1. the Indicative NPAT is the Revenue of the Measured Entity for the Measurement Period, multiplied by a quarter of the industry norm net profit margin for the Measurement Period.
2.2.3.2. the industry norm net profit margin must be determined with reference to the quarterly statistics supplied by Stats SA or such other verifiable data that might be available for the particular industry the Measured Entity operates within.
3. Total Measured Procurement Spend
3.1.Total Measured Procurement Spend is calculated as follows:
Cost of Sales + Operational Expenditure + Capital Expenditure = Total Expenditure
3.2. The following items are then excluded from Total Expenditure to determine Total Measured Procurement Spend:
3.3. Taxation:
Any amount payable to any person which represents a lawful tax or levy imposed by an organ of state authorised to impose such tax or levy, including rates imposed by a municipality or other local government.
3.4. Salaries, Wages, Remunerations and Emoluments:
Any amount payable to an employee as an element of their salary or wage and any emolument or similar payment paid to a director of a Measured Entity
3.5. Pass-Through Third-Party Procurement:
All procurement for a third-party or a client that is recorded as an expense in the third-party or client’s annual financial statements but is not recorded as such in the Measured Entity’s annual financial statements
3.6. Empowerment Related Procurement:
(a) Investments in or loans to an Associated Enterprise; and
(b) Investments, loans or donations qualifying for recognition under any statement under Code Series 400 (Enterprise and Supplier Development) or 500 (Socio-Economic Development)
3.7. Certain Imports:
(a) Imported capital goods or components for value-added production in South Africa provided that: –
(i) There is no existing local production of such capital goods or components; and
(ii) Importing those capital goods or components promotes further value-added production within South Africa.
(b) Imported goods and services other than those listed above if there is no local production of those goods or services including, but not limited to, imported goods or services that: –
(i) Carry a brand different to the locally produced goods or services; or
(ii) Have different technical specifications to the locally produced goods or services
(iii) The Measured Entity produce an Enterprise Development plan.
