IS THE USE OF B-BBEE AFFIDAVITS UNDER THREAT?

Which entities are eligible to make an affidavit of B-BBEE?

The general rule is that the Modified Codes of Good Practices (COGP ) apply. With respect to the COGP:

Exempt micro-enterprises (EMEs):

An entity with a combined annual turnover of less than R10 million:

• Option 1: The company has B-BBEE Tier Four Contributor status regardless of being less than 51% Black owned;
• Option 2: The company can qualify for promotion to Tier Two Contributor as long as it is at least 51% owned by Black;
• Option 3: Company may qualify for promotion to Tier One Contributor as long as it is 100% owned by Black ;
• Option 4: An EME who qualifies to use option 1, 2 or 3 above may elect to do so as measured by the QSE scorecard

Small Business
(QSE) qualification:

Companies with total annual sales between R10 and R50 million:

• Option 1: The company can be eligible for promotion to Level Two Contributor provided it is at least 51% owned by Black;
• Option 2: The company can opt for promotion to a "Tier One contributor" qualify as long as it is 100% Black owned;
• Option 3: A QSE that is less than 51% Black owned should be measured against the QSE scorecard; Or a QSE qualified to use
  Option 1 or 2 may choose to be measured against the QSE scorecard.

Please note: CIPC has via a B-BBEE certificate functionality online, where a CIPC certificate is issued to eligible entities as described above.

Currently this option is only available for EME. CIPC certificates can be accepted but also pose certain problems as they do not accommodate sector letters with different requirements.

The general rule is easy to understand, so why should using affidavits pose a problem?

Let's take a look at common mistakes in B-BBEE affidavits:

• The Owner/Director or Member completing the affidavit does not state in what capacity he/she is completing the affidavit. The correct designation should always be underlined/circled;
• The affidavit is signed by a person who is not the Owner/Director or Member of the measured entity. The auditor/attorney of the measured entity may not complete the affidavit on the measured entity’s behalf;
• The identity number of an owner indicates that the owner might not be a black person as defined in the B-BBEE Codes. Further evidence may need to accompany the affidavit to indicate that the owner became a citizen by way of naturalisation or that he/she is the minority shareholder and merely completed the affidavit in his/her capacity as director. Here it would be necessary to indicate that 51% or 100% (depending on the level claimed) is owned by a black person, as defined.
• The financial period/year is not properly indicated; for example, many affidavits only indicate “2020”. The correct description should be 28 February 2020.
• The affidavit is signed more than 12 months after the end of the financial year; for example, if the financial period claimed is 28 February 2020, the affidavit must be signed on or before 28 February 2021;
• The affidavit is not signed and/or not commissioned;
• The affidavit is signed and commissioned on different dates;
• QSEs with less than 51% black ownership completed the affidavit. These entities must proceed with a scorecard verification;
• The content of the affidavit was copied to an auditor/B-BBEE consultant letterhead. This is not allowed. The measured entity may copy the content of the affidavit to its own letterhead, but not that of a third party. Third parties are not allowed to charge a fee to provide a measured entity with the B-BBEE affidavit.
• The sworn affidavit was incorrectly used where the nature of business indicated in the affidavit alludes to the fact that the measured entity falls within a specific charter.

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