Obtaining licences, consents, or concessions from organs of state
Certain industries require an entity to have a particular percentage of Black ownership or BEE level in order to receive and maintain a licence to operate.
- These empowerment requirements are specific to the underlying legislation and relate to the licence to operate.
- For example, in terms of the Mineral and Petroleum Resources Development Act, 2002an entity must have 26 per cent Black ownership in order to be issued with a mining right.
In addition, entities in certain industries may be asked to indicate their transformation initiatives (which can be different to a BEE score in terms of the BEE Codes) in order to obtain concessions to, for example, export.
Transacting with organs of state
Organs of state are generally required to issue a request for proposal (RFP) for any work that they intend to source from the private sector. The response to the RFP is scored out of 100 in terms of the 90/10 or 80/20 principle, depending on the value of the work to be undertaken.
The pricing portion of the response to the RFP from bidders is scored out of 90/80 points. The BEE rating of the bidder will be scored out of 10/20 points and the two scores will then be combined. A high BEE score can, therefore result in the bidder achieving a better total score than another bidder with a low BEE score even though the bidders have similar scores for the pricing portions of their bids.
Certain organs of state have also been known to set minimum BEE criteria relating to Black ownership or BEE ratings before potential bidders may qualify to even submit bids.
Transacting with private entities
With regards to interactions with private entities, a company will score better for BEE itself if it procures goods and services from other entities with high BEE ratings.
A supplier or service provider’s BEE rating and Black ownership can, therefore, be a consideration along with price and quality when a customer is choosing whether to deal with them. Due to the nature of the preferential procurement element, a customer may prefer to procure from an entity with a low overall BEE score but high Black people and Black women ownership as that supplier will provide the customer with more preferential procurement points towards its own BEE score than a supplier with low Black ownership but a higher BEE score. Accordingly, one should not simply focus on a BEE score but, rather, the interplay between the level of Black ownership, BEE score, and commercial attractiveness to customers.
Private entities who are performing under contracts with organs of state often have specific BEE requirements that they must achieve, including in relation to the BEE status of some of their own suppliers / a portion of their procurement spend.
Suppliers to mining companies should also be aware that mining companies have specific BEE procurement obligations. Whilst these obligations do not bind the suppliers themselves, suppliers should ensure that they have appropriate corporate structures so that they are commercially attractive suppliers to mining companies.