Key Principles:

Enterprise & Supplier Development (ESD) is a priority element and therefore a 40% sub minimum must be achieved in order to avoid the discounting principle. To avoid doubt, that is 10,8 points for Preferential Procurement, 4 points for Supplier Development and 2 points for Enterprise Development (excluding any bonus points).

Preferential Procurement:

• All procurement needs to be facilitated through Empowering Suppliers. An Empowering Supplier is a B-BBEE complaint entity, which is a good citizen South African entity, comply with all regulatory requirements of the country and should meet at least 3 of the 5 criteria listed below:
  • At least 25% of cost of sales (excluding labour cost and depreciation) from local producers or suppliers, for service industry labour costs are included but capped to 15%
  • 50% of new jobs created are for black people
  • At least 25% local beneficiation
  • At least 12 days of skills transfer to black SMMEs
  • (85% labour costs paid to South African employees) – Services industry
• EME’s and Start-Up Enterprises are automatically regarded as Empowering Suppliers.
• There is enhanced recognition of 20% if procurement is done with a recipient of Supplier Development Contributions with a minimum of a 3-year contract.
• There is enhanced recognition of 20% if procurement is done with a Black owned QSE or EME with a minimum of a 3-year contract even if they are not a Supplier Development beneficiary.
• There is an enhanced recognition of 20% for procurement spend with at least 51% Black owned suppliers utilising the Flow Through Principle.
• Suppliers that are Generic with at least 51% Black ownership utilising the Flow Through Principle, can be recognised as EME or QSE for a maximum of 5 years from date of first procurement provided that they were EME or QSE when the measured entity first procured from them.
• If imports are done due to brand and/or technical specifications, a plan must be drawn up identifying a local supply. 

Supplier and Enterprise Development:

• Only EME’s, QSE’s and Generic entities that are at least 51% Black owned utilising the Flow Through Principle qualify as valid beneficiaries. However, for Generic entities, they must have been and EME or QSE when first assisted by the measured entity. This recognition for Generic entities will only be allowed for 5 years from the first time of receiving support from the measured entity.
• Supplier Development beneficiaries are part of the measured entity’s supply chain, while Enterprise Development beneficiaries are not.
• The same contribution cannot count towards both Supplier Development and Enterprise Development.
• Only contributions done within the measurement period can be taken into account.
• Shorter payment terms only count towards Supplier Development and not Enterprise Development.
• Shorter payment periods cannot contribute to more than 15% of the Supplier Development points (i.e. 1.5 points).