Unincorporated joint ventures (JV) that want to tender for government contracts need to be aware of the recent Broad-Based Black Economic Empowerment (B-BBEE) changes that came into effect on 1 December 2019, and which will significantly impact their B-BBEE scores, says Gerrit Davids, the Lead Consultant at TaranisCo Advisory.
Davids explains that, as done previously, unincorporated JVs will still need to obtain a consolidated verification certificate in order to tender for government contracts, but that the entity’s B-BBEE score will be calculated slightly differently.
“This means their respective scores will be weighted according to their proportionate share in the joint venture and added together for a combined score out of 100.”
He says; “The certificate will consolidate the already verified compliance data of each party to the joint venture, as if the new entity was a single ‘Measured Entity’. This new approach also uses the already verified compliance data of each party to the joint venture and weighs it in accordance with their joint venture agreement. This means their respective scores will be weighted according to their proportionate share in the joint venture and added together for a combined score out of 100.”
The following scores will be allocated for unincorporated JVs, where the measured entities are:
- Level 1: 100% Black Owned Exempt Micro Enterprise (EME) or Qualifying Small Enterprise (QSE) – JV Score = 100 points
- Level 2: 51% Black Owned EME or QSE – JV Score = 95 points
- Level 4: Less than 51% Black Owned EME – JV Score = 85 points
- Large Enterprises and QSEs: Less than 51% Black Owned = Current Score on B-BBEE Certificate
This new scoring indirectly allows for ‘generic companies’ and QSEs, which are less than 51% Black owned, to use the score on their existing B-BBEE Certificates for purposes of tendering under an unincorporated JV.
Another important considerations is that all JV B-BBEE Certificates are now only valid for 12 months, and for a specific project, adds Davids.
He also cautions that the Construction Sector Code has its own joint venture mechanism, which must be used by contractors, building material suppliers and the built environment profession.