TO RATE or wait? This is the most pressing question facing small business owners as they grapple with black economic empowerment (BEE) compliance.

The question may be valid, given the uncertainty surrounding the codes of good practice for broad-based black economic empowerment.

The trade and industry department closed a more than three-month public commentary period at the end of March and is poring over submissions in a bid to finalise the second phase of the codes as early as this July.

Phase one of the codes of good practice was released in November last year. Already finalised, phase one now awaits the completion of phase two before the codes are gazetted later this year.

Once gazetted, the codes become binding on organs of state and public entities, which will use the codes to evaluate the BEE status of any companies or bodies with which they do business.

While compliance with the codes is voluntary for the private sector, those companies wishing to do business with government will have no choice but to meet the codes’ criteria.

Phase two includes a separate set of codes for qualifying small enterprises (QSEs). This means that small firms, which were largely exempt from complying with the act, now have to measure and verify their BEE status.

Small businesses will have to get rated. It is only microenterprises, or firms with turnover not exceeding R300000 a year, that are exempted.

While QSEs only have to comply with five of the seven elements set out by the codes' generic scorecard, it is the small business sector that is finding it most difficult to gain a clear grasp of BEE requirements.

A question over the necessity of getting rated ahead of the codes' finalisation has been common among those seeking a clear path through BEE regulation.

To complicate the issue further, the department has indicated that the finalised version of the codes governing QSEs is likely to contain some material changes.

The draft version proposes that QSEs be defined by a maximum annual turnover threshold of between R2-million and R10-million for companies that employ between 50 and 100 people.

Following concerns that a cap on the number of employees needed to qualify as a QSE may have the unintended consequence of stunting job creation in the sector, the department has suggested that the staff limit may be dropped from the definition.

This means that the jury is still out on the definition of a QSE, at least until the finalised version of phase two is released.

The other thorn in the side of verification agencies is the fact that none have yet been accredited. BEE verification agencies, who will audit and verify the BEE claims made by business, must all be accredited by the South African National Accreditation System (Sanas) to ensure that all agencies are properly qualified to offer a BEE ratings service.

In February the department approved the establishment of a BEE verification industry watchdog with a view to fast tracking the accreditation process.

The national industry body, known as the Association of BEE Verification Agencies, began working with Sanas three months ago and it was envisioned that the accreditation process would get under way in March, with the first accreditations awarded by this month.

However, whispers among those who are party to the negotiations suggest that the first accreditation may only come through at end of next month or in August this year.

This provides companies, both large and small, with a tempting excuse. But there are at least some things a company should get started with if they want to gain a competitive edge.

First, companies could begin briefing their suppliers on the need to ascertain their BEE status. It is well known that to gain points for preferential procurement, companies will have to prove the BEE status of the companies from which they source goods and services.

A maximum of 20 out of total point allocation of 100 can be awarded for compliance with the preferential procurement target of 50% on the QSE scorecard.

Some of the larger companies have gone as far as providing their suppliers with a self-evaluation form to aid them in establishing their status.

Second, firms could start gathering the documentation required for a rating, since this is often a time-consuming process and has often been cited as the primary reason for the ratings process being held back.

Third, it is a good idea for small and medium enterprises to develop a BEE profile whether they intend to apply for a rating this year or not. The profile could serve as an effective way of securing some business before the codes kick in.

That said, companies must be reminded that BEE is now considered vital for winning new business and companies that carry an interim rating from a BEE verification firm awaiting accreditation should have the upper hand in any bidding.

Bridge is manager: research & publications at EmpowerDEX.