Two Categories, Two Rule Sets
The Construction Sector Codes recognise that not all construction businesses operate the same way, and split the sector into two distinct categories, each measured against its own thresholds:
Contractors: Businesses that carry out construction project activities directly, including civil and electrical engineering, power transmission, general building, and specialist construction work.
Built Environment Professionals (BEPs): Businesses responsible for the planning, design, and costing of construction projects, rather than the physical construction itself. This category typically includes engineers, architects, and quantity surveyors.
Establishing which category a business belongs to is the essential first step, since the thresholds that follow differ considerably depending on which side of that line a business sits.
Thresholds for Contractors
Exempted Micro Enterprise (EME): Annual turnover below R10 million. A Sworn Affidavit may only be used where turnover is below R3 million. Once turnover exceeds R3 million, even while the entity remains classified as an EME, verification becomes compulsory and a B-BBEE certificate must be obtained.
Qualifying Small Enterprise (QSE): Annual turnover of R10 million to R50 million. QSE Contractors are not permitted to rely on a Sworn Affidavit under any circumstances and verification by a SANAS-accredited agency is required regardless of the Black Ownership level.
Generic: Annual turnover above R50 million: A SANAS verification is required.
A further detail worth noting is that contractors with less than 30% Black Ownership are verified as a Level 5 contributor, rather than Level 4 as done under the Generic Codes. This plays a role when benchmarking expected outcomes against businesses outside the sector.
Thresholds for BEPs
EME: Annual turnover below R6 million. A Sworn Affidavit may only be used where turnover is below R1.8 million. Beyond that figure, verification is required even though the entity remains classified as an EME.
QSE: Annual turnover of R6 million to R25 million. As with contractors, an affidavit is not an option at QSE level.
Generic: Annual turnover above R25 million, a SANAS Verification is required.
BEPs are also subject to the same Level 5 rule where Black Ownership falls below 30%.
A Distinct Approach to Ownership for BEPs
For BEPs, more than 50% of total ownership must be held by individuals who are professionally registered and serve on Exco or in Top Management. Where a BEP does not meet this requirement, only half of the Black ownership held by the non-qualifying owners may be counted toward total Black ownership. In effect, the structure rewards firms where professional registration and equity ownership sit with the same individuals, a point worth raising in ownership planning discussions well ahead of any verification.
Skills Development and ESD Carry Their Own Nuances
The Construction Codes introduce several provisions not found in the Generic Codes:
- Candidate and mentorship programmes are recognised on the Skills Development scorecard.
- Supplier Development Programmes form part of the Enterprise & Supplier Development (ESD) element.
- ESD and Socio-Economic Development (SED) targets are not calculated from the most recent financial year alone. They are based on the average Net Profit After Tax of the previous three years, and the target itself is higher: 1.25% of Net Profit After Tax, compared to the usual 1%.
- SED measurement also places specific weight on contributions made to communities with limited access to services.
Why This Matters in Practice
For most contractors and BEPs, the costliest mistakes rarely stem from major strategic decisions. They tend to arise from the finer detail of the thresholds. A contractor with R3.2 million turnover who thinks a sworn affidavit is enough because the business is “still an EME” will likely have that assumption rejected during tender evaluation. The same applies to a QSE that submits a Sworn Affidavit instead of pursuing verification, on the mistaken belief that the rules mirror those of another sector.
The most reliable approach is to establish, early, which category a business falls into, how its turnover compares to the relevant threshold, and what that means for the documentation required, well before deadlines forces the issue.
Uncertain Where Your Construction Business Sits on the Scorecard?
Elevate Advisory Partners can help confirm the correct classification, ensure the right documentation is in place, and put together a practical plan to strengthen your B-BBEE position. Get in touch at info@elevateadvisory.co.za or visit www.elevateadvisory.co.za to get started.