Qualifying Small Enterprises

A Qualifying Small Enterprise (QSE) is one of the categories of South African businesses as per the Broad Based Black Economic Empowerment Act. "The Broad-Based Black Economic Empowerment Act (53/2003): Codes of Good Practice on Black Economic Empowerment" was gazetted on 9 February 2007. A Qualifying Small Enterprise is a business with a turnover between R10 million and R50 million and is measured using the QSE Scorecard.

The differences are substantial and the compliance with the measurement criteria for QSEs is far less onerous than for large enterprises. The first difference relates to the weighting of each element of the codes. For large enterprises the codes are weighted differently, with various weightings from 5% – 20%, look at the section on Broad Based Black Economic Empowerment for more details. However each category for a QSE has a weighting of 25%, and only 4 need be measured.

Qualifying Small Enterprises are measured in terms of Code 800 of the "The Broad-Based Black Economic Empowerment Act (53/2003): Codes of Good Practice on Black Economic Empowerment" as opposed to Code 100 through 700. However, codes 100–700 provide the theoretical background upon which Code 800 is based, and as such it is imperative that QSEs understand the full Act.

In terms of Code 800 of the Act, Qualifying Small Enterprises must be measured in terms of the 7 pillars or elements of BEE, namely:

Internal Elements

External Elements

QSEs may choose their best four elements to calculate their BEE score and related B-BBEE contributor status. Each of these elements carry a 25% weighting.

Each Element has its own goals by which it measures the measured entity.

Ownership is calculated as a score based on the 'Black' Shareholding as a percentage of total shareholding. It looks at three basic elements of ownership, namely: Voting Rights; Economic Interest & Ownership Fulfilment.

Voting rights refers to the capacity of 'Black' shareholders to be involved with voting and decision making within the entity. Economic interest is the benefit received by 'Black' shareholders as a percentage of dividends/distributions.

Ownership fulfilment is the actual value of ownership that a shareholder realises after liabilities are subtracted; this works on a sliding scale. For instance it is only assumed that 10% of the liability incurred to purchase shareholding would be paid off in the first year. This increases to 20% for year two, 40% for year three and four; 60% for year five and six; 80% for year 7 and 8, and 100% for year 9 onwards.

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