SED through Procurement
Table OF CONTENTS
- Question 1……………………………………………………………Page 2
- Question 2……………………………………………………………Page 3
- Question 3……………………………………………………………Page 4
- Question 4……………………………………………………………Page 7
- References……………………………………………………………Page 8
PREFERENTIAL PROCUREMENT, SOCIO-ECONOMIC DEVELOPMENT AND ENTERPRISE DEVELOPMENT
Harmonizing to Statement 500 of the B-BBEE Codes of Good Practice ( 2007 ) , the purpose of Preferential Procurement is to advance the usage of black owned professional providers and enterprisers as providers. By presenting points on the BEE scorecard for usage of black owned concerns, it creates a monolithic demand for an entity with a good BEE scorecard. This in bend stimulates growing for black owned concerns who will profit from clients by providing these clients with goods or services required. This BEE spend by the entity will be rewarded on the entity’s discriminatory procurance scorecard and the measured entity may obtain a better mark ensuing in the mensural entity going more competitory in seeking procurance from the populace sector.
As a consequence of the addition in demand for Black owned providers, this consequences in more black owned concerns being established and stimulates economic growing in the countries where the black concerns are based which in general is from antecedently disadvantaged countries. This besides helps in making occupations and consequence in more inkinesss being employed.
ALEXIS ( 2013 ) states that“the BEE policy is designed to promote mensural entities to utilize Enterprise Development ( ED ) in concurrence with discriminatory procurance. The most effectual mode of incorporating the two is to put in ED chances within the entity’s value concatenation. Promoting the support of ED through discriminatory procurance stimulates mutual demands between the investor and the donee that will finally take to sustainable development of black concern and economic growth.”Due to the above, the measured entity may desire to help their providers ( being black owned concerns ) by for illustration paying them under shorter payment footings such as 5 yearss as opposed to the standard 30 – 60 yearss, supply them with involvement free loans to increase their fiscal capacity and entree to hard currency flow. The mensural entity can besides supply them with operational support such as supplying staff to these entities to develop the black owned entities staff at a discounted ( or free ) rate. This can besides ease a minority investing in these entities. Based on the above, the measured entity will besides hit points for endeavor development.
The above finally consequences in more black people being incorporated into the mainstream economic system.
2.1 Value adding endeavor computation
= Net net income before revenue enhancement + entire labor cost & A ; gt ; 25 % of entire gross
= R 263,589+R 1,450,000 & A ; gt ; 25 % of R 6,763,393
= R 1,713,589 & A ; gt ; R 1,690,848.25
Therefore Company ABC is a Value-Added provider ( It should be registered for VAT as turnover exceeds R 1 million.
2.2 The entity must be registered as a VAT seller under the Value Added Tax Act of 1991. To verify enrollment, inspect the VAT enrollment certification ( VAT 103 ) and if this is non available execute a VAT seller hunt on the SARS website – www.sars.gov.za
2.3 If an entity is a value added provider, there will be enhanced acknowledgment of 125 % viz every rand spent will be multiplied by 1.25 first, before using the relevant part position.
3.1 a ) Cost of gross revenues
Cost of gross revenues is the cost of goods that have been sold, which are by and large recognised either on First in First Out ( FIFO ) or leaden mean footing. Costss include the cost of purchase, cost of industry ( including stuff, labor, etc. ) .
B ) Capital outgo
Capital outgo refers to the disbursal ( disbursement of money ) incurred in the obtaining of points of a capital nature ( viz assets that will be in usage for a period longer than 12 months ) in order to increase capacity of efficiency.
degree Celsius ) Operational outgo
It is an ongoing cost for running an operation ( concern ) . These costs are non straight incurred in the cost of a merchandise sold. It is the twenty-four hours to twenty-four hours disbursals such as rental, accounting fees, etc.
vitamin D ) Empowerment related outgo
This is expenditure incurred via the usage of black owned entities.
vitamin E ) Public sector procurance
It is the procedure by which the authorities / variety meats of province / municipalities initiates for the obtaining of goods / services required from the private sector in order to run into its ain demands. The procedure involves a tendering procedure.
degree Fahrenheit ) Depreciation
It is the systematic allotment of the cost of an plus over its utile life. It is a non-cash point.
3.2 In footings of paragraph 5.11 of Statement 500 of the B-BBEE Codes of Good Practice ( 2007 ) , all goods and services that are imported from a non-South African beginning are included in entire procurement spend. However, in footings of paragraph 6.6 of Statement 500 of the B-BBEE Codes of Good Practice ( 2007 ) , imported capital goods or constituents for value added production in South Africa ( i.e. they are used in the production of other goods ) will be excluded form Total Measured Procurement Spend if there is no bing local production of such capital goods or constituents ( viz these can non be sourced locally ) and importing those capital Gods or constituents promotes farther value added production within South Africa ( these goods will make new merchandises that can be used for industry ) .
Further to this, any other imported goods or services if there is no local production of these nutrients or services including ( but non limited to ) :
- Carry a trade name different to the locally produced goods or services ( branded imports if non produced locally may be excluded e.g. PEPSI ) or
- Items that have different proficient specifications to the locally produced nutrients or services ( e.g. laptops )
3.3 Entire Measured Procurement Spend
+ Cost of gross revenues
+ Operating disbursals
+ Capital outgo
+ Finance charges
– Wages, rewards and committee ( if paid to employees )
– Imports ( that can be excluded in footings of paragraph 6.6 of Code 500 )
– Authorization related procurance ( in footings of paragraph 6.5 of Code 500 )
– Populace sector procurance ( in footings of paragraph 6.2 of Code 500 )
= Total measured procurement spend
( HARTMAN, 2014 )
Harmonizing to ANNEXE 500 ( A ) of Statement 500 of the Codes of Good Practice ( 2007 ) , the expression for B-BEE procurance spend is
A = amount of ( BxC )
A is the deliberate entire B-BEE Procurement Spend ( equal to the entire amount for each provider )
B is the value of procurance falling within entire measured procurance spend
C is the B-BEE procurance acknowledgment degree of each provider of the measured entity
3.4 Verification of SED
– One will necessitate to verify the donees viz if at least 75 % of the value straight benefits black people, so 100 % of the spend can be recognised, if non, value of part will necessitate to be multiplied by per centum that benefit black people.
– The sum of the part will necessitate to be verified ( via verification ) , SED certification if available.
– A verification may besides necessitate to be obtained from an independent, competent individual corroborating the race of the donees.
– Beneficiaries must be identified and substantiated.
– Obtain representation from direction via direction representation missive.
( HARTMAN, 2014 )
3.5 Benefits of doing socio-economic development parts
– It carries 5 weighting points to the BEE scorecard which can promote a mensural entity’s BEE degree.
– It is besides aimed at the development of deprived people / communities which can ensue in trade name acknowledgment / trueness from such communities.
– It is seen as a signifier of giving back to the community.
– It can make greater alliance between the concern aims and the demands of the community.
Conditionss of a valid endeavor development understanding:
– There must be an understanding in topographic point.
– It must be in authorship.
– It must be signed.
– It must province the intent such as helping or speed uping the development, sustainability and finally fiscal and operational independency of that donee.
– It should province the nature of the support given ( viz loan, grant, etc. ) .
– The support given should be used in portion for intents of bettering donees overall BEE conformity degree.
– The day of the months need to be specified.
– The donees must run into the demands of a beneficiary entity.
( HARTMAN, 2014 )
ALEXIS B ( 2013 )MD ACCOUNTANTS AND AUDITORS[ Online ] Available from: hypertext transfer protocol: //www.mdacc.co.za/index.php/the-link-between-preferential-procurement-and-enterprise-development/
[ Accessed: 2neodymiumOctober 2014 ] .
Department of Trade and Industry. ( 2007 )Codes of Good Practice on Black Economic Empowerment.Government Gazette. ( Vol. 500, No. 29617 )
HARTMAN, A. ( 2014 )Management Development Programme, Preferential Procurement and Enterprise Development Presentation Slides