BBBEE status is an important factor for NPOs, particularly when engaging government or applying for public and/or private sector funding. Companies can earn BBBEE points by contributing to causes that promote enterprise and supplier development, skills development and socioeconomic development (SED). If a company contributes to these through an NPO, the company will only earn BBBEE points if the NPO complies with the requirements set out in the Codes.
NPOs are subject to the same BBBEE regulations and Codes as other entities in South Africa. As they have no beneficial ownership, they are considered ‘specialised enterprises’ and the ownership element of their BBBEE scorecard is adjusted to measure management control only.
Under the revised BBBEE Codes, which came into effect in 2015, entities with an annual turnover of less than R10 million are Exempted Micro-Enterprises (EME) and are deemed to have a Level 4 status. Most NPOs in South Africa fall into this category. An entity with a turnover of between R10 million and R50 million is a Qualifying Small Enterprise (QSE), which is also deemed Level 4, provided it meets certain measurement criteria set out in the Specialised Qualifying Small Enterprises scorecard.
If an EME or QSE has at least 75% black beneficiaries, it is elevated to Level 1 status, and to Level 2 if it has at least 51% black beneficiaries. A turnover or income of over R50 million excludes any exemptions and all targets set out in the Specialised Generic scorecard must be met.
NPOs most commonly sourced corporate funding from the SED element of the BBBEE Scorecard (57%), down from 79% in 2016. In contrast, the proportion of NPOs accessing skills development and enterprise and supplier development funds increased from 2016.