New rules for unincorporated joint ventures came into being on 1 December 2019 and it drastically changes the way it scores B-BBEE points, when tendering for government contracts.
As before, unincorporated joint ventures “are still required to obtain a consolidated verification certificate”, for purposes of government tendering.”
The certificate will consolidate the already verified compliance data of each party to the joint venture, as if the new entity was a single “Measured Entity”.
The new approach also uses the already verified compliance data of each party to the joint venture and weighs it in accordance with the “joint venture agreement relevant to the specific joint venture.”
In essence, it means that if two suppliers were forming an unincorporated joint venture, “their respective scores will be weighted according to their proportionate share in the joint venture and added together for a combined score out of 100.”
Further, it also governs the score for those companies measured as Qualifying Small Enterprise (QSEs), since its “B-BBEE score out of 100, must be used to calculate the consolidated score”.
The following scores will be allocated for unincorporated joint ventures, where the measured entities are a:
– Level 1: (100% Black Owned EME or QSE) – JV Score = 100 points
– Level 2: (51% Black Owned EME or QSE) – JV Score = 95 points
– Level 4: (Less than 51% Black Owned EME) – JV Score = 85 points
– Large Enterprises and QSEs (<51% Black Owned): The score on their B-BBEE Certificates will be used to calculate the points for the JV.
The mechanism above indirectly allows for “Generic Companies” and QSEs, which are less than 51% Black owned, to use the score on their existing B-BBEE Certificates for purposes of tendering under an unincorporated JV.
From now on, all JV B-BBEE Certificates, “will only be valid for 12 Months and only applicable to a specific Project”, which means that every time parties form a Joint Venture, a new B-BBEE Certificate must be obtained for tendering purposes.
However, this new approach does make allowance for the “black ownership of the respective partners” to be used under the “flow through principle” in the JV, “in proportion to the respective JV partners’ economic interest and voting rights in the JV as determined by the JV agreement.”
Please Note: The Construction Industry Sector Charter has its own mechanism for determining B-BBEE Scores for JV’s.