Value adding supplier - Preferential Procurement Print
Monday, 22 June 2009 08:52

Value adding supplier

A value adding supplier is a BEE compliant company that the measured entity (the company whose scorecard is being worked on) acquired goods/services from whose total labour costs plus the Net Profit Before Tax is more than 25% of annual turnover.

The total amount procured from such a value adding supplier is multiplied by a factor of 1.25.

Example:

Company B (the supplier)

 

Annual turnover

R10 000 000

25% of Turnover

R2 500 000

Payroll spend

R1 000 000

 

 

Net Profit Before Tax

R2 000 000

 

 

Sum of payroll spend and Net Profit Before Tax

R3 00 000

 

 

Since the sum of payroll spend and the net profit before tax is more than 25% of annual turnover company B is a value adding supplier.

 

 

 

Benefit to company A (the measured entity)

 

 

 

Total procurement from company B

R50 000

 

 

Company B's BEE recognition level (for example)

100%

 

 

Recognised BEE spend with company B

R50 000 X 1.25 = R62 500

Thus, it is of more benefit to company A to acquire goods/services from a company like company B.