BBBEE Compliance for SMEs: What the Proposed 2026 Codes Changes Mean for Your Business

Why these changes matter

The proposed amendments touch two core parts of the BBBEE scorecard. They introduce a new Transformation Fund as an alternative to enterprise and supplier development, and they reshape how preferential procurement is measured.

For SMEs, the key implications are:

• Your current enterprise and supplier development programmes may need to change.
• Your procurement targets will shift if you supply larger businesses.
• The thresholds for EMEs and QSEs remain unchanged despite years of economic growth.

These changes are still proposals. The public comment period closed on 30 March 2026, and the Minister will consider submissions before publishing final amendments. Nothing is binding yet.

The proposed Transformation Fund

What it is

The Transformation Fund is a centralised vehicle into which businesses would contribute 3% of their Net Profit After Tax (NPAT). In return, the contributing business earns up to 20 scorecard points for the Enterprise and Supplier Development element.

The Fund would be managed by a Special Purpose Vehicle (SPV) whose board is appointed by the Minister of Trade, Industry and Competition. A website (sa-transformationfund.co.za) is already operational.

How it replaces current ED/SD

Under the current Codes, businesses earn points for spending on Enterprise Development (ED) and Supplier Development (SD):

• ED: 1% of NPAT scores 5 points
• SD: 2% of NPAT scores 10 points
• Total available: up to 15 points

Under the proposed changes:

• Contribution of 3% of NPAT to the Fund scores up to 20 points
• Total available: up to 20 points

The extra 5 points are an incentive, but the trade-off is significant. You must choose between:

1. Continuing with your own ED/SD programmes, or
2. Contributing to the Transformation Fund

You cannot do both. If you choose the Fund, your existing ED/SD initiatives would end. The proposed Codes contain no transition period for winding down current programmes, which could have legal and commercial consequences for both your business and the beneficiaries you currently support.

What SMEs should consider

Before deciding, every business needs to evaluate:

• Whether the additional 5 points would materially improve your BBBEE level
• The tax treatment of contributions (the Fund’s website states contributions will be mostly tax-exempt under section 56(1)(h) of the Income Tax Act, with deductions available under section 18A)
• The terms of the Participation Agreement you would sign with the Fund
• What happens to existing beneficiary relationships

The Fund is intended to pool resources and drive impact for Black-owned enterprises, particularly EMEs and QSEs, rather than relying on individual business programmes.

Changes to preferential procurement

The shift to 100% Black-owned suppliers

The current scorecard rewards procurement from suppliers that are at least 51% Black owned. The proposed changes restructure this significantly:

The bonus points (2 points) now require 100% procurement from Designated Groups (unemployed Black people, Black youth, disabled Black people, Black people in rural areas, and Black military veterans), up from the current 2% target from 51%-owned suppliers.

What this means in practice

For businesses that supply larger companies, these changes affect your value as a BBBEE procurement partner:

• If you are 100% Black owned, you become more attractive to procurement teams
• If you are 51% Black owned but not 100%, your procurement recognition drops significantly
• Only around 10,000 of the approximately 54,000 BBBEE-certified businesses in South Africa are 100% Black owned, and 90% of those have turnover below R50 million

For businesses that buy from suppliers, meeting the new targets may require restructuring your supply chain. The 25% target for 100% Black-owned suppliers is a substantial shift from current practices.

EME and QSE thresholds remain at 2013 levels

The proposed Codes maintain the existing definitions:

• Exempted Micro-Enterprise (EME): annual turnover below R10 million
• Qualifying Small Enterprise (QSE): annual turnover between R10 million and R50 million

These thresholds have not been updated since 2013. Given inflation and economic growth over the past 13 years, many businesses that would have been classified as EMEs or QSEs a decade ago now exceed these limits. Business Day and other commentators have noted that these thresholds are long overdue for an increase.

For SMEs, this means:

• Your classification may not reflect your current business size
• Businesses that have grown past R10 million in turnover move from EME to QSE status, with different verification requirements
• QSEs that are not at least 51% Black owned must be verified by an accredited verification professional

Sector Codes are not affected (yet)

The proposed changes apply only to the Generic Codes of Good Practice. Sector-specific Codes remain in place for businesses operating in:

• Agriculture
• Chartered Accountancy
• Construction
• Financial Services
• Information and Communication Technology (ICT)
• Forestry
• Property
• Tourism
• Transport

Businesses covered by Sector Codes will not score points from Transformation Fund contributions, and their procurement scores are not affected by the proposed changes, unless and until their Sector Codes are updated to align with the Generic Codes.

If your business falls under a Sector Code, check whether your sector’s Code is being amended separately.

What to do now

While the final Codes have not been published, there are practical steps every business can take.

1. Understand your current BBBEE position

Review your latest BBBEE verification or affidavit. Know your current level, your scorecard breakdown, and which elements contribute most to your rating.

2. Map your enterprise and supplier development spending

Identify where your ED and SD contributions go, who your beneficiaries are, and what relationships exist. If the Fund becomes mandatory or preferred, you need to know what you would be ending.

3. Review your procurement chain

Understand what percentage of your procurement currently goes to 51% Black-owned suppliers versus 100% Black-owned suppliers. If the proposed procurement targets are finalised, quantify the gap.

4. Monitor the public process

The Minister will consider comments received before deciding on final amendments. Stay informed through your industry body, your BEE verification agency, or your auditor.

5. Get professional advice

The proposed changes are complex and carry tax, legal, and commercial implications. SC Audit can help you understand how the changes affect your specific business and BBBEE level.

The bottom line

The proposed 2026 BBBEE Codes changes move enterprise development from scattered individual programmes toward a centralised fund, and shift procurement scoring from majority Black-owned suppliers toward 100% Black-owned suppliers. Whether these changes are finalised in their current form or modified through the comment process, they signal the direction of BBBEE policy.

SMEs that understand their current position and begin planning now will be better placed to respond when the final Codes are published.

SC Audit is an IRBA-registered audit firm based in Bellville, Cape Town. SC Audit’s partners Niel Schoeman, Simone Coetzee, and Hennie Meyer support businesses across South Africa with BBBEE compliance, statutory audits, independent reviews, and assurance services. Contact SC Audit to discuss how the proposed BBBEE changes affect your business.

Frequently Asked Questions

Are the proposed BBBEE Codes changes final?
No. The proposed amendments were published on 29 January 2026 for public comment. The comment period closed on 30 March 2026. The Minister will consider submissions before publishing final amendments. The current Codes remain in force until the final versions are gazetted.

What is the BBBEE Transformation Fund?
The Transformation Fund is a proposed centralised vehicle into which businesses would contribute 3% of their Net Profit After Tax (NPAT). In return, the business earns up to 20 scorecard points for Enterprise and Supplier Development. The Fund would be managed by a Special Purpose Vehicle appointed by the Minister of Trade, Industry and Competition.

Can I continue with my existing enterprise and supplier development programmes?
Under the proposed Codes, you must choose between contributing to the Transformation Fund or continuing with your own ED and Supplier Development (SD) programmes. You cannot do both. If you choose the Fund, your existing ED/SD initiatives would be terminated. The proposed Codes do not include a transition period for winding down current programmes.

How do the procurement changes affect my business as an SME supplier?
If your business is 100% Black owned, the proposed changes make you a more attractive procurement partner, with specific targets and points allocated to 100% Black-owned EMEs, QSEs, and general suppliers. If your business is 51% Black owned but not 100%, your procurement recognition under the scorecard would decrease significantly compared to the current Codes.

Do the proposed changes apply to Sector Codes?
No. The proposed changes apply only to the Generic Codes of Good Practice. Sector-specific Codes for Agriculture, Chartered Accountancy, Construction, Financial Services, ICT, Forestry, Property, Tourism, and Transport remain in place unless and until updated separately.