The B-BBEE "Discounting Principle": How to Avoid a One-Level Penalty

In the modern B-BBEE framework, not all scorecard elements are created equal. The government introduced "Priority Elements" to stop businesses from "points shopping" and force them to engage in substantive transformation.

Failure to comply with these specific elements triggers a severe "discounting principle"—a penalty that can undermine your entire B-BBEE effort.

What Are the Three Priority Elements?

For Generic (Large) Enterprises, there are three non-negotiable Priority Elements:

1. Ownership (specifically, the Net Value component)

2. Skills Development 

3. Enterprise and Supplier Development (ESD) 

   
   

What is the 40% Sub-Minimum Rule?

To avoid the penalty, your business must achieve a sub-minimum target of 40% of the total points available for each of these priority elements.

• Example: Skills Development is worth 20 points. The 40% sub-minimum target is 8 points.

• Example: ESD is worth 40 points. The 40% sub-minimum is 16 points.

What is the "Discounting Principle" Penalty in B-BBEE?

If your company fails to meet the 40% sub-minimum on any one of these three elements, the discounting principle is automatically triggered.

Your final, calculated B-BBEE status level will be dropped by one level.

This means if your company scores 87 points (a Level 4), but you failed to get 8 points in Skills Development (e.g., you missed your WSP/ATR deadline), you will be discounted to a Level 5. This can be the difference between winning and losing a major contract.

How We Protect You

Navigating these high-stakes requirements is our specialty. White Paper Systems' consulting and learnership services are designed to guarantee that you meet the sub-minimum targets for Skills Development and ESD, protecting you from the discounting penalty.

Don't risk your B-BBEE level. Contact us for a strategic compliance review.