The enhanced recognition status of 51% and 100% black owned Exempted Micro-Enterprises and Qualifying Small Enterprises is not recognised where the Modified-Flow Through principle is applied due to the definition of a black owned entity being:
An entity where
- black people hold at least 51% or 100% of the exercisable voting rights as determined under Code Series 100;
- black people hold at least 51% or 100% of the economic interest as determined under Code Series 100; and
- has earned all the points for Net Value under Code Series 100
Therefore, Qualifying Small Enterprises that do not apply the Flow Through principle to black ownership will be required to perform a full B-BBEE verification to achieve a B-BBEE rating certificate and will not be able to simply obtain a sworn affidavit. An Exempted Micro-Enterprise will still be able to obtain a sworn affidavit, however, the rating level will not exceed Level 4, rather than the automatic Level 2 or 1.