The CIDB grade “2” designation gives a construction company an opportunity to bid for government construction tenders between the values of R130, 001 to R650, 000. In order to qualify for the grade, a company needs to have completed a construction project between the values of R130, 001 and R450, 000 within the past five years.

Construction projects completed more than five years are not accepted as at the date of application. Therefore, if you are going to be applying for a grade 2, all your project paper work should be within a period of 5 years. In addition to the above, the company needs to also be compliant with any of the general legislative requirements such as tax as well as the companies and intellectual property commissioner requirements. I shall be discussing all the requirements in detail in the paragraphs that do follow.

Works capability refers to the historical construction projects carried out by the company in the past five years. It refers to the single largest contract ever carried out and this should not be confused with the aggregate or total of a number of projects performed.

Let me illustrate this by using an example. Let’s say you had 3 projects in the past 5 years. The first project was R100, 000. The second R200, 000 and the third R400, 000. You cannot claim a works capability of R700, 000. The CIDB will only consider the R400, 000 as the single highest project and therefore, qualify you for a grade 2 only despite having performed a total works capability for a grade 3. As mentioned above, the works capability for a grade 3 is calibrated between construction contracts between the values of R130, 001 to R450, 000

Financial capability refers to the best of total revenue between two comparable financial years generated by the company. It also refers to the net assets value which is derived by taking the total assets of the company less its total liabilities. For a grade 2, there is no need to demonstrate financial capability because a grade 2 is only measured on its works capability only.

Grades of 3 and higher will definitely be measured on financial capability but not for a grade 2. For this reason, that is why the grade 2 application does not require one to submit a set of annual financial statements. That’s because no assessment is going to be carried out on the company’s financial capabilities.

It seems pretty obvious that a tax clearance certificate should be the easiest part about complying with when submitting a CIDB 2 grading application form however, from the look of things, it appears that there is more to be considered when submitting a tax clearance. In the previous years, tax clearance certificates were valid for a period of 12 months as at date of printing, however, as from late 2019, it appears that the tax clearance certificate is only valid as at the date of confirmation.

What does this mean?

It means that when you submit your tax clearance certificate, you need to remain compliant throughout the period of submission. Since you can’t predict the date when the CIDB shall be checking on your taxes, it is wise to remain compliant throughout the entire 21 days submission. This is especially true for clients who have companies that submit monthly payroll.

Should you miss a monthly payroll tax return during the time of upgrading, tax affairs that were compliant a couple of days ago, might no longer be compliant. This is immediate grounds for dismissal of your upgrade.Therefore, it is advisable that your company remains fully tax compliant throughout the period of application as well as the periods when your CIDB has been granted. Remember, your CIDB shall be taken down in case of non tax compliance.

The CIDB requires construction companies to be compliant with the CIPC. Being compliant with CIPC requires the filling of annual returns on the CIPC’s website. To determine if the company is compliant with the CIPC, you should print out your latest company’s registration documents from the CIPC to determine the enterprise status. Companies in good standing will be indicated by an enterprise status written “In Business” whereas those that need to file and pay their annual returns, shall be indicated by the enterprise status “In deregistration process” or “Deregisted”.

If your company is a close corporation, then there is no need to look for a shareholders certificate, however, if the company’s designation ends with a (PTY) Ltd or (Inc), then a shareholders certificate shall be required. The shareholders certificate must at least be done by a competent professional to meet the minimum disclosure requirements and they should be certified within 3 months as at the date of submission.