Article by Izikhulu BEE Ratings
The final version of the New BBBEE Codes of Good Practice was gazetted on 11 October 2013, after being unveiled at the first ever National BBBEE Summit arranged by the Department of Trade & Industry the week prior.
As there are many fundamental changes, organisations are encouraged to familiarise themselves with this new legislation and start implementing without delay to stay ahead of their competition and mitigate negative impact on scorecard levels.
Izikhulu BEE Ratings will be publishing a series of articles discussing each of the five scorecard elements in more detail, however this article is aimed at providing an introduction, and addresses the key principles and structure.
General: Core themes throughout the Codes include:
- Easier compliance for >50% black owned entities with annual turnover < R50-million. Coupled to this is the criminalising of fronting with substantial penalties in the BBBEE Amendment Bill to deter misrepresentation.
- Greater focus on black women empowerment
- Increased emphasis on beneficiation and use of local suppliers.
- Definition of "Black" remains as is, however some targets are now race- and gender-driven.
- Entities need to have "empowering supplier" status to feature in the procurement supply chain.
Implementation date: The Codes state that they may be applied immediately or at the latest, in a year's time after the transitional period has ended. In this case, date of measurement is construed to be applicable to all financial year-ends after the 12 October 2014. Organisations are reminded that initiatives to comply with the new Codes should start at the start of the financial period, and tracked during this period to best achieve targeted BEE levels.
All entities that are governed by a gazetted industry Sector Code (i.e Construction, Transport, ICT, CA, Forestry, Tourism, Property, Finance, Agriculture) will continue to be assessed on the Sector Codes until they have been updated to align with the new BBBEE Codes.
Thresholds: The annual turnover thresholds for the three different categories have amended as follows:
Scorecard Category
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2007 Codes
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2013 Codes
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Exempted Micro Enterprise (EME)
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|
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Qualifying Small Enterprise (QSE)
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R5 – 35 million
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R10 – 50 million
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Large Enterprise
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>R35 million
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>R50 million
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BEE Recognition Levels: These have changed considerably, from now having to gain at least 40 points to be compliant, to requiring 70 points to enter Level 6 which was previously at a 45 point entry. Companies hence need to gain a significant number of points before they achieve the same level. From Level 6 upwards, the difference between each level is much lower at mainly 5 point intervals, making it easier to ramp up.
Scorecard Elements: The previous seven elements have now been condensed to five elements viz. Ownership, Management Control, Skills Development, Enterprise and Supplier Development (ESD), and Socio-economic Development. These add up to a total of 109 points and nine bonus points, giving entities a greater pool to score points on. There is no separate QSE scorecard, so QSEs are to be measured on all five elements as well.
A new concept of priority elements is in place, where sub-minimum of 40% of the Ownership net value score, Skills Development and ESD are required. Should large companies not meet this sub-minimum in all three, their BEE level would drop one level whereas QSEs would drop a level only if Ownership and one of the other priority elements are not met.
EMEs: It is now easier and cheaper for EMEs to comply:
- 100% black-owned EMEs are automatically Level 1 contributors
- >50% black-owned EMEs are automatically Level 2 contributors
- All other EMEs receive a Level 4 status.
- An EME can opt to be scored on the QSE scorecard should they wish to potentially score better.
- An EME requires only a sworn affidavit confirming annual turnover and black ownership as proof of status.
Should you require further information or any assistance on BBBEE related matters, contact Izikhulu BEE Ratings on 0861 505 555, info@izikhulu.co.za or visit our website www.izikhulu.co.za