The Amended Financial Sector Codes of Good Practice (“Amended Codes”) was gazetted on 1 December 2017 and came into effect immediately.
The Amended Codes differ from the generic Department of Trade and Industry (DTI) Codes of Good Practice in their calculation of the BEE level requirements as the Amended Codes include an additional formula which must be applied to determine the final score of an entity that is measured under the Amended Codes. This is where much of the confusion around the Amended Codes has arisen from, as there are different calculations for the different entities that operate within the financial services industry.
The formula required by the Amended Codes to be applied to determine the score and resultant BEE level for an entity is the following:
|Number of points in the CoGP scorecard
|Total number of DTI points
|X Total number of available industry points
The “Number of points in the CoGP scorecard” refers to the number of points required by the entity for a specific level as indicated in the Amended Codes. This number must then be divided by the “Total number of DTI points” which refers to the 109 points which are available in terms of the DTI Codes.
The result of this calculation must then be multiplied by the “Total number of available industry points” which differ for different types of entities and are as follows for Generic entities:
– Banks: 120
– Short-term Insurers: 115
– Stock Exchanges: 103
– Others: 105
The best way to illustrate the working and potential effect of this formula is by way of an example: If a bank, for example, wishes to achieve a level 4 they would normally require between 80 and 90 points. If we apply the above formula we get the following result:
80/109 x 120 = 88.08
90/109 x 120 = 99.08
A bank would therefore be required between 88.08 and 99.08 points to achieve a BEE level 4 result. This illustrates the dramatic effect that this formula can have on the level of entity. In this example, the bank would have to obtain nearly 10 more points on its scorecard just to achieve a level 4 under the Amended Codes as compared to the generic DTI Codes.
While the example above looks at the negative impact on Generic entities in the Banking sector, the formula can also potentially have a positive impact on a QSE entity where there are only 100 points available in terms of the DTI Codes. For example, an entity which hopes to achieve a BEE level 5, would normally require 75 points on its scorecard. If we apply the Amended Codes formula then we get the following result:
75/109 x 100 = 68.81
In this example, a QSE entity would only need to obtain 68.81 points to achieve the level 5 result, showing that in this instance the formula provided the QSE entity with a slightly easier target.
This formula is one of a number of changes brought about by the Amended Codes. To calculate your BEE level as well as the planning that will be needed to achieve your target BEE level, it is advisable that you consult with a BEE specialist regarding the impact of the Amended Codes and changes that may be needed to your BEE planning