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BEE | Construction

Should I down tools on the current construction sector BEE codes or not?

“I own a mid-sized construction company and the end of my financial year is fast approaching. My auditor has advised me to make any BEE expenditure I wish to make before the end of my financial year. I’ve been following BEE developments in the construction industry and have noted with concern that the the deadline for submission of a new Construction Industry BEE Charter has been missed. Now I’m unsure as to which codes I must use for my BEE planning and any BEE expenditure I still need to make before the end of my financial year.”

The BEE Act provides for sector BEE codes which will apply to specific industry sectors and companies that fall within a sector BEE code are obliged to report under that code. A number of sectors previously implemented sector BEE codes under the Old BEE Codes. However, the current position in respect of the Amended BEE Codes and sector codes is still a grey area.

All sectors with BEE codes were given until 31 October 2015 to align their sector codes with the Amended BEE Codes. The Department of Trade and Industry also confirmed that a failure by a specific sector to align their sector BEE code by the given deadline could lead to the possible repeal of that sector code.

Unfortunately the majority of the relevant sectors failed to align their codes by this deadline, validating your confusion as to whether the construction sector BEE codes are now repealed or not, and if so, which codes a construction company would have to plan and report under. 

Yet, although most of the sectors missed the deadline, the majority have published draft amended sector BEE codes. These drafts still need to be commented on and the final versions gazetted before they will apply. However progress is underway with their alignment. 

The construction sector however, is one of the few sectors that failed to produce even a draft amended sector BEE code. It has been reported that despite ongoing industry negotiations and consultations, the construction sector has been unable to agree on alignment targets for the sector. This was confirmed in a statement issued in November 2015 by the Construction Sector Charter Council (CSCC), which in light thereof advised all construction measured entities seeking to renew their BEE certificates to make use of the Amended BEE Codes.

But, does this mean the current construction sector BEE codes have been repealed? No, as the CSCC statement does not constitute a repeal of the current construction charter, which can only be repealed via a formal notice in the Government Gazette or be replaced by an amended sector BEE code which has been properly gazetted.

At present the current construction sector codes have not yet been repealed, which means that should the majority of your company’s income be derived from construction related activities, your company has to report under the current construction sector BEE code. For now, it means that the existing construction sector BEE codes will apply to your company. But, facing the possibility of repeal and possibly also the Amended BEE Codes applying until a new sector BEE code is implemented, it does require consideration beyond only the current construction sector BEE Codes.

A prudent approach would therefore be to ensure that sufficient expenditure is made in terms of the current construction sector BEE codes, but also to apply the targets as set by the Amended BEE Codes to each element. Should the current construction codes therefore either be aligned or repealed, a company spending as suggested would still be in an adequate position regarding either the aligned sector targets, or the targets contained in the Amended Codes (whichever applies).

Planning for construction companies is more intricate than ever during this transitional phase and it is highly advisable that you seek the assistance of a BEE specialist to help with planning during this period of uncertainty to ensure your continued BEE compliance.

Please note:

Post publication of this article the construction codes were formally repealed in the Government Gazette of 17 February 2016. All companies operating in the construction industry may now be verified in terms of the Amended BEE Codes of Good Practice. It is advisable that you seek the assistance of a BEE specialist to help you plan accordingly.

February 9, 2016
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