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Take note of the New Construction BEE Codes

"I own a construction company which is heavily reliant on state tenders. I understand that new construction BEE codes are coming soon. I am worried about these new codes as the old construction codes had many provisions that my company found difficult to comply with. Will this be the case again? What should I be on the look-out for?"

The Draft Revised Construction Sector BEE Codes (“Draft Construction Codes”) were published for public comment on 28 October 2016 with the expectation that the final promulgated codes will be in place by early 2017. As with the Old Construction Codes, the Draft Construction Codes contains distinct provisions that construction companies need to be aware of for their future BEE verification. In what follows, we highlight some of the key provisions of the Draft Construction Codes:

1. Verification agencies will have to report to the Construction Sector Charter Council (CSCC):

Agencies that issue BEE certificates will be obliged to annually provide the scorecards of the companies they verified to the CSCC which will track the progress of compliance and report to the BEE Commissioner. 

2. Automatic levels:

Numerous unique provisions have been included for companies relying on automatic levels:

• The modified flow-through principle may not be used for automatic level recognition of QSE companies – only the flow-through principle can be used.
• An EME with less than 30% black ownership will only achieve level 5 recognition. An EME with less than 30% black ownership and not achieving 40% of its skills development target will be discounted to a level 6. The result of this provision will arguably mean that EME’s may not be as competitive for tender purposes without having at least 30% black ownership.
• An EME can advance its levels by achieving full points for Skills Development spend and Supplier Development compliance.
• A QSE qualifying for an automatic level (level 2 on account of 51% black ownership) will be discounted by a level if a sub-minimum of 40% of its Skills Development target is not met. An automatic level QSE can enhance its recognition by achieving full points for Skills Development and Supplier Development. The result here will be that QSE companies will still have to spend on skills development despite qualifying for automatic levels.

3. Built Environment Professional (BEP) companies:

The black shareholders of a BEP company holding more than 50% of the issued shares in the company must be professionally registered and a member of the executive management of the company. This provision will have the biggest impact on BEP’s not already subject to the strict ownership requirements of their applicable professional body.

4. Enterprise and Supplier Development:

The Enterprise Development element has been omitted from the scorecard and Supplier Development now accounts for 15 points of the total scorecard.

5. Suppliers of materials to construction companies:

Material suppliers to construction companies will fall within the ambit of the Draft Construction Codes and not the Revised BEE Codes of Good Practice issued by the Department of Trade and Industry. This provision will mean that there will be numerous companies that may have to realign to comply with the Draft Construction Codes.

The Draft Construction Codes does contain many potentially challenging provisions that will greatly impact the BEE strategy and planning of construction companies. So do your homework early and enlist the help of a BEE specialist to help align your construction business to these new provisions.

November 9, 2016
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