The Amended BEE Codes of Good Practice

On 3-4 October 2013 the Department of Trade and Industry together with the Black Economic Empowerment Advisory Council hosted the first ever National B-BBEE Summit in South Africa. The Amended BEE Codes of Good Practice were announced at this summit and were published in the Government Gazette a week later, on 11 October 2013.

These new Codes have introduced a number of significant points which we have listed below:

1. The new Codes have a 12 month transitional period starting 11 October 2013 in which businesses have a choice to report under either the old Codes or the new Codes. Once this period is over, reporting under the new Codes will become mandatory.

2. The new Codes do not, however, replace the sector charters and these will still remain in force.

3. The number of points necessary to qualify for a particular level is adjusted as set out in the table below, requiring substantially higher points to achieve a good BEE level than under the old Codes:

B-BBEE Status Qualification under
the new Codes
Qualification under
the old Codes
B-BBEE
recognition level
Level 1 ≥ 100 Points ≥ 100 Points 135%
Level 2 ≥ 95 but < 100 Points ≥ 85 but < 100 Points 125%
Level 3 ≥ 90 but < 95 Points ≥ 75 but < 85 Points 110%
Level 4 ≥ 80 but < 90 Points ≥ 65 but < 75 Points 100%
Level 5 ≥ 75 but < 80 Points ≥ 55 but < 65 Points 80%
Level 6 ≥ 70 but < 75 Points ≥ 45 but < 55 Points 60%
Level 7 ≥ 55 but < 70 Points ≥ 40 but < 45 Points 50%
Level 8 ≥ 40 but < 55 Points ≥ 30 but < 40 Points 10%
Non-Compliant < 40 Points < 30 Points 0%

 

4. The thresholds for different level of scorecard compliance, have also been adjusted as follows:

  • EMEs require a turnover of less than R10 million
  • QSEs require a turnover of between R10 million and R50 million
  • Generic Entities require a turnover of more than R50 million

5. The previous 7 elements have been reduced to only 5 elements with Procurement now forming part of Enterprise and Supplier Development and Employment Equity being integrated to form part of Management.

6. EMEs and QSEs which have 100% Black ownership will automatically qualify as Level 1 contributors and EMEs and QSEs which have 51% or more Black ownership will automatically qualify as Level 2 contributors. Importantly, these entities will only have to provide an affidavit confirming that their turnover is under the relevant threshold and the percentage of Black ownership is above the required level.

7. EMEs with Black ownership of less than 51% will automatically qualify as Level 4 contributors while QSEs with less than 51% Black ownership will have to report under all 5 of the elements.

8. 3 Priority Elements have been introduced, namely Ownership, Enterprise and Supplier Development and Skills Development.

9. QSEs will have to meet a subminimum of 40% of the target for Ownership and one of the other Priority Elements or they will lose a level, while Generic Entities will have to meet the subminimum for all three Priority Elements or risk losing a level.

10. The target for Skills Development has been increased to 6% of the Leviable Amount, meaning that businesses will have to spend 2.4% just to meet the subminimum of 40%.

The changes mentioned above are only a few of the many changes which will be brought about by the new Codes and as always the devil is in the detail, and there is a lot of detail which will have to be assimilated to understand the full extent of the impact of the new Codes. These will have a major effect on current BEE scores, with the Ownership element becoming vitally essential for businesses if they want to get a certificate better than a Level 8 or even avoid non-compliance.

There are numerous errors and uncertainties in the new Codes and it will take time before these are corrected or clarified. Until we reach this point it can only be speculated as to how the Codes will practically be interpreted and implemented by verification agencies. Most importantly, take note of the new Codes and start preparing your business to comply as the new Codes will definitely affect your current BEE strategy.

October 25, 2013
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