The BEE net widens: don’t get caught out

You may feel that your business is immune to the requirement to comply with Black Economic Empowerment (BEE) or that these requirements are not relevant to your business. Yet the reality of the pervasive effect of South Africa’s BEE legislation and accompanying codes and charters is that your business may not be as immune as you think, and if it still is, it may not be so forever. Authorities are drawing the net tighter to include more and more businesses as the application of BEE is widened across the board.

The drive to widen the application of BEE is evident from the following excerpt of President Zuma’s State of the Nation Address delivered to Parliament on 17 June 2014:

“We will sharpen the implementation of the amended Broad-based Black Economic Empowerment Act and the Employment Equity Act, in order to transform the ownership, management and control of the economy. We will promote more employee and community share ownership schemes and boost the participation of black entrepreneurs in the re-industrialisation of the economy.”

Already the effect of this approach can be seen in the recent inclusion of BEE compliance as a requirement in numerous government licensing procedures and incentive schemes, of which some of the more prominent are highlighted below:

Import and export licenses

In terms of Notice 27 and Notice 28 of 2014 published in the Government Gazette of 21 January 2014 pertaining to the import and export of specified agricultural foodstuffs and flowers, the Department of Agriculture, Forestry and Fisheries included a valid B-BBEE certificate as one of the requirements for obtaining new export and import permits.

Although the Department’s intention is clear from the above, what is not clear is whether mere minimum compliance with this requirement will prove sufficient, or if the Department will (as has happened in practice in the past) enforce a more specific and stringent requirement to be met by prospective licensees. Only time will tell how and to what extent this requirement will be enforced.

Liquor licenses

According to the Liquor Amendment Regulations 2013 published in the Government Gazette of 3 December 2013 the Department of Trade and Industry (DTI) expanded the existing criteria for liquor licence applications to now include a valid B-BBEE certificate when applying for new liquor licences.

Notwithstanding the above, prospective licensees are further required to place their commitments made towards black economic empowerment in writing as part of application process. It is still unclear as to what is meant with “commitments towards black economic empowerment”, and the FAQ section on the National Liquor Authority’s website pertaining to B-BBEE only stipulates that prospective licensees “must commit in terms of the seven elements as per the codes of B-BBEE.”

For now the lack of precise delineation of the very wide definition of the term “commitments towards black economic empowerment” will not only make proper interpretation thereof and planning impossible, but may also result in the term being dangerously open to interpretation.

Manufacturing Competitiveness Enhancement Programme

In 2012 the DTI launched an incentive scheme called the Manufacturing Competitiveness Enhancement Programme (MCEP). The aim of the scheme is to induce firms to upgrade their production facilities, processes, products and people in the short-term and to provide funding in the form of cash grants for such upgrades. This programme complements the state’s Industrial Policy Action Plan, which was launched in April 2013.

In terms of the latest qualification criteria issued in April 2014, applicants must at least achieve a level four B-BBEE contributor status in terms of the B-BBEE codes of good practice or must submit a plan to demonstrate how they will progress towards achieving level four B-BBEE contributor status within a period of two years from the submission of the application. The B-BBEE plan must be aligned to the DTI B-BBEE codes and must indicate activities, time frames, and costs associated with the plan to achieve a level four contributor status.

Only applicants that achieve at least a level four B-BBEE contributor status will be considered for the MCEP as of 1 June 2015, and no plans will be accepted from this date.

The above clearly illustrates the authorities’ growing intention to promote B-BBEE at all levels of the economy and this, coupled with the onerous B-BBEE compliance requirements contained in the Revised Codes of Good Practice (effective from April 2015), might leave business owners who are under the impression that B-BBEE is not relevant to them in for a nasty wake-up call in the near future.

In addition to the socio-economic benefits of BEE and its contribution to the transformation of our country, BEE compliance is also a business risk that must be anticipated and planned for – and all businesses would do well to start early and plan for BEE compliance.

July 8, 2014
Human Rights: Upholding the right to education

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The right to education is outlined in section 29 of the Constitution of the Republic of South Africa, 1996 (hereinafter “the Constitution”). This section guarantees that everyone has the right to basic education and the right to further education, which the state, through reasonable measures, must make progressively available and accessible. In South Africa the right to basic education can be described as a fundamental socio-economic right, that is, an entitlement to conditions and resources necessary for the material well-being of people.

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