Revised BBBEE Codes of Good Practice

The general Codes of Good Practice published under the Broad-Based Black Economic Empowerment Act, 2003 was gazetted by Government on 11 October 2013 effective from 11 October 2014.

The general Codes set out the details as to how businesses and other organisations operating in South Africa must measure their levels of broad-based black economic empowerment (BBBEE).  Draft revised Codes were published for comment in October 2012.  The Department of Trade & Industry (DTI) has now finalised the revised Codes which will be published in the Government Gazette on 11 October 2013.

At the BBBEE Summit held this past week by the DTI, the key principles of the revised Codes were discussed.

 

The key principles include that:

The revised Codes will provide for a transitional period of 12 months.

The number of elements on which companies will be scored has been reduced to five from seven.  These are: ownership, management control, skills development, enterprise and supplier development and socio-economic development

Increased focus will be placed on skills development and enterprise and supplier development.

Sub-minimum targets have been set for parts of the ownership, skills development and enterprise and supplier development scorecards. These elements of BBBEE are considered to be priority elements.  In this regard –

Businesses will have to score 40% of the targets set for net value, which is one of the indicators on the ownership scorecard.  Net value is the extent to which acquisition debt is reduced over time, so that black shareholders’ ownership interests are not subject to debt.

40% of the skills development expenditure targets must be met.

On the enterprise and supplier development scorecard, 40% of the preferential procurement and 40% of the enterprise and supplier development targets must be met.

The consequence of not complying with the sub-minimum requirements is that the measured enterprise will drop one BBBEE level (as opposed to two as was proposed in the draft revised Codes).

Ownership will now count for 25 points on the scorecard.  It presently counts for 20 points with the possibility of 3 bonus points.

People who will now qualify as “new entrants” will be people who hold total equity interests of less than R50 million (previously R20 million). Participation by new entrants is now an indicator that forms part of the principal ownership scorecard.  Previously it was something for which only bonus points could be scored.

Businesses and other organisations which are measured in terms of sector-specific Codes (which apply in each of the property, tourism, chartered accountancy, construction, agricultural, transport, forestry, ICT, and financial sectors) will continue to be measured in terms of those sector-specific Codes.  The sector Codes will be aligned with the new revised Codes soon.

The threshold for exempted micro-enterprises which are deemed to be Level 4 contributors to BBBEE will increase to R10 million from R5million.  The threshold for Qualifying Small Enterprises will increase to R50 million from R35 million.

All companies except EME’s will be measured on all five elements.

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