Implementation of proposed new B-BBEE codes of good practice

Hester Davis sheds light on the new proposed B-BEEE codes of good practice, their implementation and possible effects.
Hester Davis sheds light on the new proposed B-BEEE codes of good practice, their implementation and possible effects.

During 2012 Qualitas Career Academy assisted a large number of Qualifying Small Enterprises and Generic Enterprises to optimize their B-BBEE score through correct and effective management strategies on the 7 elements of the B-BBEE codes of good practice. 

By implementing certain proposed strategies some of the companies increased from a level 8 to a level 4 contributor, and some from being non-compliant to being B-BBEE compliant. 

 Revised codes of good practice 

In 2011 the Department of Trade and Industry (DTI) has introduced a revised Broad-Based Black Economic Empowerment document on the B-BBEE codes of good practice, and these proposed changes calls for new revised strategies to be implemented by industry. Industry is currently awaiting the final outcome of the proposed codes. 

Some of the major changes are that the current generic scorecard contains seven elements and these have been reduced to five, with a total of 105 points assigned to the five elements. All companies, except the Exempted Micro Enterprises (EMSs) should comply with all the elements of the scorecard. 

Changes to points
Not only has the above changes been proposed but there is also some proposed adjustments to the points allocated to each element, and some major proposed changes to the criteria of each element. There is also an enhanced recognition of the status of black-owned micro enterprises. 

Minimum requirements for priority elements
One of the new things being proposed in the revised codes was the introduction of minimum requirements for priority elements. These are ownership, skills development and enterprise and supplier development. Qualifying small enterprises (QSE) are required to comply with two of the elements, although ownership is compulsory, while large entities (GE) will have to comply with all of the requirements. 

Another major change is that the thresholds for EMEs and QSEs have also been adjusted, with EMEs increasing from R5-million to R10-million and QSEs increasing from between R5-million to R10-million, and Generic Enterprises from R35-million to R50-million. 

All entities would be forced to comply with priority elements under the following conditions: QSEs would need to comply with at least two of the priority elements, which include compulsory black ownership and education for sustainable development or skills development; while large entities (GE) would need to comply with all priority elements. 

May affect current scorecard levels
A shock to all businesses is that, if the amendments are processed in their current form, entities that do not meet the thresholds and minimum compliance of 40% of targets in priority elements would be discounted in B-BBEE levels. In some cases their overall contribution status could drop two levels if they are a large entity and a drop of one level if they are a qualifying small enterprise, should they not meet the minimum compliance of 40%. 

Harsher scrutiny and penalties for fronting
The bill has also been amended to include much more comprehensive definitions of fronting, and a commissioner will be established to investigate these kinds of practices, should any company been found guilty of fronting they face a huge penalty. 

Qualitas Career Academy again this year assists Qualifying Small Enterprises and Generic Enterprises to optimize their score, by effectively executing their Skills Development, Enterprise Development, and Socio Economic Development element. We also propose and recommend effective strategies for the other elements should companies need assistance.

We invite all QME’s and GE to call us for assistance on the new codes; we endeavour to assist you with the correct and effective implementation of the new proposed B-BBEE codes.

Feel free to contact us for more information. Our centre of expertise located at the Vanderbijlpark campus, should you wish to make direct contact.

Source:  Qualitas World

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