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Amended BEE codes of good practice: The salient points

B2After more than 6 years of working with the BEE Codes of Good Practice (“the old Codes”), businesses and verification agencies around the country were finally getting to know what was expected of them when it came to BEE verifications. This will however change with the publishing of the Amended BEE Codes of Good Practice (“the new Codes”) and business will have to take a fresh look at their BEE strategies if they are to maintain their current BEE level or even reach any level at all.

But what are the changes introduced by the new Codes?

On 3 and 4 October 2013 the Department of Trade and Industry together with the Black Economic Empowerment Advisory Council hosted the first ever BEE Summit. The Amended BEE Codes of Good Practice were announced at this summit and were officially published in the Government Gazette on 11 October 2013.

These new Codes have introduced a number of salient points which have been listed below:

  • The new Codes have a 12 month transitional period 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.
  • The new Codes do not, however, replace the sector charters and these will still remain in force.
  • The number of points necessary to qualify for a particular level is adjusted as set out in the table below:
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%
  • The annual turnover thresholds have been adjusted as follows:
    1. EMEs have a turnover of less than R10 million;
    2. QSEs have a turnover of between R10 million and R50 million;
    3. Generic Entities have a turnover of more than R50 million.
  • The 7 elements under the old Codes have been reduced to 5 elements with Procurement element now forming part of Enterprise and Supplier Development element and the Employment Equity element being integrated to form part of the Management element.
  • EMEs and QSEs which have 100% Black ownership will automatically qualify as level 1 contributors to BEE and EMEs and QSEs which have 51% or more Black ownership will automatically qualify as level 2 contributors to BEE. 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.
  • EMEs with Black ownership of less than 51% will automatically qualify as level 4 contributors to BEE while QSEs with less than 51% Black ownership will have to report under all 5 of the elements.
  • 3 priority elements have been introduced, namely Ownership, Enterprise and Supplier Development and Skills Development.
  • 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.
  • The target for Skills Development has been increased to 6% of the Leviable Amount (roughly equal to the Company’s annual payroll), meaning that businesses will have to spend an amount equal to 2.4% of its Leviable Amount just to meet the subminimum requirement under Skills Development.

The changes mentioned above are only a few of the many changes which will be brought about by the new Codes. These will have a major effect on current BEE scores, with the Ownership element becoming essential for businesses that wish to achieve a BEE contributor status better than a Level 8.

There are currently a number of errors and uncertainties in the new Codes and it may take some time before these are corrected or clarified and until we reach this point it will be difficult to determine how the Codes will be implemented practically.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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