16 Oct 2013

Corporate & Commercial Law, BEE Update, Revised Broad-Based Black Economic Empowerment Codes of Good Practice Published

Practice Area(s): Corporate & Commercial |

  1. On Friday, 11 October 2013, the revised Codes of Good Practice ("New Codes") in terms of the Broad-Based Black Economic Empowerment ("BEE") Act, 53 of 2003, were published in the Government Gazette.
  2. The New Codes will drastically alter the nature of BEE in South Africa as they place much greater focus on black ownership, in relation to both a company's own ownership and the ownership of its suppliers.
  3. The following is a brief summary of some of the more important aspects of the New Codes: 
  • the scorecard has been reduced to 5 elements, namely:
  • Ownership:                                 25 points
  • Management:                             19 points
  • Skills Development:                    20 points + 5 bonus points
  • Enterprise & Supplier Dev:         40 points + 4 bonus points
  • Socio-Economic Development:  5 points;
  • there is no separate scorecard for Qualifying Small Enterprises ("QSE's");
  • the thresholds for Exempted Micro Enterprises ("EME's") and QSE's have been adjusted, with EME's having an annual turnover of R 10 million and below and QSE's having an annual turnover between R 10 million and R 50 million;
  • EME's and QSE's that are at least than 51% black owned will qualify as level 2 contributors to BEE; while EME's and QSE's that are 100% black owned will qualify as level 1 contributors to BEE;
  • the points required to achieve each of the status levels have been increased;
  • 3 elements have been given "priority status", namely Ownership, Skills Development and Enterprise & Supplier Development;
  • large entities must meet the sub-minimum requirements in each of these 3 priority elements and QSE's must meet the sub-minimum requirements in 2 of the 3 priority elements to avoid being discounted by 1 BEE status level;
  • obtaining the sub-minimum requirements requires achieving at least 40% of the points for:
  • the paid-up black ownership points, according to the targets set for each year;
  • the total points for Skills Development;
  • the total points for each of the sub-categories of Enterprise & Supplier Development, being preferential procurement, enterprise development and supplier development;
  • Enterprise & Supplier Development, which carries a possible 44 points, contains 3 sub-elements, procurement, enterprise development and supplier development.  Procurement now only recognises amounts spent on suppliers that are either EME's or QSE's or are "Empowering Suppliers", being a supplier meeting 3 of the following 4 factors, if it is a large enterprise:
  • 25% of total cost of sales are from RSA suppliers;
  • 50% of jobs created since last BEE measurement were for black people;
  • 25% of raw materials are "beneficiated" or transformed;
  • it must spend 12 days a year on assisting black EME's and QSE's.
  1. These are just some of the radical changes that have been made to the BEE Codes of Good Practice.  South African businesses will have a lot to grapple with if they wish to achieve anywhere near the same BEE status levels they currently have.
  2. It is startling that laws of this magnitude can be introduced by way of a regulation signed by a single minister with no parliamentary debate or process.
  3. S&W, in conjunction with AQRate, will be holding a workshop on Tuesday 29 October 2013 at 8 am to discuss these changes.  For more info, call Erika on 031 575-7410.