The NEW BEE Codes are out. Below is a brief breakdown of the key changes and how they will affect our clients. We have compiled this brief in order to alleviate any qualms anyone might have. Apex is available to assist you in any regard. There are already a few areas with typing errors, that we are sure the DTI will clarify immediately.
Please peruse the following New BEE Codes and do not hesitate to contact us should you have any queries. We will notify you shortly with regard workshops and seminars we will be running to assist our clients. We are available for in-house training as well.
The Revised Codes apply to:
All entities wishing to undertake economic activity, whether direct or indirect, with any other Measured Entity's subject to measurement under these codes.
Eligibility as an Exempted Micro Enterprise (EME):
- Any enterprise with an annual Turn Revenue of R10 Million or less.
- An EME automatically has a recognition of a Level 4 Contributor with a Procurement Recognition of 100%
- An EME which is 100% Black Owned qualifies as a Level One Contributor with a procurement recognition of 135%
- An EME which is 51% Black Owned qualifies as a Level Two Contributor with a procurement recognition of 125%
- For measurement purposes an EME is required to produce a sworn affidavit confirming turnover of less than R10 Million and Black ownership.
Eligibility as a Qualifying Small Enterprise (QSE):
- A Measure entity with an annual Total Revenue of between R10 Million and R50 Million qualifies as a QSE.
- A QSE must comply with all the elements on B-BBEE for the purposes of measurement.
- A QSE qualifies for enhanced recognition with Black Ownership in excess of 51%
The fundamental changes as laid out in the New BBBEE Codes is the implementation of Priority Elements, Sub-Minimum and the Discounting Principle.
The 3 Priority Elements:
1) Ownership
Sub-Minimum requirement for Ownership is 40% of Net Value. Net Value is a total of 8 points allocated to the full 25 points awarded to Ownership. These 8 points are awarded according to the Black Equity held in the Measured Enterprise. The Sub-Minimum required for this element is 40% of the 8 points i.e. 3,2 points.
2) Skills Development
The Sub-Minimum requirement for Skills is 40% of the weighting points allocated for Skills, i.e. 8 of the 20 points allocated.
3) Enterprise & Supplier Development
This element is a combination of Procurement and Enterprise Development aimed at developing Small Business.
The Sub-Minimum for this element is to achieve 40% for each of the 3 catagories within this element, namely Preferential Procurement, Supplier Development and Enterprise Development.
A Generic Enterpise has to comply with all 3 of the Priority Elements.
A QSE has to comply with Ownership as a compulsory element and either Skills Development or Enterprise and Supplier Development.
Non Compliance with the 40% Sub-Minimum required in any of the Priority elements will result in the Measured Entity having their status level discounted by One Level down.
The Generic Scorecard:
Element Weighting Code Series Reference
Ownership:
There are 25 points available under Ownership with a Sub-Minimum target of 3,2 of the 8 points for Net Value. This equates to a requirement of 10% equity in the hands of Black People measured through Employee/Ownership Schemes, Direct Ownership, Mandated Investments and Equity Schemes. The Net Value formula does not utilise "Voting Right" so only applies to Equity Shares,
- The "Modified Flow Through Principle and 'The Flow Through Principle" remain unchanged.
- "Mandated Investments" are allowed to be excluded in Ownership to a maximum of 40%.
- "Multinationals' are no longer being accommodated in the Amended Codes.
- The "Sale/Loss" of Shares may be counted for a period of as many years following the sale/loss of the shares on condition that this period does not exceed the period of the original ownership.The other conniptions are that the shares had to have been in the hands of Black people and must remain within the Measure Entity after the Sale.
- The Amended Codes allow for the use of Equity Funds when calculating the Equity in the hands of Black people.
Management Control:
This is not a Priority Element
- There is a total of 19 points available but a maximum of 15 points can be scored.
- Junior and Middle Management are being calculated separately.
- It is the intention of the DTI to align this element with The Employment Equity Act.
- This element has embraced the previous "Employment Equity" element allowing for disabled staff.
- There is a focus on employing Black Females though all Management levels.
- Should a company not differentiate between Executive and Top Management they may be combined and calculated as one.
Skills Development:
This is a Priority Element and a QSE may choose this as their Priority Element.
- The Sub-minimum for Skills is 40% of the targets set out.
- There are 25 points allocated of which 5 are bonus points.
- The Bonus Points are awarded for retaining staff in your employ once their course is complete.
- The compliance target for Skills is 6% of the Liable amount.
- There is an implementation of Priority Skills (Core, Scarce Skills relating to the industry).
- Skills Development expenditure includes and legitimate expenses for Learning Programs.
- The Learning Program Matrix has been clarified with minimal changes.
Enterprise & Supplier Development:
This is a Priority Element and a QSE may elect to have this as their Sub-Minimal element rather than Skills.
- There are 40 points allocated to this element with 2 Bonus points.
- 10 Points are allocated to Supplier Development which is a spend of 2% of NPAT. This is a direct cost the Measured Entity incurs developing Suppliers through Grants, Preferential Credit Terms, Early Settlement, etc. There is a comprehensive list of the manner in which an entity can ensure compliance.
- Enterprise Development is a further 5 points
- Preferential Procurement has been developed to include all spends with Small businesses and Empowered Suppliers.
- The target for Preferential Procurement as a percentage of a Measured Entity's TMPS ( Total Measure Procurement Spend) is 80%.
- The TMPS has been clarified as to what may or may not be excluded.
- Imports that are Value-Added to the South African market may be excluded provided they meet certain citeria as laid down in the Amended Codes.
Socio-Economic Development:
- This element remains unchanged as it is a key element to the upliftment of Previously Disadvantaged South African's.
- 5 Points are allocated for this element for a compliance of 1% of NPAT.
These Codes will come into effect on the 12th October 2014.
Apex wishes to ensure our Clients that we are here to assist you. With clever planning and implementation we will assist you in complying to these targets. You have a minimum of One Year to implement these Amended/NEW BBBEE Codes. With our assistance and forward planning this can be extended to up to 2 years.
Please contact us for any assistance.
