BEE in the Know

Amended Tourism Sector Scorecard – an overview

Jenni Lawrence Jenni Lawrence

Amended Tourism Sector Scorecared - an overview

September is National Tourism Month in South Africa. The theme for 2016 is “Tourism for all – Promoting Universal Accessibility” and related to this theme, an amended B-BBEE tourism sector code was finalised and gazetted late last year. 

So, what do the new codes actually mean for you, do you know if your business falls under the requirements of the new scorecard, and how should you be positioning your business to ensure compliance?

“Tourism’s contribution to the economy is measured by jobs created, contribution to GDP, and revenue generated from tourism activity. Furthermore, as a services export sector, tourism is a significant earner of foreign currency. In the South African context, this growth should be underpinned by the principle of inclusivity to drive tourism-sector transformation.”

This extract from the Department of Tourism’s annual performance plan articulates so clearly why tourism is crucial as a growth driver in our economy and communities. A specific tourism sector scorecard is one measure towards ensuring that this growth benefits black people in our economy.

While the amended codes for B-BBEE came into effect for most companies effective April 2015 measurement periods, those companies that fall under specific sectors were given a reprieve.

Sector charter councils were given an extended deadline to align their specific scorecards to the amended codes. Both the Chartered Accountancy and Construction councils missed this deadline and these scorecards were repealed, due to failure of the various parties agreeing on the submission.

Tourism, forestry, ICT, transport, AgriBEE and the financial sector all submitted their amendments to the DTI in time for consideration and - while we are still awaiting most of them in their final effective form - out of all of these, only the tourism scorecard is currently in force, in its amended format.

The new scorecard is effective for all tourism related entities who are measuring a financial period ending after 20th November 2015, the date on which it was gazetted.

Why a sector charter?

Section 12 of the BEE Act refers to the gazetting of Transformation Charters. These are also referred to as Sector Charters and have been developed by major stakeholders in the relevant industries, in the interests of achieving broad-based transformation.

The intention is to increase the pace of transformation within that specific sector, as well as taking into account any characteristics within that sector, which may need to be treated differently.

Does my business fall under the amended tourism scorecard?

The Amended Tourism B-BBEE Sector Code applies to all enterprises within the Tourism Sector and all parts of its value chain, inter alia:
 

9.1 Accommodation:

9.1.1 Hotels;

9.1.2 Resort properties and timeshare;

9.1.3 Bed and breakfast (B&B’s);

9.1.4 Guest houses;

9.1.5 Game lodges; and

9.1.6 Backpackers and hostels.

9.2 Hospitality and Related Services:

9.2.1 Restaurants (not attached to hotels);

9.2.2 Conference venues (not attached to hotels);

9.2.3 Professional catering;

9.2.4 Attractions, Casinos; and

9.2.5 Consulting and professional services companies.

9.3 Travel and related services:

9.3.1 Tour wholesalers;

9.3.2 Tour operators;

9.3.3 Travel agents;

9.3.4 Tourist guides;

9.3.5 Car rental companies; and

9.3.6 Coach Operators. 

 

Which scorecard applies to me?

Companies in the tourism sector which have a turnover under R5 million per annum will qualify as an exempt micro enterprise (EME). These companies do not require a formal B-BBEE audit, they can declare their B-BBEE status by means of an affidavit confirming their turnover and percentage of black ownership. 

With 100% black ownership, they would achieve a Level 1 BEE level, and with at least 51% black ownership, a Level 2 BEE level will be achieved. If black ownership is below 51%, an automatic Level 4 is achieved. 

A qualifying small enterprise (QSE) is one that has a turnover of between R5 million and R45million per annum.  If these businesses have at least 51% black ownership and turnover is below R45 million per annum, you may use an affidavit confirming turnover and percentage black ownership.

As with EMEs (above) at 100% black ownership, they would achieve level 1 BEE recognition, with at least 51%, a level 2. If black ownership is below 51%, a BEE audit would be required to determine the BEE level.

A generic enterprise is one that has a turnover exceeding R45 million per annum and in all cases, a BEE audit would be required to determine the BEE level.

How many points do I need?

The weighting points per element have changed in the amended scorecard, as have the points required in order to reach each level of BEE compliance.

QSE Element Weighting Code Series Reference

 

Points

Ownership

26

Management Control

15

Skills Development

25

Enterprise & Supplier Development

30

Socio-Economic Development

5

TOTAL

101

Generic Element Weighting Code Series Reference

 

Points

Ownership

27

Management Control

19

Skills Development

20

Enterprise and Supplier Development

40

Socio-Economic Development

5

TOTAL

111

Points per level

Level

B-BBEE Status

Qualification

Level One Contributor

 

≥100 points on the Scorecard

135%

Level Two Contributor

≥95 but <100 points on the Scorecard

125%

Level Three Contributor

≥90 but <95 points on the Scorecard

110%

Level Four Contributor

≥80 but <90 points on the Scorecard

100%

Level Five Contributor

≥75 but <80 points on the Scorecard

80%

Level Six Contributor

 ≥70 but <75 points on the Scorecard

60%

Level Seven Contributor

 ≥55 but <70 points on the Scorecard

50%

Level Eight Contributor

≥40 but <55 points on the Scorecard

10%

Non-Compliant Contributor

<40 points on the Scorecard

0%

Priority elements

The Priority elements have been implemented in those areas which have been deemed to be slow to transform, and in terms of these priority elements, the following is required:

-          Large Enterprises are required to comply with all the three Priority elements;

-          Qualifying Small Enterprises (QSEs) are required to comply with at least two priority elements, which are Ownership AND either Skills Development OR Enterprise and Supplier Development.

If an entity does not comply with the 40% subminimum requirements of any of the priority elements, this will result in the measured entity’s B-BBEE Status Level and corresponding B-BBEE Recognition Level being dropped down by one level until the next applicable verification period.  At the next applicable verification period, the measured entity will be required to demonstrate compliance with the 40% sub-minimum requirements.

The priority element requirements for the amended tourism sector scorecard are as follows:

Ownership: The sub-minimum requirement for Ownership element is 40% of Net Value (40% of the 8 points).

Skills Development: The sub-minimum requirement for Skills Development element is 40% of the total weighting points (excluding bonus points).

Enterprise and Supplier Development: The sub-minimum requirement for Enterprise and Supplier Development element is 40% of the total weighting points of each of the three measuring categories within the Enterprise and Supplier Development element.  These three measuring categories which are relevant for Enterprise and Supplier Development are Preferential Procurement, Supplier Development and Enterprise Development.

To prevent any confusion or doubt regarding the sub-minimum requirement, the measured entity must achieve at least:

-          10 points under the Preferential Procurement element;

-          4 points under the Supplier Development element; and

-          2 points under the Enterprise Development element.

Empowering Supplier:

The tourism sector scorecard requires an entity to meet at least four of the following criteria if it is a generic or two if it is a QSE.

A prerequisite in order to qualify is that  the entity be B-BBEE compliant and must comply with all regulatory requirements of the Employment Equity Act, Skills Development Act, Skills Development Levies Act:

  1. At least 25% of cost of sales excluding labour cost and depreciation must be procured from local producers or local suppliers in South Africa (SA);
  2. At least 85% of total labour cost should be paid to SA employees by service industry entities;
  3. At least 50% of jobs created during the Measurement Period are required to be for Black People provided that the number of Black employees since the immediate prior verified B-BBEE Measurement is maintained;
  4. At least 51% of Total Measured Procurement Spend must be from SA suppliers;
  5. Skills transfer by Senior and Top Management (as defined by the Employment Equity Regulations) spend at least 12 days per annum in assisting 51% Black Owned EMEs and QSEs to increase their operational and/or financial capacity.

Economically Active Population (EAP) targets

Under the “old” targets, the adjusted recognition for gender (ARG) calculation determined the target for black female representation across the scorecard, where specific targets for women were not indicated.

Under the amended codes, targets for women are based on specifically aligned economically active population (EAP) targets, which give specific recognition to African, Coloured and Indian people, which are then broken down further into male and female targets.

The EAP targets apply to the generic scorecard for junior, middle and senior employees under management control, as well as targets for skills development. They do not apply under other targets such as ownership or board recognition. Also, the targets do not apply under the QSE scorecard, where “black” is not broken down further into “sub”-race groups, but instead, “black” is treated as a whole.

Click here [ 83 kb ]to view the major differences in the elements between general amended codes and tourism amended codes.

The information below relates to the generic scorecard. The QSE scorecard generally has slightly lower targets but is now also required to be measured under all five scorecard elements.

Ownership

Ownership is a priority element and as such, a sub-minimum applies. In this case the subminimum of 40% applies to net value, which refers to the accumulated net economic interest in the hands of Black People after the deduction of monies owed on the debt.

The target for black representation under the ownership element is higher than the general amended codes, at 30% for voting rights and economic interest and there is a target of 15% for representation amongst black women.

Management control

While the target for black board members remains the same at 50%, the target for black female representation under tourism is 30%, rather than the 25% target under the general codes.

Under the amended codes, the employment equity element is now combined under management control.

The targets under senior, middle and junior management are similar to those under the general amended codes, with lower targets for junior management and bonus points for exceeding the target for employees with disabilities.

The EAP targets apply to junior, middle and senior employment only, and not to board participation.

Skills Development

This is a priority element with 40% of the points (excluding bonus) to be achieved to avoid a penalty level drop.

As well as a larger target (6% instead of 3% under the old codes), there is a significant focus on skills expenditure which is specifically aimed at tourism related qualifications. These are listed as spend related to skills and qualifications related to:

- Accommodation;

- Hospitality and related services; and

- Travel and related services.

As with the general amended codes, recognition for spend on learners is based on specifically aligned economically active population (EAP) targets which give specific recognition to African, coloured and Indian people, and these targets are broken down further into male and female targets.  Unemployed learners are now counted under the scorecard and this creates an opportunity to recognise points under any demographic target where you do not employ sufficient staff, to allow you to achieve the skills points per category.

Enterprise and supplier development

This element is a combination of 2 elements from the “old’ codes, procurement and enterprise development, with the addition of a new sub-element - supplier development.

Important differences to be aware of:

–        Only purchases from empowering suppliers can be counted towards the procurement total;

–        There is a major shift in importance of procurement from 51% black owned and 31% black women owned suppliers;

–        The supplier development target under the general amended codes is 2% net profit after tax (NPAT) but it is increased to 3% NPAT in the tourism sector. This relates to contributions similar in nature to enterprise development but here they are specifically for 51% black owned or 31% black women owned suppliers with a turnover under R50 million; and

–        The enterprise development target is 0.50% NPAT and is required to be sector specific.

Socio economic development (SED)

The target for SED remains at 1% NPAT and the TOMSA levy requirement remains.

TOMSA refers to a levy collection initiative administered by the Tourism Business Council of South Africa (TBCSA) to raise additional funds for the marketing of SA as a preferred tourist destination.

It is interesting to note that “social wages” are specifically outlined and included in this section. These are costs related to items such as medical costs, which are paid to employees. However, it is a requirement that these costs can only be allocated towards SED if not part of the normal remuneration package.

To discuss your BEE certification requirements according to the amended tourism codes, or for further information, please contact Jenni Lawrence.

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