BEE in the Know - Alert

Postponement of “Empowering Supplier” gives lifeline to many

Jenni Lawrence Jenni Lawrence

The dti issued a statement on 28 October 2016 under notice 708 of 2016, in which it stated that all valid “Empowering Supplier” certificates issued by 31 April 2016 would be automatically considered to be “empowering”, while certificates issued on or after 1 May 2016 would also be automatically recognised as “empowering”.

The temporary extension comes as great relief for those companies who were not able to qualify under this requirement, which effectively rendered their BEE status non-compliant.

Some of the largest employers in South Africa import components or products that are not yet locally available and this factor directly affects the organisation’s “empowering supplier” status.  Many companies have also had to retrench staff in the past year due to the current challenging economic situation. This announcement gives them a lifeline by providing the employers with some valuable extra time to get their localisation plans in order, while still allowing them to be compliant and competitive.

According to the Amended Codes of Good Practice, the definition of an “empowering supplier” is, ‘a B-BBEE compliant entity, which is a good citizen South African Entity, complying with all regulatory requirements of the country’ and meets the criteria below.

An organisation should meet at least three of the following criteria if it is a large enterprise (turnover exceeding R50 million) or one of the following criteria if the company is a QSE (R10 million – R50 million):

  • At least 25% of cost of sales excluding labour cost and depreciation must be procured from local producers or local suppliers in SA.  It is important to remember here, though, that service industry labour costs are also included but capped to 15%;
  • Job Creation – 50% of jobs created are required to be for black people provided that the number of black employees since the immediate prior verified B-BBEE measurement is maintained;
  • At least 25% transformation of raw material/beneficiation which includes local manufacturing, production and/or assembly, and/or packaging;
  • Skills transfer – at least 12 days per annum of productivity is required to be spent by the deployment to assist black EMEs and QSEs beneficiaries in increasing their operation or financial capacity; and
  • At least 85% of a company’s labour costs should be paid to South African employees by relevant service industry entities.

Exempt Micro Enterprises (EMEs) and start-ups are automatically recognised as empowering suppliers.

What can we expect in the coming weeks / months?

Grant Thornton’s Verification Services team believes there is some indication that the “empowering supplier” requirement will be re-introduced with some additional criteria which will make it possible for those that were unable to qualify to apply this requirement in ways which are more applicable to their industry.

We will keep you updated with any further announcements. For any further information, please contact Jenni Lawrence.