BEE in the Know

BEE in the Know – Edition 4 2015

Unintended side effects of the DTI’s new B-BBEE gazettes

May was a month of massive change and upheaval for those involved in B-BBEE. Clarification notices were issued and withdrawn, dates and deadlines moved and many companies sighed in relief to find out that they could still qualify for one more verification under the “old codes”.

With the announcement that all B-BBEE verifications conducted using a financial year ending before 30 April 2015 can still be verified using the 2007 codes, many companies have been given another year to adjust and plan for the reality of the new codes.

However, the contents of some of the new gazettes and clarification notices have resulted in some negative unintended side effects.

When it became obvious that not all of the sectors with specific scorecards were likely to have gazetted their new amended scorecards by 1 May 2015, the Department of Trade and Industry (dti) issued a notice extending their particular deadline to 30 October 2015.

The unintended side effect of this notice has left black-owned companies falling within these scorecards, at a distinct disadvantage.

Since their sector scorecards are still in effect, it means that they cannot take advantage of the more favourable scoring, which now only applies to 51% black-owned companies measured under the general scorecard.

In effect, a black-owned company who falls under scorecards for tourism, construction, transport, financial services, property, forestry, agriculture, chartered accountancy or ICT, will qualify for a maximum level 3, while those under the general scorecard will be entitled to an automatic level 1 or 2, depending on percentage of black ownership.

As long as the dti is not willing to issue a notice giving some relief to the affected businesses, black-owned companies who are intended beneficiaries of the higher ratings will bear the brunt of this dual legislation, potentially losing business to those with higher ratings.

Although the dti has indicated that it was not the intention for companies to be rated differently, the blame has been placed squarely on the sector councils themselves, for failing to meet the required deadline.

Meanwhile, another issue causing confusion is the requirement for empowering supplier status, for black-owned Qualifying Small Enterprises (QSEs).

Under the new amended codes, a generic entity (turnover exceeding R50 million) must comply with a minimum of 3 of the 5 criteria, while Exempt Micro Enterprise (EMEs) (turnover under R10 million) and start-up enterprises are given exemption from this requirement.

QSEs are required to comply with only 1 of the criteria.

The new ‘empowering supplier status’ requirement in the amended codes is vital. Failing to meet this requirement effectively deems your BEE certificate null and void, regardless of your score.

However, there is some confusion regarding the requirements for certain QSEs – those companies with a turnover between R10 and R50 million.

Clause 5 of statement 000 in the 2003 codes says nothing about black-owned QSEs requiring empowering supplier status. 5.3.3 indicates they need only obtain an affidavit confirming annual revenue and ownership. Yet, statement 400 clause 3.3 indicates QSEs need empowering supplier status and that EMEs and start-ups are exempt from this.

Could it be that the intention of statement 400, clause 3.3, was that only QSEs with less than 52% black-ownership and generics required this status?

It would make sense, in that the amended codes are specifically aimed at decreasing the BEE burden on black-owned companies in order to speed up their potential growth.

A representative within the dti has now confirmed that, despite the conflicting clauses in statements 000 and 400, black owned QSEs do require one empowering supplier status to be verified. The indication is that this will be reinforced in the much awaited verification manual, now rumoured to be due for gazetting no later than August this year.

What this means is that a >51% black owned QSE needs one of the 5 empowering supplier status’ to be verified and the result of this verification must be confirmed on the face of their BEE certificate or affidavit.

The codes are silent as to who can validate the empowering supplier status, but it would seem logical that those accredited by SANAS or registered by IRBA to issue certificates under these codes would be the responsible parties. This was confirmed in conversation with an official within the dti’s BEE unit.

For more information on empowering status, please refer to the article available our BEE in the Know – Edition 1 2015.

A fifth criteria was gazetted on 6th May 2015, as follows: “Amended Code Series 400, paragraph 3.3 is hereby amended by the additional criteria that reads as follows: at least 85% of labour costs should be paid to South African employees by service industry entities”.

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How pivotal programs can benefit your B-BBEE scorecard

By Candice Lotter, LabourNet Training & HR Consultant

Changes to the new B-BBEE codes have caused heated debate across the marketplace in South Africa. In anticipation of the revised codes taking effect many organisations have been anxiously preparing.

The Department of Trade and Industry has also released a Notice of Clarification (Government Gazette 38799) on 15 May 2015 to confirm that all B-BBEE verifications completed on a financial year ending after 30 April 2015 must use the new codes.

As a new “priority element” entities that do not comply with sub-minimum in the Ownership element will automatically drop one level. Both Skills Development andEnterprise & Supplier Development have also become priority elements. These elements each have a sub-minimum target of 40%, which has to be reached in order to avoid the scorecard being discounted one level. Skills Development points have increased from 15 to 20 points, with an additional five bonus points that can be obtained. The target for skills spend has increased from 3% of leviable amount to 6% leviable amount. In addition, for companies to achieve the points under Skills Development, they are encouraged to participate in PIVOTAL progams.

What are PIVOTAL programs you may ask?

PIVOTAL (Professional, Vocational, Technical and Academic Learning) encompasses all learning programs that lead to either a partial or full qualification. This includes all skills programs that are registered and accredited through the National Qualifications Framework. Some example of PIVOTAL may include:

  • workplace experience
  • apprenticeships
  • leanerships
  • bursary programs
  • skills programs
  • graduate development programs
  • recognition of prior learning
  • adult-based education and training

 
Points can be scored for the following on the new scorecard under skills development:

8 points can be scored if 6% of the leviable amount is spent on black employees (distributed over the overall demographic of black, coloured, Indian and Chinese people) and an additional 4 points can be scored if 0.03% of the leviable amount is spent on black employees with disabilities. Under PIVOTAL training, 4 points can be scored for PIVOTAL programs if 2.5% of the leviable amount is spent, and another 4 points for PIVOTAL training for unemployed learners if 2.5% of the leviable amount is spent. The additional 5 bonus points are awarded to those organisations that continue to absorb unemployed black learners into its workforce once the various programs have been completed.

However, the benefits of participating in PIVOTAL programs are not limited to merely scoring points on the B-BBEE scorecard. Such participation can be used to claim an additional grant from the relevant SETA, over and above the mandatory grant, upon submission of the WSP/ATR report. Once the SETA has approved the program, it will fund 39.9% of the amount spent on any PIVOTAL training initiatives, given that it falls within the skills shortage of the relevant industry.

One should also not forget the benefit of creating opportunities for underprivileged or previously disadvantaged individuals. As it stands, many organisations find themselves in a constant battle to find suitably qualified people within their respective markets. Being able to improve the quality of the workforce by providing qualifications is forward thinking and progressive, and should be encouraged in order to improve the overall health of the economy in the future.

Naturally, every change comes with a few wrinkles that need to be ironed out. While companies may find it challenging to identify the correct training programs that are relevant to their respective industries, they may find it even more challenging to identify suitable candidates who are committed to finishing the program, as well as accredited providers who are able to provide quality training. Claiming for the Discretionary Grant may also be somewhat tedious and time consuming, but the rewards outweigh the administrative slog.

With sufficient planning and a bulletproof strategy, incorporating PIVOTAL programs will ensure that money spent on B-BBEE will not be money wasted and that a return on the investment is guaranteed. It as an opportunity to truly create a better South Africa with better-educated individuals populating the market place, whether we choose to absorb them into our own workforce or simply the industry in general.

LabourNet has a national footprint and assists businesses to structure and implement systems to achieve diversity, drive innovation and ensure compliance while maximising employee potential.

The systems employed aim to align business processes and procedures with appropriate Employment Equity, Skills Development and B-BBEE requirements. For more information visit www.labournet.com or contact Engela Verwey at 041 373 2994.

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Going green, burning bright. A supplier development initiative with MEDO

 

Pascal Nderitu stumbled into the field of sustainable energy development after a referral from a friend. The referral quickly turned into something bigger, something that kept him awake at night until he finally started PolAmco, a company dedicated to sustainable energy by designing an installing wise energy alternatives. Taking on the continent one solar lamp at a time, PolAmco is becoming South Africa’s next giant of sustainable energy.

After growing up in Kenya, Pascal went on to finish a degree in Computer Systems Design. Thereafter he went onto work for various multinational companies where he was granted the opportunity to work and travel across the globe.

“I am who I am today because of having travelled, lived, worked and interacted with people all over the world and I have never looked back,” Pascal chips in excitedly. Life in the corporate world, however, could not contain Pascal, “I became fed up of being answerable to toxic, insecure bosses operating in regimented organisations, each trying to outdo the other.” Leaving his travels behind him, Pascal tried his hand with many IT-related ventures.

“In IT I achieved some success, but for some reason, I always felt pigeon-holed and therefore unable to think laterally.” After a friend nudged him into the direction of sustainable energy, PolAmco was born and Pascal never looked back. “I have found my purpose and I enjoy what I’m currently doing. I am the architect of my own destiny, and the money and goodies will follow upon that.”

“Sustainable development is not about government handouts to those in need but creating an environment that in the long term benefits and transforms lifestyles.” Pascal’s dream for PolAmco is to ensure that its brand of portable solar lamps become a pervasive feature as phones amongst the population off the national grid throughout the whole of Africa.

“My dream project would be to take an entire town off the national electricity grid and use that experience to develop an iterative model which becomes the benchmark for sustainable development in the renewable energy sector.” The BT and ISUZU Supplier and Development workshop was Pascal’s first experience with MEDO, and asking him where he sees this relationship going he merely answers, “to infinity”.

“On this programme I learnt that building a business requires knowledge, patience, hard work and a thick skin. If you fail, fail fast, get up, dust yourself and consider changing direction.” “Entrepreneurs need the know-how to navigate the complex procurement processes of large corporations while at the same time giving these organisations the assurance that the SMME can deliver on expectations,” Pascal furthers around his experience of supplier development. He explains that in this regard what he takes away from the programme is diligence. “If your business is to succeed, you have to be diligent and accountable to yourself and your stakeholders.”

Pascal has big plans for the future of PolAmco. He doesn’t just want to branch out internationally, he wants to transform the way people use energy. In ten years he seesPolAmco as a multi-million dollar company, majority-owned by staffers, “Our pace will not be dictated by investment bankers, but by our own capabilities.” Pascal’s light is burning bright, and MEDO is only stoking his fire, sustainably of course.

For more information on PolAmco, go to:

www.polamco.co.za
Twitter: @polamco_
Email: info@polamco.co.za

For more informtion on MEDO, go to:
www.medo.co.za
Twitter: @MEDOnews
Email: JS@medo.co.za