bee in the know

Dti remains mum on amended BEE codes despite 1 May deadline

Jenni Lawrence Jenni Lawrence

With just hours to go before the B-BBEE Amended Codes of Good Practice come into law on 1 May, the dti has yet to clarify several important points, including the draft QSE codes and revision of sector codes, and agencies have still not been accredited to issue certificates under the new codes.

“Parts of the codes are still not gazetted, others have not even been issued for comment and the verification manual is nowhere to be seen,” says Jenni Lawrence, managing director: Verification services at Grant Thornton Johannesburg. “It’s like giving a baker a recipe with missing ingredients and no cooking method.”

Clients are panicking and the industry is extremely nervous – yet still the dti remains mum.

“The department is ignoring our pleas for clarification,” says Lawrence. “This is incredible when you consider that BEE is one of government’s key approaches for addressing the imbalances of apartheid. You would expect the dti, having just introduced massive and potentially expensive changes to doing business in this country, to act decisively and give business confidence.”

Many businesses simply do not know how to forge ahead with BEE now.

Lawrence says there are so many critical issues and so many unanswered questions:

- How are companies supposed to comply when they have had no implementation period (for the sectors) and they don’t even know where the bar is set?
- How are agencies supposed to issue certificates under the new codes, when they have yet to receive any guidance or accreditation to issue certificates under the revised codes?

The Amended B-BBEE Codes of Good Practice, which were partially gazetted in 2013, will now come into force on Workers Day this week.

Enterprise and Supplier Development element – a tough target to achieve!
One of the most difficult targets to achieve under the amended codes – the enterprise and supplier development element – will demand a significant turnaround in business focus in order to meet the new requirements.

“The enterprise and supplier development element has far-reaching consequences for businesses and focused attention needs to be given to this section in order to make sure that points can still be achieved,” says Lawrence.

Previously, companies had to spend 70% of their procurement spend with BEE-rated suppliers to score 12 points and only 9% of this needed to be with black owned businesses, to score an extra 3 points.

However, Lawrence warns that the amended codes require that far more stringent parameters are met. The new codes require that 80% of a company’s spend should be with BEE-rated suppliers but that this earns only five points. Also 40% of this is to be spent with black-owned businesses, in order to earn a further nine points.

“Businesses are asking where they are to find these black suppliers,” she says. “The amended Codes have directly shifted the responsibility for creating and developing these black-owned businesses away from government and onto business at large.”

The new Codes award points to businesses for developing potential black-owned suppliers to become viable suppliers, for awarding them three-year contracts and for contributing towards creating jobs within these suppliers.

“Black” further divided into racial sub-groups and scoring penalties introduced
Another addition to the B-BBEE Amended Codes is the sub-division of “black” into racial subgroups. Also, scoring penalties have now also been introduced for failing to reach certain targets under ownership, skills development and enterprise and supplier development.

“The BEE Act and the amended codes have always elicited an emotional response and these new introductions to the legislation will certainly add more fuel to the fire,” she continues.

Black owned businesses under R50m turnover no requirements to contribute to scorecards
The new codes now state that black-owned businesses with a turnover under R50million have no requirement to contribute to any BEE elements or initiatives, and these companies are essentially given a free pass to do business with whomever they please, because these companies will automatically be granted high BEE level.

“Ultimately, larger businesses, and all of those with less than 50% black ownership, will need to up their game in order to meet the new requirements and all of the revised targets, but black-owned businesses with less than R50m turnover will have an easier time in this realm of the business world,” says Lawrence.

But…it’s not all doom and gloom
Lawrence concedes that the new Codes are not all doom and gloom for businesses. In fact, she agrees that many of the changes outlined in the B-BBEE Codes of Good Practice legislation will hopefully see BEE becoming less of a box-ticking exercise and more of a strategic objective focused on sustainability and real change.

“We also expect to see fewer large equity transactions and more meaningful skills development as well as supplier development initiatives,” she says.

“Points are now awarded for training unemployed people or those other than employees. Apprenticeships for potential staff, or a budding new supplier, will improve a business’ score under skills development as well as supplier development. It’s easy to see the return on investment for this type of contribution. It benefits are threefold – for the company, the potential new supplier and the learner. It also benefits South Africa. This is truly broad-based black economic empowerment.”

Will these changes in the amended codes see the rapid and significant change that the youth of our country are clamouring for? Will they speed up the pace of transformation, helping to stem the frustration that has recently led to falling statues, land invasions, service delivery protests and xenophobic attacks?

“Probably not,” she cautions. “At least not immediately.

“Developing other businesses while still running your own will not happen overnight. But with some planning, some trial and error, some initiative and collaboration, it will happen. And as these black-owned businesses grow, and expand, and as we become less reliant on imports and the unemployed become employed, transformation will be happening.

“Business is the generator of jobs and stability in the economy. There is such an urgency to address the imbalances for previously disadvantaged individuals, but lack of clarity just muddies unstable waters even further,” she concludes.