Be B-BBEE wise

The Department of Trade and Industry has announced 30 April 2015 as the implementation date for the new Broad-Based Black Economical Empowerment (B-BBEE) codes.

Hentie Prinsloo, CA(SA) at Integritas Auditors strongly recommended that all businesses renew their B-BBEE certificates before the mentioned implementation date as the rating will be done on old codes and the level will be significantly higher than on the new codes.

The implementation of the new B-BBEE codes will have a significant impact on businesses in South Africa, especially where the rating affects the continuation of contracts and business deals.

Black Economic Empowerment (BEE) was launched to redress the inequalities of apartheid by giving certain previously disadvantaged groups (blacks, coloured people, Indians and Chinese who arrived before 1994) of South African citizens economic privileges previously not available to them.

It includes measures such as employment preference, skills development, ownership, management, socioeconomic development and preferential procurement.

The BEE programme was implemented in 2003. It was criticised for benefiting only a few previously disadvantaged groups, and this led to the introduction of a modified programme called Broad-Based Black Economic Empowerment or B-BBEE in 2007.

“There are so many people who never even understood the first B-BBEE codes implemented in 2007 or what they meant for the South African business owner, so it is no surprise that there are companies that still think it means giving a portion of your business away. That is not how it works. With the right planning and advice, you too can make B-BBEE benefit your company,” Prinsloo said.

According to Prinsloo, many companies already are operating under the codes but don’t realise it and therefore they are not reaping the full benefits.

Examples Prinsloo explained are companies sponsoring a worker’s child’s school fees, and those providing free accommodation to their workers. Both companies qualify for points under the Socioeconomic Development element.

“You are not being forced by law to register your company but all the major players take companies’ B-BBEE status into consideration and are most likely to deny you business or contracts accordingly,” Prinsloo explained.

If you have been trading under the previous B-BBEE status, one of the critical changes in terms of the amendments to the codes is that a business’ overall B-BBEE status will drop when measured on the new codes.

“This is because the movement of overall contribution levels for a given level of points has been changed and secondly because the business probably won’t continue to meet the revised sub-minimum criteria for all priority elements. A business therefore could drop as many as four levels on the new codes,” Prinsloo added.

“The new B-BBEE codes structure businesses in three categories: Exempted Micro Enterprise (EME) – annual turnover less than R10 million; Qualifying Small Enterprise (QSE) – annual turnover between R10 million and R50 million and Generic Enterprise – annual turnover more than R50 million.

“The new codes will have five elements (from the previous seven). Generic enterprises will be rated on all five and a significant change for QSEs is they will be rated on all five elements, from the previous four.”

The five elements are ownership (25 points), management control (19 points), skills development (15 points), enterprise and supplier development (36 points) and socioeconomic development (five points).

If you need more information on B-BBEE or need help getting your company registered you can contact Integritas Auditors in Homestead Avenue on 011 693 6584 or contact Hentie directly on 082 550 3576.