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A closer look at the Amended Agriculture Sector Code

A closer look at the Amended Agriculture Sector Code

The amended Agriculture (Agri) Sector Code was gazetted on 8 December 2017 and came into effect immediately. This Sector Code applies to any entity falling within the following scope of application:

  1. Primary production of agricultural products.
  2. Provision of inputs and services to Enterprises engaged in the production of agricultural products.
  3. Beneficiation of agricultural products, whether of a primary or semi beneficiated form (beneficiation is where value is added to a product).
  4. Storage, distribution, and/or trading and allied activities related to non-beneficiated agricultural products.

The same requirements for an Exempted Micro Enterprise (EME) as per the Amended Broad-Based Black Economic Empowerment (B-BBEE) Act is applicable. Where an entity has a turnover of less than R10 million per year, they will qualify for an automatic level 4 affidavit. If the entity has 51% or more black ownership and their turnover is less than R10 million, they will be entitled to an automatic level 2 affidavit. Should the ownership be 100% black and the turnover below R10 million, an automatic level 1 affidavit can be obtained.

Entities with a turnover of R10-R50million will qualify as a Qualifying Small Enterprise (QSE). These entities have to be rated on the QSE Scorecard, unless they have 51% or more black ownership. If they have 51% or more black ownership, they will also qualify for an automatic level 2 affidavit and if the black ownership is 100% they will qualify for an automatic level 1 affidavit.

Business owners must note the following important points regarding the amended Agri Sector Code:

  1. Enterprises (farms) with gazetted land claims are exempted from the Ownership element, provided that there is sufficient evidence from the Land Claim Commission. These entities will use the specialized scorecard.
  2. Farmworkers are included in the definition of Designated Group.
  3. Where a percentage of the land is under land claim, the exemption from ownership should be proportional.
  4. 85% of Skills Development expenditure must be spent on scarce- and critical skills as determined by the relevant SETA.
  5. Socio-Economic Development (SED) refers to contributions that are related to the agricultural industry.
  6. Where SED is directed at farm workers it should not be linked to the wage packages.
  7. An entity can earn the full points under SED element, in case where 10% of agricultural land was made available for farm workers. A formal lease agreement must be in place between lessor (farmer) and the lessee (farm workers) without any restriction of trade to the lessee.

These are just a few of the important differences in the amended Agri Sector Code and business owners must contact their legal advisor for more detailed breakdown of the Codes.

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