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Under Construction

Under Construction

When calculating an entity’s Broad-Based Black Economic Empowerment (B-BBEE) score, it is important to establish whether it falls under a specific Sector Code or under the General Codes of Good Practice. This article briefly discusses the Construction Sector Code.

In October 2013, the Minister of Trade and Industry Hon Rob Davies gazetted and published the B-BBEE Amended Codes of Good Practice. This changed the measurement principles and targets in respect of the implementation of B-BBEE in both the private and public sectors. Subsequently, the Construction Sector Code gazetted in June 2009 together with all other gazetted Sector Codes were required to be aligned with these new Codes of Good Practice.

The Construction Sector Code’s alignment

The Construction Sector Code failed to align with the new Codes of Good Practice. As a result, the Construction Sector Code was repealed by the Minister of Trade and Industry on 17 February 2016. This led to all entities that fell under the Construction Sector Codes to be rated on the Amended Codes of Good Practice.

The Draft Construction Code has therefore been formulated for presentation, as an amended Construction Sector Code will inevitably be enacted. The proposed Code is aligned with the Amended Codes of Good Practice, but there are various differences and aspects which are unique to the proposed Construction draft (hereinafter referred to as the ‘Draft’).

Elements of the proposed Draft

The Draft deviates especially regarding entities which qualify as an Exempted Micro Enterprise (EME, an entity with a turnover of less than R10 million). White owned EMEs are provided with an opportunity to enhance their B-BBEE level contribution by 1 level up if they choose to spend 100% on training or enterprise development as set out in the Draft Qualifying Small Enterprise (QSE) Construction scorecard.

 

This will encourage and incentivise start-ups, emerging and growing enterprises to contribute to industry priorities, which are skills- and enterprise development. The Draft also makes no provision for an affidavit in order to be B-BBEE compliant as an EME.

The new Construction Sector Code further distinguishes between an exempted threshold for contractors & manufacturers (R10 million) and Built Environmental Professional (BEP) firms, which is R6 million, in order to qualify as an EME.

The ownership target has also been increased from 25.1% to 32.5 % on the Generic scorecard on the Draft. Great emphasis is placed on the economic interests of designated groups.

In terms of the Generic scorecard, a total of 123 weighting points, 5 points more than the weighting points (118) set out in the new Generic B-BBEE codes, have been allocated across the 5 elements of the scorecard.

This provides construction companies with the opportunity to leverage more bonus points when they commit more spend on initiatives that are a priority to construction sector designated beneficiaries such as black women, the youth, people with disabilities and the construction workers.

3 segments of application

In comparison to the 2009 Construction Sector Codes, the revised Draft Construction Sector Codes now proposes a more proper definition of the scope of application thereof. It identifies 3 segments of the value chain, namely:

  1. The Built Environmental Professionals
  2. Contractors (General Build)
  3. Manufacturers and Suppliers of building materials, plant hire and equipment

All entities who fall in the above 3 categories will therefore be rated on the Amended Construction Codes once it is enacted. One will therefore have to wait on the Department of Trade and Industry as to when the amended Construction Codes will take effect.

 

ABOUT THE AUTHOR

Edmund Drake has been a SEESA BEE Legal Advisor since January 2016. He obtained his Bcom Law degree in 2011 and his LLB degree in 2013. He completed his articles at Greyvensteins Incafter which he was admitted as an Attorney and Notary of the High Court of South Africa.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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