The Amended Construction Sector applies to all entities that fall within the Construction Sector. It is important to note that there are two sub-sectors within the Construction Sector, namely, BEP (Built Environment Professional) andConstruction Contractor, which also includes Construction Suppliers.
The significant difference between both sub-sectors is that BEPs conduct the planning, designing and costing of construction projects, whereas the Construction Contractor sub- sector conducts the actual construction project.
The Supplier Development Element is a priority element, which means that the entity needs to reach a 40% sub-minimum on both the Supplier Development Programmes and the Supplier Development Contribution indicators. If they do not reach the 40% target spend for the supplier development initiatives, the entity will be discounted by 1 level.
The target is 3% of the entities’ Net Profit After Tax (NPAT), of which 20% of the 3% of the NPAT must be spent on 51% or more Black Women-owned entities.
It is important to note that requirements must be met before a supplier development program and supplier development beneficiary will qualify. The first important requirement is that the Supplier Beneficiary must be a supplier to the construction industry. Should the Supplier Beneficiary not comply with these requirements, only 50% of the contribution will qualify for Supplier Development Contributions.
The requirements for the Supplier Development Programme Beneficiaries are the following:
- The measured Entity may not hold over 20%, calculated in terms of the
normal flow through principle, in the Beneficiary;
- The Beneficiary must employ a minimum of 3 permanent employees;
- Beneficiary must have a valid tax clearance certificate;
- Beneficiary must have a sworn affidavit (where applicable) or B-BBEE certificate that was valid on the date of entering the agreement;
The number of entities that need to be assisted by the measured entity is determined by the turnover of the measured entity. The turnover of the beneficial entities must also meet the required targets as set out in the Construction Sector Codes.
The requirements for the Supplier Development Program are as follow:
- Supplier Development agreement which must be signed by both parties in which the Needs Analysis is documented during the measurement period, and the following must be stated:
- Clear objectives identifying three needs as stated in the needs analysis. The areas that may be targeted for development are not limited but can include:
- Management and labour skills transfer;
- Establishment of an administrative system;
- Planning, tendering and programming skills transfer;
- Business skills transfer with an emphasis on negotiation skills;
- Technical skills transfer with emphasis on innovation;
- Legal compliance;
- Procurement skills transfer;
- Establishment of credit rating and/or history;
- Establishment of financial loan capacity and/or history;
- Contractual knowledge transfer;
- Marketing and branding;
- Access to or implementation of business systems;
- Priority interventions to address the objectives; (how the needs will be met, and what will be done to meet the needs)
- Value of the contributions.
A Supplier Development Champion must be appointed to overlook the Supplier Development initiative. This must be a person in senior management or higher (this person’s CV will be required at the audit stage)
In conclusion, The Supplier Development initiative has many requirements. However, it can be done correctly to maximize BEE points if the above is followed
Want to know more about the Supplier Development requirements? Contact your nearest SEESA for expert legal advice. Alternatively, leave your contact details on our website, and a SEESA representative will contact you.
About The Author:
Solita Pillay started her career at SEESA in 2020. She is currently a BEE Legal Advisor in the SEESA Durban branch. Solita graduated from the University of Kwa-Zulu Natal and is an Admitted Attorney.
Resources:
- The Amended Construction Sector Charter gazetted on 1 December 2017;
- Geralene Van Wyk Construction Manual.