The department of Trade and Industry (DTI) published notice 306 of 2019 Amended Code Series 000, Statement 000 in terms of Section 9 (1) of the Broad-Based Black Economic Empowerment Act 2003, (Act No. 53 of 2003) as amended by Act 46 of 2013 for implementation within 6 months from date of Gazette and replace Amended Code Series 000, Statement 000 within Gazette 36928 with the following Amended Code Series 000, Statement 000. The basis for measuring B-BBEE initiatives under the Codes is the BBBEE compliance of the Measured Entity at the date of measurement.
Will these changes affect my business?
All organs of state and public entities are measurable under the codes as well as all measured entities that undertake any economic activity with organs of state and public entities. Any other Measured Entity that undertakes an economic activity will also be measurable under the codes, whether this economic activity is direct or indirect, with any other Measured Entity that is subject to measurement and which is seeking to establish its own B-BBEE compliance.
EMEs and QSEs
The B-BBEE Codes now confirm that in order for Exempted Small Enterprises (EMEs) and Qualifying Small Enterprises (QSEs) to have the benefit of automatic Level 1 or Level 2 recognition, they must be measured as 100% or at least 51% Black-owned, respectively, on the basis of the flow-through principle, and not the modified flow-through principle.
Sub-minimums
The sub-minimum requirements for compliance with the priority elements of skills development and enterprise and supplier development remain 40% of the applicable weighting points, but will now explicitly exclude the bonus points. The sub-minimum requirements for Enterprise and Supplier Development are now clearly stated as 40% of the total weighting points for each of the three categories within the Enterprise and Supplier Development element.
Qualifying Small Enterprises or Generic Enterprises that fail to meet the 40% sub-minimum requirement for any or a combination of the priority elements in terms of the above mentioned will have their B-BBEE status level discounted one level. The discounted level will be recorded and be the applicable status level for that Measured Entity.
Skills Development
The target for the sub-element relating to Skills Development expenditure on learning programmes for black people (2.1.1.1 on the Scorecard) has been reduced from 6% to 3.5% (for a total of 6 points) and a new element of Skills Development expenditure on bursaries for black students at higher education institutions has been introduced as 2.1.1.2. The target is 2.5% of the Leviable Amount for 4 points.
The sub-element for the number of black unemployed people participating in learnerships, apprenticeships and internships has been deleted.
The B-BBEE Codes state that the 3.5% target for sub-element 2.1.1.1 includes external training expenditure for unemployed black people. The target for the sub-element in 2.1.2.1 for the number of black people participating in learnerships, apprenticeships and internships have been increased from 2.5% to 5% with an increase in total points from 4 to 6.
The limitation on the recognition for Skills Development expenditure in respect of informal and workplace learning programmes has been increased from 15% to 25% of the total value of Skills Development expenditure. Additionally, the limitation on the ability to claim costs relating to training, such as accommodation, catering and travelling as Skills Development expenditure will not apply in relation to compliance with the new sub-element 2.1.1.2 relating to bursaries.
Enterprise and Supplier Development
The target and weighting for procurement from 51% Black-owned suppliers have been increased to 50% and 11 points respectively. In addition, if a company procures from a QSE, EME or large enterprise that is 51% Black-owned as measured in terms of the flow-through principle (and not the modified flow-through principle), such company will be entitled to apply a multiple of 1.2 when calculating its B-BBEE procurement spend from such supplier (and not a multiple of 2 as proposed in the draft amendments).
A measured entity may also recognise procurement from large enterprises that are 51% Black-owned as measured in terms of the flow-through principle under the sub-elements for procurement from EMEs or QSEs, provided that the supplier had been a QSE or EME on the date that the measured entity first procured the goods or services from it, and such recognition will be limited to a total of five years from such date of first procurement.
A large enterprise that is 51% Black-owned as measured in terms of the flow-through principle may also be treated as an Enterprise and Supplier Development beneficiary if it had been an Enterprise or Supplier Development beneficiary of the particular measured entity prior to becoming a large enterprise. The measured entity will only be able to recognise itself as an enterprise or supplier development beneficiary for a maximum of five years from the date on which the measured entity first provided such assistance to the beneficiary.
50% of the amount of any guarantee provided to an Enterprise or Supplier Development beneficiary can be recognised as an enterprise or supplier development spend.
Enhanced recognition for certain categories of black people
Throughout the Codes, various criteria appear which advance the interests of certain categories of Black people. These include black women which should form between 40% and 50% of the beneficiaries of the relevant elements of the scorecard. Black people with disabilities, Black youth, Black people living in rural areas and Black unemployed people form part of the beneficiaries of the relevant elements of the scorecard.
After considering all the amendments it is important to keep in mind that a Code remains in effect until amended, substituted or repealed under Section 9 of the Act. The Minister may review the Codes at any stage, and regular reviews will take place to monitor the implementation of B-BBEE throughout the economy. It is important that all affected entities be made aware of these amendments as this will have an effect on the total amounts that are required to be contributed towards these elements and ultimately the total points an entity can gain through these new targets and weightings.
ABOUT THE AUTHOR
Tinita Gerber is a Labour and BEE legal advisor with qualified training in the Consumer Protection and POPI department. She conducted her studies at the North-West University of Potchefstroom and started working for SEESA in February 2019.