Our final Amended Codes seminar of the year will be on the 3rd of December 2013 in Johannesburg – Gallagher Estate. This will be the last chance before the end of the year to gain a thorough understanding of the recently gazetted Amended Codes of Good Practice. If you would like to attend please book early as we have filled up our venues very quickly.
The basics of the Amended Codes of Good Practice 2013 (part 2)
In a previous newsletter we discussed some of the most important elements of the amended codes. In this newsletter we will discuss in more detail some of the other changes.
Under the Enterprise and Supplier Development element the DTI has made some changes – the most interesting is the addition of an empowering supplier. An empowering supplier is defined as a company that meets certain criteria.
An EME and a start up enterprise is automatically an Empowering Supplier. A QSE needs to comply with at least one of the criteria in order to become an empowering supplier. A Generic needs to comply with at least three of the criteria to become an empowering supplier.
The definition of an empowering supplier is:
1) At least 25% of the cost of sales excluding labour cost and depreciation must be procured from local producers or local suppliers in South Africa. For a service industry labour costs are included but capped to 15%. 2) Job creation – 50% of jobs created are for black people provided that the number of Black employees since the immediate prior verified B-BBEE measurement is maintained. 3) At least 25% transformation of raw materials/ beneficiation which include local manufacturing, production and assembly and packaging. 4) Skills Transfer – spend 12 days per annum of productivity deployed in assisting black EME’s and QSE’s beneficiaries to increase their operational or financial capacity.
It will be vitally important for companies (who would like to do well on the scorecard) to become an empowering supplier. It is an onerous clause in which companies will have to plan their activities well in advance in order to be an empowering supplier.
Procurement is one of the elements where it was possible to earn easy points if you chose your suppliers well. With the amended codes it will become far more difficult to earn the same number of points on procurement as many companies BEE levels will be dropping.
New to the Enterprise Development element is the addition of bonus points. Supporting your Enterprise Development beneficiaries by purchasing from then is encouraged.
Socio-economic Development is the last element on the scorecard. It hasn’t changed much with the amended codes. The target of 1% of Net Profit After Tax still applies. You are able to claim 5 points on this element. It is important to identify potential beneficiary organizations and ensure that they have black beneficiaries of more than 75%. You are able to give of your organizations time, expertise, as well as certain non-monetary contributions. Earning points for Socio-economic Development does not just have to be a cheque writing exercise, it can be a valuable way for your organization to get good publicity and help people at the same time.
Our Managed Service is an ideal solution for any business wanting to save time on implementing B-BBEE. Through our Managed Service we assist clients prepare a scorecard for both the current year and the future year with the view of constantly improving the number of points on the scorecard. Since our view is based on a long term view we are able to continuously keep track of progress, advise on important changes as and when the changes happen and ensure success through every single transaction.
The dti has taken action against a company that was misrepresenting its BEE status.
Firm linked to Zuma’s brother loses BEE certificate November 24 2013 at 11:08am By CANDICE BAILEY Published in Business Report
Johannesburg – A company previously accused of using President Jacob Zuma’s younger brother as a front has had its BEE certificate withdrawn for allegedly misrepresenting itself in an application.
And Muthelo-BEE, the company that issued the certificate to Midway Two Contractors, has had its accreditation suspended.
Last year Midway Two Contractors became embroiled in a saga in which Michael Zuma and his two business partners allegedly paid R55 million for shares in the company, but never had any decision-making powers.
In this case the company tried to get an EME certificate (exempt micro enterprise) even though its turnover was way in excess of its threshold. The agency concerned has also been suspended.
It is interesting how the report indicates that the FD of the company denied knowledge of the process and blamed the agency. On the other hand the agency states that it used data supplied by the company.
The decisive action by the dti is to be welcomed and should serve as a warning to many companies: There is no point in verifying data if the agency simply relies on data supplied to it by the company or the accountant. We have case studies where many agencies rely on information given to them without any checking or verifying whatsoever. The purpose of verification is to confirm the data.
When we receive certificates we always check them: For example if the company is an EME we identify customers and spend. In one case our client spent R120m with the “EME”. On further checking, and contacting the company they told us they were a startup company, proving that this company had no turnover last year. The codes however state that a startup cannot be an EME if it is a “mere continuation of an existing business” which is what the company was – it had a simple name change.
The above news report highlights a disturbing trend – no one is prepared to take responsibility for a fraudulent certificate.
In another case the company contracted a “consultant” to obtain a certificate. The consultant obtained a forged certificate, using the name of a well-known agency. Their company refused to acknowledge blame, saying it was the consultant’s fault. The consultant states that the person he dealt with was at fault.
We have two case studies recently where the company director was visiting the dti campus in Pretoria. In both cases they were approached by someone who offered to give them a BEE certificate. They were told to meet the “verification agency” at the local Wimpy with R2500. The day after payment, a false certificate was issued.
We have reported hundreds of instances of fronting to the dti without much success. Hopefully, based on the news report this will change.
Understanding the Amended B-BBEE Codes of Good Practice
The new codes will have an impact on your strategies that you need to implement.
Many people think that the new codes will be more difficult to understand and implement. We will show you that this is not necessarily the case. Join us for a full day and
Learn how to benefit from the new codes.
Understand the intricacies of the codes
See the differences between current codes and new codes
Identify strategies to follow
Recognise how easy it will be to follow the new codes
3rd December – JHB – Gallagher Estate 2014 dates to be finalised soon
We will be hosting additional events based on demand. In-house presentations available on request to a minimum of 10 delegates.
Preferential Procurement – Save Time by using the BEE Procured database containing over 40 000 BEE Certificates. Procurement Managed Service: Our consultants can phone your suppliers for a BEE certificate – Managed Service.
While there is demand for a B-BBEE Scorecard someone will be taking advantage, shouldn’t that someone be you…
The basics of the Amended Codes of Good Practice 2013 (part 2)
Fronting Consequences Increase
In other news
EconoBEE is an expert BEE consultancy. EconoBEE helps businesses Become BEE Compliant, prepare for verification, earn maximum BEE Points and ensure that they achieve the BEE Level they need to get more business.
Your time on your business, our time on your BEE status
Although the Amended Codes give a 12 month transitional period the reality is that the preparation needs to begin immediately. Through our managed service prepare early and gain a competitive advantage.