We would like to wish all our valued readers a warm welcome to 2016. We are expecting a particularly busy and very interesting year ahead. 2016 will be the first complete year using the Amended Codes which means we are out of the transitional phase and into the full swing of things. We are also expecting a massive mindset change on how companies implement BEE because a low level is going to cause suppliers to be changed.
Contact our consultants on 011 483 1190 to assist you manage your BEE compliance process.
|B-BBEE in 2016 – an overview|
If you do not fall into one of the nine sector codes:
1) If your financial year end is prior to May 1 2015, you MUST be verified using the 2007 Codes.
2) If your financial year is after May 1 2015, then you must be verified using the 2013 Amended Codes.
If you are an EME (less than R10m annual turnover), then at any time you can use the Amended Codes.
If you are a QSE AND at least 51% black owned (with no outstanding debt) then you can use the Amended Codes.
If you fall into one of the 9 sector codes.
1) If your financial year end is prior to May 1 2015, you must be verified using the “old” sector codes.
2) If your financial year end is after May 1 2015, then you will still follow the applicable sector code.
3) Only one sector code – Tourism has been amended, and must be followed.
4) All other sector codes have not been repealed or amended. They therefore must continue to be followed until either amended like Tourism, or repealed via a notice in the gazette in terms of both 9(5) and subsequently 9(1) of the B-BBEE Act.
NB. The minister had announced that he would consider repealing sector codes if sector councils were not ready by end October 2015. He has not yet issued notices as to his decisions. Various sector councils (including Construction and Accountancy) have announced that they were unable to reach consensus on amending their codes and they announced that their codes were no longer in effect. They DO NOT have the right to unilaterally CANCEL their codes. Only the minister in line with the B-BBEE Act may do so.
Entities in sectors with gazetted codes still fail to use the sector codes. This is especially prevalent amongst EMEs. The mistakes are often made by accountants/accounting officers. The clause around fronting in the B-BBEE Act holds both the accounting officer/accountant and business owners responsible, even for mistakes.
The minister has not yet issued a notice around the task team’s investigations, so the existing Codes remain as they are: Verification agencies and approved auditors continue to make serious mistakes in verifying and awarding points for schemes calling themselves “ownership” but exhibiting no actual OWNERSHIP. Whatever the minister decides, many verifications currently are flawed, and those schemes could fall foul of the fronting clause of the B-BBEE Act.
Areas for agencies to keep close watch are:
1) Does a Black Natural Person have rights to ownership, as opposed to the trust in which the person is a mere beneficiary?
2) Check carefully what those rights are: Does the black person have a right to the actual shares or portion of shares or only dividends and profit shares. If only dividends and profit shares, then this is not an ownership scheme and agencies/auditors must not award points.
3) Does the black person have a right, at some reasonable point in the future, to sell his shares?
4) Does the black person automatically lose his rights without compensation if he ceases to be a beneficiary, eg no longer an employee?
5) If this is a broad-based scheme, is it ring fenced to individual black natural people?
Typical mistakes being made by agencies in awarding points include:
Beneficiary only ever receives payment towards his schooling or education fees.
|Business Unusual – Change is the only Constant|
It’s business unusual.
The only constant in business is change. Whatever you did yesterday is not what you will do today. Customers change. Tastes change. Markets change. Weather and climate changes. Technology changes. Staff and management change. Governments and ministers change together with policies.
The problem for many businesses is they dislike change. It makes life difficult. Once you have learned one skill or mastered a new technology, another arrives. I remember 20 years ago trying unsuccessfully to convince a company to implement email for their staff. Nowadays no one can run a business without email or a cell phone.
In South Africa in 2016 it will also be business unusual as usual. BEE is here to stay. Some people and businesses simply cannot cope emotionally with change. The BEE changes seem difficult to implement. BEE will cause many business models to change. The clever businesses will adapt and thrive. Others will fail, just like any company would if they did not adapt to new technology or changed market conditions.
One of the biggest areas of change that is often overlooked is the supply chain. Buyers are usually happy with their suppliers. They know how to deal with them. They know how to negotiate. A new supplier is fraught with difficulties. If the buyer finds a new supplier and it does not work out well, he will be blamed for changing. If the existing supplier does not deliver, the supplier can be blamed. The buyer is more likely to want to stick with the same suppliers.
The creditors department does not like the idea of taking on a new vendor. It takes time: data capture, verification checks, new bank beneficiary needs to be created. All this makes it so much more difficult for businesses to change for the better.
One aspect of BEE requires finding new suppliers. If you do not meet procurement targets, your own score will suffer. There is no alternative, short of resisting change, and that is going to result in less business.
On the positive side the businesses that do embrace change have already prospered. The slow adapters will lose out.
Preferential Procurement – Save Time by using the BEE Procured database containing over 70 000 BEE Certificates. 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…
20 January 2016
In this issue
- Welcome to 2016
- B-BBEE in 2016 – an overview
- Business Unusual – Change is the only Constant
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.
Our services include BEE Management Systems, Training, EME Pack, Complete Managed Services, consulting and advisory and Procurement Solutions.
As leaders in the industry we are driven to help maintain and develop knowledge in the BEE industry.
Already have a BEE Certificate
Please send it to us and we will include it in our BEE Procured database.
Tel: 011 483 1190
Fax: 011 483 1195
We know how useful our newsletters are but you needn’t wait for our newsletters – follow us on Twitter, connect with us on Facebook or stay well informed by reading our BEE Blog.
Know someone who might be interested in this email? Why not forward this email to them using [forward].