Extraordinary newsletter – BEE codes have been Gazetted

BEE Codes have been Gazetted

9th February 2007

The dti has managed to get the Codes of Good Practice gazetted. This is very good news and quite exciting for all businesses (especially those involved). The dti did say that the codes would be out in the early parts of 2007, which they have done.

The issuing of the codes also gives businesses clarity on what is truly expected of them.

We have been reading and working through the new codes and we have noticed some interesting changes.

EME’s will simply need proof that their turnover is below R5 million. As we had suggested previously the codes do allow EME’s to comply with the QSE scorecard to maximize points.

QSE’s are allowed to choose any 4 out of the seven elements. This will make compliance considerably easier for them.

One major change is relating to verification agencies. The dti encourages their use, but they are not mandatory. The dti will issue additional comments on this subject later. They probably realise that ratings agencies also need time to gear up to do ratings. Self-rating appears to be acceptable, as long as the scorecard is signed by the business fiduciary and an auditor or accountant.

Management and Employment Equity with the adjusted gender recognition levels (we will post a detailed calculation on our website) has changed. A key point is enterprises must score at least 40% of the target points in all indicators of employment equity in order to score any points on the scorecard. In other words, if you do not employ any black disabled employees, then no matter how high the rest of your employment equity is, you will earn zero points!

The Skills Development Learning Programmes allows companies to include all aspects of Skills Development in fewer indicators.

The Preferential Procurement calculation remains unchanged (you will still need to ask all suppliers for a BBBEE Scorecard and calculate it based on the amount of money you spend with them). Within Preferential Procurement they have expanded the definitions to exclude some imports. For example it appears that oil refineries need not include crude oil as part of eligible procurement because crude oil is not available in South Africa.

Enterprise Development sees the introduction of the benefit matrix which allows companies to follow it and easily determine the value of certain Enterprise Development contributions to the company. They have also clarified payment terms and investments in black owned companies.

Socio-economic empowerment also sees the introduction of a benefit matrix. Socio-economic Empowerment allows for spend that benefits majority (75%) black beneficiaries.

Ownership schemes, especially employee share ownership (ESOPs) have changed substantially. Our resident expert and colleague, Cathy Bryant attorneys has been analysing how it impacts on large scale employee ownership schemes. Companies may need to wait up to 3 years after implementing an ESOP to be able to earn points.

As expected the underlying concepts behind Broad Based BEE remain mostly unchanged. Some of the targets have been changed, as have some definitions. In general the BEE codes have been simplified and the total number of pages has been reduced tremendously. It will still be interesting to see how companies in general take to the new codes and in particular some of the calculations (which have not been simplified).

We are very happy to see the codes gazetted and will be updating our website regularly to keep all readers up to date with all of the new information.

We will of course be updating all of our commercial documentation including all of our Workshop/Seminar Presentations and EconoBEE Scorecard. This will be available for all future purchases of these products. (EconoBEE Scorecard users will be allowed to download an update)*Terms and Conditions Apply.

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