Sector codes causing BEE and transformation to become a joke

The Amended codes were originally gazetted in 2013. They arguably are substantially more onerous than the previous codes, particularly for small business. However all businesses are finding that, unless they work twice as hard and spend twice as much, their BEE level will drop by 4 to 6 levels.

The Amended codes were issued in the interests of accelerating transformation, which has not succeeded as well as it should, or needed to.

In 2013 it was only the generic scorecard that was published. The QSE scorecard was subsequently published in May 2015. The biggest delay has been the sector codes.

In 2013 there were nine finalized sector codes: Transport, construction, forestry, AgriBEE, ICT, Property, Finance, Accounting and Tourism. It is a requirement that these sector codes also be aligned with the Amended codes. These sectors count for large part of economic activity. The aim of a sector code is for it to be more appropriate to an industry sector, but also to go beyond the standard code – ie be a bit more harsh. This was the case with the original codes. Some targets for the sector codes were higher than the original codes. However when we compare the original sector codes with the substantially higher targets of the Amended  Codes we note that the current sector codes and way more lenient than the Amended codes. They do not have the priority element so no entity will drop a level if they do not have sufficient ownership, skills or enterprise and supplier development. They use the old points to levels table, not the new one. A company that achieves 65 points in a sector is a level 4. A similar company following the Amended codes with higher targets and achieving 65 points is a level eight if it does not achieve the priority status.

The dti minister had originally stated that the Amended Codes would come into effect in October 2014, but he delayed this until May 2015, partially due to the fact that the sector codes were not ready.
In May 2015 the minister gave the sector councils until October 2015 to align their codes with the Amended codes. This would still have been 3 years after the Amended Codes were published.
In October the minister cancelled the construction and accounting sector codes, but left the remaining seven sectors in place – obviously in the hope that they would put their new codes in place quickly.
Unfortunately to date only Tourism, and a new sector code MAC (Media advertising and communication) has been finalized and in use. The remaining sector codes are in a state of flux. All codes have to go through a two step process – publish for publish comment and a draft, and after consideration and redrafting issue a final version. Rumours are that ICT is about to be finalized and gazetted. The remaining codes, still accounting for a large part of the economy have not been gazetted. Many companies are still able to “escape” the new codes and use the older easier ones.

There are two major problems with this:
1)    Entities that have to follow the Amended Codes are feeling very unhappy that certain sectors are still able to use the older, easier codes. Some company have to spend 6% of payroll on skills development and still only reach level 8 while others can spend half that amount and get to level 4.
2)    The whole transformation process is making many people very unhappy. They ask how serious government is about transformation if the minister effectively exempts half the economy from using the Amended Codes.

What should the minister have done? It was simple: The minister could have issued a notice in 2013 stating that all sector codes that are not ready by October 2014 would be abolished, and would only be resurrected again once finalized – much as he did for Accounting and Construction.

Sector CodeStatus
ConstructionCancelled by the minister in 2015. The Construction Council is working to re-launch the codes. Until then all in the construction sector to follow the Amended Codes
AccountingCancelled by the minister i 2015. All in the accounting sector to follow the Amended codes
TourismAmended Tourism Codes were gazetted in November 2015. All in the tourism sector to follow it.
MACMedia, advertising and communications sector code was finalized in May 2016. All in the sector to follow it.
AgriBEEDraft sector code issued in November 2015. Not yet finalized. All in sector must follow old sector code.
PropertyDraft sector code issued in November 2015. Not yet finalized. All in sector must follow old sector code.
ForestryDraft sector code issued in November 2015. Not yet finalized. All in sector must follow old sector code.
ICTInformation communication technology issued a draft in February 2016. Not yet finalized. All in ICT must follow old sector code.
TransportDraft sector code issued in March 2016.Not yet finalized. All in sector must follow old sector code.
Financial Services (FSC)Draft sector code issued in March 2016. Not yet finalized. All in sector must follow old sector code.

As can be seen, some sector codes have been in draft since November 2015. Others like FSC were issued quite recently. It makes one wonder when the banks and insurance companies will be required to follow an aligned set of codes. The same applies to transport companies whose draft code was only issued in March 2016.

In the meantime some in these industries have indeed been working towards compliance against a set of aligned codes that they believe will come about. They understandably get very annoyed when they discover that they spent 6% of payroll on skills development when they still have to follow the old codes. They see it as overspending in terms of the codes – a waste of shareholders money! Many have become so disillusioned that they have made the decision to stop their transformational activities.
This reinforces the argument of the “anti-BEES”. Something is patently wrong and unfair.

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