Abolish the Tourism Sector Code! – EconoBEE Newsletter – 15 July 2014

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Sector codes were designed to allow industries to change the scorecard to be more applicable to a particular industry. For example the financial sector code identifies “access to finance” as one of the important elements applicable to the finance industry. The Construction Sector code uses a different adjustment for gender because it recognises that the industry by its nature is male dominated.

The tourism sector code, issued in 2009 has some differences to the generic codes, but it has significant impact on how it is followed. For example the threshold for EMEs is R2.5m.

There must be a good reason why the tourism industry wants to limit the size of an EME – and it generally only effects guesthouses and B&Bs.

There is one problem: Due to the differing thresholds in the tourism sector companies intentionally, or in error, issue an EME certificate with the wrong threshold – showing that the company is an EME because its turnover is less than R5m. We have uncovered hundreds of certificates that use a threshold of R5m. In addition, many companies simply ignore the sector code and get verified in terms of the codes of good practice.

We report these transgressions whenever we can to the sector council. Unfortunately nothing gets done about it. Although the dept of tourism accepts that this practice is happening they are powerless, or refuse to do anything about it.

These are not isolated instances – it is pervasive through the industry. It is not only EMEs but all size tourism companies that do not bother to follow their own sector code. We contend that if the sector code is not followed or enforced, it serves no purpose. It leaves us with no choice but to suggest to the minister of tourism that the sector code should be abolished. The sector code costs the taxpayer and industry a lot of money to create and administer: Staff costs, office costs, legal costs, department costs to create a sector code that is not being followed sufficiently or enforced.

We have been trying since 2009 to get the sector codes enforced. Today, five years later the tourism sector council is still busy, wasting tax payers money trying to re-write the sector code for the Amended Codes. Do they have any idea how this new code, costing millions of Rands is going to be enforced? The answer is clearly NO. They will say they are waiting on the dti, or SANAS, or IRBA or the BEE Commissioner to do their job. While we are waiting for every organisation to do its job, we don’t need the sector code. The simple conclusion is the sector code serves no purpose and should be abolished. All tourism companies therefore should follow the Amended Codes.

Naturally vested interests will dispute this article. I invite them to take action against those flouting the sector code to prove that it actually does work. I invite them to lay charges against companies, auditors, verification agencies, accountants ignoring the sector code. Let’s see action or cancel the whole thing!

In the interests of transformation, Minister please abolish the tourism sector code, until such time as you can make it work.

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An EME (Exempt Micro Enterprise) is an entity that is exempt from producing a BEE scorecard.

In terms of the 2007 Codes of Good Practice:
An EME is defined as any entity whose annual revenue is less than R5m, depending on sector. There are 9 gazetted sector codes, some of which have a different EME threshold, e.g tourism is R2.5m.

In terms of the 2013 Amended Codes:
An EME is defined as any entity whose annual revenue is less than R10m, depending on sector.

The Amended Codes state that right now an entity can choose which set of codes to follow, but as from 1st May 2015, it must be the Amended Codes.

If an entity falls into a specific sector it must follow the relevant sector code.

Comment:
It is obvious that a business that has an annual revenue of less than R10m, and that does not fall into any sector that has a gazetted sector code, the entity would want to follow the Amended Codes, particularly if its revenue is more than R5m but less than R10m.

Firstly decide which codes you will be following:

1) The 2007 Codes require auditor’s certificate or similar certificate issued by an accounting officer or verification agency.

Comment: Get your accountant to write a letter confirming that your revenue is below the threshold.
 
or

2) The Amended Codes require a sworn affidavit on an annual basis confirming the annual revenue and the level of black ownership.

In all cases the Codes require you to have suitable evidence supporting your status, such as audited financial statements, or other financial information that completely proves your letter or affidavit.

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Gavin and the EconoBEE Team