The B-BBEE codes of Good Practice were issued in 2007. Two elements, Employment Equity and procurement had compliance targets set for “Years 0-5” and ‘Years 6-10”. It was understood that this meant that 5 years after the codes were issued, the targets for years 6-10 would come into effect. I.e. as from February 2012.
The wording of the codes was slightly confusing in that it used targets for “0-5” and “6-10”. Back in 2011, we started lobbying the dti to issue clarity on when the new targets would be applied. We knew that any new gazette may have to be issued as a draft first and then as a final code which could take up to a year. It was also important because businesses need to plan ahead, especially for employment equity, as well as procurement.
On 7th February 2012 the minister issued a notice giving clarity on when the targets for years 6-10 would be applied. The notice, which had various errors, including a serious “0-6 year” error and lack of definition of “measurement period”, did indeed explain that the new, higher targets would be applied to all entities whose measurement period ended after 9th February 2012. This was understood to imply that if your financial year end was for example 29th February 2012, your next verification would use the targets for years 6-10. This notice did not come as a surprise to us or our clients, or to most verification agencies.
Many verifications have taken place using the new targets for businesses whose year end was after 9th February 2012.
On 11th May 2012, the dti sent an email stating
“the dti is in the process of refining the Codes of Good Practice on B-BBEE and therefore the 0-5 year targets will be applied until the process of refining the code is finalised and gazetted.
In the light of the aforementioned, the dti will withdraw the notice to eliminate the confusion in the market regarding the implementation of the 6-10 targets and provide further guidance on the measurement date.”
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This simply means:
- The old targets will continue to be used for the foreseeable future.
- Existing certificates issued by verification agencies using the new targets are incorrect, and should be withdrawn and recalculated and reissued. The question is who should pay to obtain a new certificate? The business or its verification agency, or the dti?
- The refining of the codes is a process that could take a long time. We would suspect that this only be done once the B-BBEE Amendment Act is passed by parliament which could take months. Thereafter the dti must issue draft codes as per section 9(5) of the current act, await comments and finally issue the new refined codes as per section 9(1) of the act. We would be surprised to see this happening before the end of 2013.
- The effect of using the old, lower targets will be that businesses will earn more points, but will surely upset the commission for employment equity, and many other pressure groups that are relying on B-BBEE to transform the economy. By allowing lower targets, the government is implying that B-BBEE is not as important as it had been perceived in 2003. Yet, far too little transformation has taken place. We have always blamed government for allowing the slow pace of transformation, and this is another case where government is legislating lower, easier targets.
- It is doubtful that the minister can unilaterally change the codes, as he intends doing by cancelling the higher new targets. Any change to the Codes of Good Practice must be gazetted for comment and then finalized.
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21 May 2012
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