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It’s beyond a crisis – B-BBEE – EconoBEE Newsletter – 28 January 2015

EconoBEE - BEE Points = Business

 

It’s beyond a crisis

The Amended Codes come in effect on 1st May 2015. That is approximately 3 months from now.The sector codes also, logically, have to be amended and must also come into effect at the same time, as must the QSE codes.

There are currently 9 sector codes, each with codes for generic and QSE. Some sector codes have multiple sub-sector codes: Transport, Property, Finance, Construction.

The process for gazetting a sector code is complex and time consuming. It must be discussed and approved by the role players in the sector and the sector councils. The draft is then submitted to the dti minister for approval and gazetting as a draft (Section 9(5)). The public must be given 60 days to comment on the draft. Thereafter the sector council must re-draft, re-discuss and re-issue the code to the dti minister for final gazetting as a sector code (Section 9(1)). The dti minister can and often does send back drafts for re-drafting if it does not meet the requirements.

In the past this process has typically taken more than 12 months. It is no longer feasible for the dti to issue all 9 sector codes before 30th April 2015. We have been saying for a long time that the timelines are going to be stretched.

Practical implementation: The DTI expects every certificate issued from 1st May 2015 to use the Amended Codes. This includes;

  • Generic codes which were gazetted in October 2013 (draft October 2012) .
  • QSE codes which have not yet been gazetted (draft October 2014)
  • Sector Codes which have not yet been gazetted (draft not yet issued)

It is expected that any company producing a scorecard post 1st May 2015 takes into consideration activities during the rating period (always in the past) for their respective scorecard. This means a company needs to comply with a not yet gazetted scorecard in a way that is not yet known, retrospectively and if they don’t, they lose business because their BEE score is unacceptably low.

 

If the minister really wants to implement the Amended Codes by 30th April 2015, it is no longer an urgent task.
It is no longer a crisis. It is beyond a crisis.

Last year we suggested that the minister abolish all sector codes, ideally forever, but at least until they can be aligned with the Amended Codes. Last year this time the minister could have issued such a statement. It is too late for him to do so now. The various industries belonging to sector codes will simply not allow the minister to do so now. The construction sector for instance has higher ownership thresholds. Would the major players in the construction industry be happy to follow codes with lower targets, thereby allowing their competitors to gain extra points? We doubt it! Would the financial industry be happy to use the codes of good practice?

The dti has already stated that all sectors must follow the amended sector codes, when they are finalised as from the date of gazette. Never mind the unfairness of a sector having to follow a code as from 1st May 2015 that still does not exist, those sector codes are not going to be ready before 30th April 2015.

Let us assume that the dti gazettes for comment a sector code this week, eg 29th January. The 60 day commentary period will be the end of March. To collate the comments, read, analyse and discuss them will take many weeks. Let us assume 3 weeks. That will be near the end of April. The sector code has to then go to the minister for approval and be published in the government gazette. We often find that the minister approves a gazette many weeks before it finally is printed. Can this be done by 30th April?

Can all 9 sector codes be finalised by 30th April? No, never.

What are the options?

  • Can the minister abolish all sector codes that have not been aligned by 30 April 2015? No!
  • Can the minister implement the Amended Codes and still allow the old sector codes to be used? No! Imagine half of industry following the old, more lenient codes of the sector with lower thresholds for levels, and the other half following the new Amended codes. All that will happen is every company will suddenly decide to belong to a sector because it is easier to score. There is no policing wholesale fronting will expand.
  • Can the minister extend the transitional period for another 12 months in addition to the extension to 30th April he had previously given? Politically no, but practically he has no choice.

The dti has had since 2012 to plan for the Amended Codes. If they couldn’t get it right over a period of 24 months, what chance is there that they will solve the problem in the next 3months.

Why must it come down to this?!


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EconoBEE Newsletter
 28 January 2015

In this issue

  • It’s beyond a crisis

In other news

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Gavin and the EconoBEE Team
 

  
Executive summary of B-BBEE

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