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Small Black Businesses Harmed by New BEE Codes – EconoBEE Newsletter – 12 February 2014

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Small Black Businesses Harmed by New BEE Codes

Small businesses and especially Black Businesses are being harmed by Sector Codes not aligned with the Amended Codes

The Amended codes have come in for a fair amount of criticism. One area where they have been praised is how they treat small businesses. A company with an annual turnover of less than R10 million is automatically level 4. If the company is 100% black owned it is level 1. This makes a black owned company very attractive to its customers. The amended codes even allow for 100% black owned companies with a turnover of less than R50m to be considered as a level 1.

However companies in a sector that have a sector code must continue to follow that sector code. None of the sector codes have been aligned with the amended codes. The sectors affected are construction, tourism, transport, forestry, accountancy, property, agriculture, finance and ICT. Any company in these sectors will still follow their sector code. For example a company in the ICT sector, with a turnover of less than R5m will have to use the ICT sector code and will be level 4 or level 3 depending on its black ownership. If its turnover is R8m it will have to follow the ICT QSE codes, and go through the verification process, only because ICT has not yet been aligned with the Amended Codes. If a 100% black owned ICT company had a turnover of R45m it would have to follow the generic ICT scorecard. If it were not in a sector it would automatically be considered a level 1 QSE.

The dti cannot want to make the process for companies in a sector code so much more difficult. We suspect that when the charters are eventually aligned, it too will allow 100%  black owned businesses with a turnover below R50m per annum to be an automatic level 1. The Amended Codes which have been intending to make life easier for small businesses, especially black owned companies, is not doing so for any company in a sector, only because that sector code has been delayed.

We therefore call on the minister to ensure the alignment process happens faster than it is currently progressing.

Alternatively the minister should issue a notice allowing all companies falling into a finalised sector code to choose if they want to follow the old sector codes or the amended codes until the new sector codes have been finalized. The minister of trade and industry is entitled to issue notices in terms of the act and we believe that this is one he should issue as soon as possible. Businesses in sectors that have finalized codes should not be unfairly disadvantaged, or even advantaged compared to other businesses.

It could be quite a while for some of the sector codes to be finalized. The aforesaid ICT charter is going to be very delayed because the communications minister has yet to appoint an ICT Sector Council. Once this has been done, the council must meet, and consult with the industry and draft an amended ICT charter. This must be gazetted and the public given at least 60 days to comment. Thereafter a final sector code must be drawn up, approved by the minister and finally gazetted as an official sector code. The whole process is likely to take at least 18 months from now. In the meantime the entire ICT industry will be in limbo, and small black owned ICT businesses harmed the most. The same is applicable for most of the other sector codes.

Our Managed Service is an ideal solution for any business wanting to save time on implementing B-BBEE. Through our Managed Service we assist clients prepare a scorecard for both the current year and the future year with the view of constantly improving the number of points on the scorecard. Since our view is based on a long term view we are able to continuously keep track of progress, advise on important changes as and when the changes happen and ensure success through every single transaction.

Visit our website or contact 011 493 1190 for more information on our Managed Service.

 

 


Status of the PPPFA

The PPPFA (Preferential Procurement Policy Framework Act) regulations were only recently aligned with the B-BBEE Codes. The regulations, promulgated in 2011 stated that state tenders should apply the 80:20 or 90:10 rules (depending on value of tender). 90% of the evaluation was to be made on the basis of the price offered by the vendor, and 10% was to be based on the valid B-BBEE level achieved.

When the regulations were originally published (which we supported), we were very concerned about the wording. We had wanted the regulations to refer generically to the codes and use the codes as the overriding rules. For example the regulations had stated that any company with a turnover of less than R5million was an EME, and level 4. We disputed this – some companies have to follow various sector codes and not all companies with a turnover of less than R5m are indeed level 4. For example a company in the tourism industry is only an EME if its turnover is less than R2.5m. 

At that time we pointed this out as a critical error in the regulations “Government Procurement Act  – critical mistake.” In the end the minister did issue a guide stating that sector codes may have a different threshold.

We now fast forward to the amended codes issued on 11th October 2013: The codes are now in effect and a company can elect to use them or follow the older codes until October 2014. Many companies that have a turnover of less than R10m will want to follow the amended codes, especially black owned businesses. They would be allowed to issue a sworn affidavit stating their turnover and then be given an automatic level 4, or level 1 (if 100% black owned) or level 2 (if at least 51% black owned). Black owned QSEs are also allowed to issue a sworn affidavit instead of building up a scorecard and issue a certificate.

Unfortunately the PPPFA Regulations have not kept up. The PPPFA Regulations and Guidelines still refer to an EME as being below R5, not R10m as per the amended codes.  A company with a turnover of say R8m should be able to submit its BEE affidavit as proof of its BEE status as an EME. However the PPPFA Regulations do not allow this, only because they have not yet been updated. 

We would very much like to see the original PPPFA regulations stating that BEE certificates and level supplied as per the B-BBEE codes without “hard-coding”, or specifying  the actual turnover values. Had they done so these problems would have been avoided.

In the meantime we call upon the minister of finance to urgently issue regulations allowing businesses to use the amended codes for submitting tenders if they elect to do so. In any event October 2014 is not that far away, and PPPFA Regulations need to be updated for that date at the very worst. 

Unless the Amended codes themselves are delayed…but that’s an article for a future newsletter.

 

 

 


Implementing the Amended B-BBEE Codes of Good Practice

The new codes will have an impact on your strategies that you need to implement.

Many people think that the new codes will be more difficult to understand and implement. We will show you that this is not necessarily the case.

  • Learn how to benefit from the new codes
  • Understand the intricacies of the codes
  • See the differences between current codes and new codes
  • Identify strategies to follow
  • Recognise how easy it will be to follow the new codes

Full Day Sessions
Half Day Sessions
20th February – JHB – Gallagher Estate
We host regular half day workshops on Tuesday mornings in our Bryanston office.
8:30 for 9:00 – 17:008:30 for 09:00 – 13:00
R2500 excl VAT (R2850 incl VAT)R1500 excl VAT (R1710 incl VAT)
Email info@econobee.co.za
Contact 011 483 1190
Book online or download our brochure.
Email info@econobee.co.za
Contact 011 483 1190

In-house presentations available on request to a minimum of 10 delegates.

 

 

 

 

 


Let our consultants save you time on B-BBEE.

Preferential Procurement – Save Time by using the BEE Procured database containing over 40 000 BEE Certificates. Procurement Managed Service: Our consultants can phone your suppliers for a BEE certificate – Managed Service.

 


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While there is demand for a B-BBEE Scorecard someone will be taking advantage, shouldn’t that someone be you…


Want us to manage your BEE Process – Managed Service.

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Need a scorecard – produce one yourself – EconoBEE V3

 
EconoBEE Newsletter
 12 February 2014

In this issue

  • Small Black Businesses Harmed by New BEE Codes
  • Status of the PPPFAes

In other news

About EconoBEE

EconoBEE is an expert BEE consultancy. EconoBEE helps businesses Become BEE Compliant, prepare for verification, earn maximum BEE Points and ensure that they achieve the BEE Level they need to get more business.

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Regards
Gavin and the EconoBEE Team
 

  
Executive summary of B-BBEE

Turnover below R10 million per annum – automatic BEE status

 

Turnover above R10 million per annum – you need a BEE Scorecard. Our workshops, scorecard tools, procurement manager or a complete managed services will be best for you.

 

Your time on your business, our time on your BEE status

Tip:

Although the Amended Codes give a 12 month transitional period the reality is that the preparation needs to begin immediately. Through our managed service prepare early and gain a competitive advantage.

 

10 Strategic Steps to B-BBEE!
 We have prepared an easy to follow guide “B-BBEE in 5 Minutes” and “Crash Course to BEE Verification” which explains BEE in a simple step by step approach.

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