The Tourism sector code is a Broad Based Black Economic Empowerment scorecard that was gazetted on 22nd May 2009. Compliance with the sector code is mandatory for all stakeholders operating within the tourism industry. Therefore all businesses operating in the industry should comply with the Tourism sector code and not the Generic Codes of Good Practice.

Entities in the Tourism sector include;

Accommodation – Hotels (small and big), Resort Properties and timeshare, Bed and breakfasts, Guesthouses, Game lodges, Backpackers and hostels

Hospitality and Related Services – Restaurants, Conference venues, Professional catering, Attractions, Consulting and professional service companies

Travel Distributed Systems -Tour wholesalers, Travel Agents, Tourist guides, Car rental companies and Cash operators

The sector code is based on the Codes of Good practice, however it has some differing weighting points, targets and definitions. The first notable difference is the sector thresholds. Exempt Micro Enterprises have a reduced threshold of R2.5 million and not R5 million. Exempt Micro Enterprise enjoy automatic BEE recognition of a Level 4 contributor and those, which have more than 50% black ownership, are elevated to a Level 3 contributor.

The relaxed thresholds in the Codes of Good practice ease the regulatory burden on small enterprises, many of which struggle and experience financial and capacity constraints. Therefore the reduction of the Exempt Micro Enterprise threshold might work against this good objective. However from the Tourism sector point of view the reduction could be due to the fact that the sector has many enterprises that have an annual turnover below R5 million therefore transformation initiatives would grow at a slow pace.

The Tourism sector code has a two-phased approach, points and targets for 2012 and 2017.

Qualifying Small Enterprise Scorecard

Component

BEE Elements

Points 2012

Points 2017

Direct Empowerment

Ownership

25

28

 

Management

27

27

Human Resources

Employment equity

27

27

 

Skills development

25

25

Indirect Empowerment

Preferential procurement

25

25

 

Enterprise development

25

25

Residual

Socio-economic Development

25

25

Total

 

179

182

Qualifying Small Enterprise threshold is between R2.5 million and R35 million. In line with the Codes of Good Practice Qualifying Small enterprises may choose four of the seven elements featured on the scorecard and need only comply with those chosen. The significance of ownership for the period up to 2012 has been reduced given that the Ownership target was reduced from 25% to 21% and ownership fulfillment, net value and the bonus points were removed whilst weighting points dropped from 28 to 25.

Generic Scorecard

Component

BEE Elements

Points 2012

Points 2017

Direct Empowerment

Ownership

15

23

 

Management

17

13

Human Resources

Employment equity

17

15

 

Skills development

20

18

Indirect Empowerment

Preferential procurement

15

20

 

Enterprise development

14

10

Residual

Socio-economic Development

8

10

Total

 

106

109

The definition and threshold for Generic enterprises has remained in conformity with the Codes of Good Practice although the importance of the elements and the heart of transformation have changed from ownership to skills development especially for the 2012 phase.

The reduction on the ownership element weight and targets affirms the need to shift focus from BEE deals which lead to Narrow-based recognition that tend to benefit a limited number of black people with access to capital. Similar to the QSE scorecard, ownership target on the Generic scorecard was reduced from 25% to 21%. Ownership fulfillment, net value and the bonus points were also removed and the weighting points were lowered to 15. We have seen companies that earned points on ownership earning little or no points on the management element. The increase on Management and Employment equity elements points will encourage companies in the sector to put more effort in increasing black representation at junior, middle, senior and top management levels.

The successful implementation of true empowerment within the country lies with skills development. The skills development element now has 20 points, which is the highest on the scorecard until 2012. The sector code recognises the skills shortage in the country and that all the other elements of Broad Based Black Economic Empowerment can easily be achieved if the nation has skilled. Furthermore skills development can tremendously contribute to the performance of businesses in the country.

There was a regression on the procurement element, which was reduced from 20 to 15 points. The Codes of Good Practice promote Broad-based Black Economic Empowerment by encouraging procurement opportunities to be made available to B-BBEE compliant suppliers, black owned, black women owned entities, small and micro enterprises. In addition one of the reason why companies aim to be BEE complaint is because their customers require their scorecard. Therefore the BEE cascading effect may be affected during the period until 2012.

Enterprise development, which aims to accelerate the development, sustainability and ultimate financial and operational independence of black owned enterprises, was slightly reduced from 15 to 14 points. However enhanced recognition is now provided for enterprise development spend on black tourism SMMEs and contributions made towards B-BBEE verification of tourism SMMEs. On the Socio-economic Development front the points increased from 5 to 8 and there are now two additional indicators. A drive towards the inclusion into the mainstream economy of the black unemployed school leavers without work experience was included.  Enterprises in the sector are encouraged to employ black new recruits with no prior work experience and the target is 10% of all new recruits. Furthermore if the enterprise is a TOMSA (Tourism Marketing South Africa) levy collector it earns 3 additional points.

On the whole the main acclamation of the Tourism sector code is the prominence of skills development, which we believe should be the foundation that will spearhead Broad Based Black Economic Empowerment. The sector certainly took heed of President Zuma’s emphasis on training and skills development as the cornerstone of transformation in the country.

Written by:

Keith Levenstein/Patience Dozwa

EconoBEE

17th July 2009

www.econobee.co.za

EconoBEE is a specialist BEE consulting company.

Keith Levesntein is CEO of EconoBEE. Patience Dozwa is a BEE Consultant at EconoBEE.