When do the Amended Sector and QSE Codes Come into Effect?
Relax! The Amended Sector codes and the Amended QSE codes have not yet been gazetted. However, the dti has stated many times that the amended sector codes and amended QSE codes will be gazetted anytime from July to December 2014.
The B-BBEE Act states that new codes must be issued as a draft in terms of section 9(5) of the act, and after a period of public comment it must be finalised as per section 9(1) of the act. It is only when issued as a 9(1) that it must be followed.
The chances of all sector codes and QSE codes being finalised before May 2015, when the generic amended codes come into effect is NIL.
Let us assume some of the outstanding codes are not gazetted before May 2015. How will businesses in those sectors comply? The Amended codes state:
“3.2.3 A Measured Entity in a sector in respect of which a sector code has been issued in terms of Section 9 of the BBBEE Act as amended, may only be measured for compliance in accordance with that code.”
This means that if, for example, you belong to the Tourism Sector you may only be measured in line with the tourism sector code, and similarly with all other sector codes as well as QSEs.
Let us assume that the Tourism Sector code is not ready by May 2015. You will have to follow the existing Tourism Sector codes of 2009. This would be great news for some in the tourism sector and bad news for others. If you are black owned and EME or QSE you could not take advantage of being a level 1, without verification. If you are not black owned, you will not drop a level because the existing Tourism Sector codes do not have the priority elements. Even better, your level 4 is 65 points, not 80. Your target for skills development is 3%, not 6%.
We could very well have the ridiculous situation that half the economy (those following sector codes) have a far more lenient scorecard, only because their sector councils were inefficient. It is ridiculous that some generic companies will be non-compliant with 39 points, while others will be level 8.
We have heard rumours that the minister will cancel all sector codes if not ready by May 2015. Then, when, or if they are ever gazetted, they must be followed again. This is the best option, because the reality is the sector codes will not be ready. If this is correct, it means that businesses in those sectors will follow the Amended Codes.
This has not been gazetted, so businesses in those industries could be excused for not knowing what to do today. Do they plan to follow the Amended codes (as we have been recommending)? Do they follow the letter of the law and plan for the current – their existing sector code? There are huge differences between the Amended Codes and the sector codes. Is it fair to spring a new set of codes onto a business, without giving them a transitional period? The dti may say that businesses should have planned better, but we could take that straight back to the dti and say they should have told us. Anyway the minister has not announced that the sector codes will be abolished if not ready by May 2015. We sincerely believe that the dti thinks it can get the sector codes ready by May 2015, but the minsiter is not aware that this is unlikely going to happen! The dti has not yet planned for the eventuality by issuing a relevant gazette, so why should businesses be expected to plan better?
What if the new QSE codes not gazetted before May 2015? In line with the Amended Codes, QSEs must follow the old QSE scorecard. What about a company whose annual revenue is between R35m and R50m? There is no code for those businesses at the moment. Are they a QSE in terms of the amended codes? Or a generic in tems of the Amended Codes. In May 2015 what will they do?
The other issue is what if the Amended Sector and QSE codes are ready?
Let us assume that they aer gazetted in November 2014. Is it fair that a company will have to follow those codes as from May 2015? If a company is being verified in say August 2015, the financial period being verified could be the financial year January 2014 to December 2014 or March 2014 to February 2015 or July 2014 to June 2015. In all cases it is already too late to plan, take decisive action and becoem compliant. This is why of course we have recommended to our clients to be verified slightly BEFORE the May 2015 deadline so their next verification will only be May 2016. It still does not make it fair that companies are being given too little time to comply.
What should be minister do?
Short of abolishing the sector codes permanently the minister should issue a gazette today advising all companies that all sector codes will cease on May 2015, and the amended codes used instead. If a sector code is eventually gazetted, companies should be given time to adjust, ie a transitional period of one year. Ideally companies should be gvien the choice today, or following the current sector code, or the Amended Codes. This will help EMEs and black owned QSEs.
This does not solve the QSE problem. The Amended codes do tell us that even QSEs will have a priority element of owenrship and one other element, and that QSEs will have to follow all 5 elements so the minister could rightfully tell us that we did know (roughly) what the new QSE codes will say.If that is the case, then why has it taken nearly a year since the Amended codes were released in October 2013? QSE codes should therefore also have a transitional period of one year. How companies with a turnover of between R35m to R50m should be handled is anyone’s guess!