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Amendments to the B-BBEE Generic codes of Good Practice

Article by Phoenix Capital Advisors

Amendments to the B-BBEE Generic codes of Good Practice was gazetted on 31 May 2019. The amendments address changes to Schedule 1: Definitions, Statement 000: General Principles, Statement 300: Skills Development and Statement 400: Enterprise and Supplier Development.

EFFECTIVE DATE AND APPLICATION

On the 1st of December 2019, the sections affected by the 2019 revisions are formally repealed and the amendments will come into effect. Companies, may however, elect to apply the amended provisions immediately.

This means that the amendments are to be implemented within 6 months of the date of the Gazette, therefore any BBBEE Certificates, Affidavits or CIPC EME Certificates from the 1st of December 2019 onwards must be issued according to the 2019 Revision of the BBBEE Codes of Good Practice.

Any Sector Code issued in terms of S9(1) of the BBBEE Act remains applicable until aligned to the 2019 Revisions. The Sector Codes are encouraged to initiate an alignment process.

SCHEDULE 1: DEFINITIONS

Outlined below are some key definitions.

Absorption means a measure of the Measured Entity’s ability to successfully secure a long-term contract of employment for the Employee, Learner, Intern or Apprentice.  
Current Equity Date means the later occurring of the date of commencement of statement 100 and the date upon which the transaction undertaken by the Measured Entity in order to achieve black rights of ownership, became effective and unconditional.  
Designated Group Supplier means a supplier that is at least 51% owned by black people defined under Black Designated Groups  
Long-Term Contract of Employment means a legal agreement between an individual and an entity that this individual would work for until his or her mandatory date of retirement.  
Qualifying Enterprise and Supplier Development Contributions Amends qualification of beneficiaries to 51% Black Owned or Black Women owned QSEs or EMEs.      
30% Black Women Owned Means an Entity in which: Black women hold at least 30% of the exercisable voting rights as determined under Code series 100; Black women hold at least 30% of the economic interest as determined under Code series 100; and has earned all the points for Net Value under statement 100  

STATEMENT 000: GENERAL PRINCIPLES

EXEMPT MICRO ENTERPRISES (EME) AND QUALIFYING SMALL ENTERPRISES (QSE) 

  • An EME or QSE may only apply the Flow Through Principle to determine the black ownership claimed
  • An EME of QSE that is at least 51% Black owned using the Flow Through Principle is elevated to a Level 2 BBBEE status
  • An EME of QSE that is 100% Black owned using the Flow Through Principle is elevated to a Level 1 BBBEE status
  • An EME may elect to be measured against the QSE scorecard
  • A Black owned QSE may elect to be measured against the EME scorecard

UNINCORPORATED JOINT VENTURES

  • A consolidated verification certificate is required
  • The consolidation is based on the weighting as defined in the joint venture agreement
  • The respective scores are weighted according to their proportionate share in the joint venture
  • A joint venture certificate is valid for 12 months and only applicable to a specific project
  • Economic Interest and Voting Rights are determined may be flowed through to the joint venture as per the respective partners Economic Interest and Voting Rights as determined by the joint venture agreement

STATEMENT 300: SKILLS DEVELOPMENT

KEY CHANGES

  • The points available under skills development and bursary expenditure are increased to 10 from 8 before although the combined target remains at 6%.
  • The application of demographic targets includes Bursaries, but the formulas are unchanged.
  • Double counting of initiatives under skills development expenditure and bursaries is not permitted.
  • The 40% sub-minimum for Priority Element compliance is clarified as 8 points.
  • The cap on informal and workplace skills development expenditure under Category F and G Learning programmes is increased from 15% to 25%.
  • The provisions regarding recognisable expenses for Category A bursaries are extended to include ancillary costs for subsistence, catering, travel and accommodation etc. without a limit.
  • The cap on ancillary costs remains at 15% but the cap does not apply to Bursaries.
  • The inclusion of Stipends under Formal Skills Development expenditure is extended to include Category A Bursary students. So now one can claim stipend expenditure for Category A, B, C and D Learners.
  • The Narrative Description of Category A in the Learning Programme Matrix is amended.
  • The corrected EAP formulas, previously provided in Gazette 38765, are included.

SCORECARD

STATEMENT 400: ENTERPRISE AND SUPPLIER DEVELOPMENT

KEY CHANGES

  • The rules relating to NPAT usage are clarified
  • The multiplier of 1.2 for first time suppliers is removed and replaced by a 1.2 recognition boost for purchasing from 51% Black Owned or Black Woman Owned suppliers whose qualification is achieved using the flow-through principle and not the modified flow-through principle.
  • The target for spend with Black Owned entities has increased from 40% to 50% and the points achievable increase from 9 to 11.
  • Beneficiaries of Enterprise and Supplier Development contributions must be 51% Black Owned or Black Woman Owned EME or QSE suppliers whose qualification is achieved utilising the flow-through principle. 
  • Generic Entities may also qualify as Enterprise and Supplier Development beneficiaries if they were previously EMEs or QSEs who first received assistance from the Measured Entity within the past 5 years.
  • A similar qualification applies to procurement from Generic entities recognised under the EME or QSE indicators i.e. Procurement from a 51% Black Owned or Black Woman Owned Generic Supplier (using flow-through only) can be counted as procurement from an EME of QSE if the ME first procured from them within the past 5 years while they were still an EME or QSE.
  • The Benefit Factor Matrix is amended in that 50% of Guarantees provided on behalf of a Beneficiary can be claimed instead of 3% as before.

O

*Enterprise and Supplier Development per Statement 400

** Bonus Points

CONCLUSION

B-BBEE compliance is becoming increasingly more difficult and expensive for Company’s who taken a tactical and reactional approach. B-BBEE is not static and demands a considered response in order for it to make business sense. B-BBEE is a catalyst for transformation and has to be integrated into business practices. If implemented correctly, it will reduce the stigma and related anxiety and with time, the costs will be absorbed through general business practices.

Phoenix Capital Advisors is proud Partner of the NSBC.