Businesses struggling to grasp the amended Broad-Based Black Economic Empower-ment (BBBEE) Codes of Good Practice can now use The Practical Guide to Amended B-BBEE Codes of Good Practice to help them understand the new regulations.

The book, which is published by content and technology solutions provider LexisNexis, was launched last month and aims to not only help users understand the new regulations but also allow them to calculate their BBBEE scores before they reach the verification stage of accreditation.

The book links to a scorecard calculator appli-cation and a scorecard comparison schedule, which covers every issued sector code. It also pro-vides access to legislative content, which enables users to track progress and take appropriate action to ensure compliance and continuous improvement.

Co-author Brigitte Brun tells Engineering News that, unfortunately, the BBBEE codes have become complex and often confusing, with businesses turning to consultants, specialists and other advisers to gain clarity.

“The amended codes place a strong focus on the ownership of the organisation, which is a move away from the broad-based aspect of black economic empowerment (BEE). The introduction of the measurement of sub-race groups, namely further subdivision of black people into separate sub-race categories of African, Indian and Coloured, will also be a challenge for companies,” she says.

To score full points on the management control element of the scorecard, organisations will now be required to employ the requisite number of African, Indian and Coloured males and females, in line with the Economically Active Population data published in the Commission for Employment Equity’s yearly report.

There are also many drafting, calculation and definition errors in the BBBEE codes and the book provides guidance on how to deal with these, while waiting for clarification from the Department of Trade and Industry.

Co-author Maxi-Lee Machado says the amended BBBEE Codes of Good Practice apply different and, in some instances, higher targets and compliance criteria than the current codes of good practice. For example, the skills development training spend target has increased to 6% of a company’s payroll, compared with the current 3% of payroll target.

The Priority Elements concept has also been introduced and, as a result, if organisations do not meet certain minimum compliance targets within the scorecard elements of ownership, skills development and enterprise and supplier development, they could be downgraded one level in their overall BEE recognition level.

The amended codes will be applicable to all certificates issued from May 1, 2015, and Machado suggests that organisations should start planning for their next verification on these amended codes.

She warns that insufficient or incorrect plan-ning could result in organisations experiencing further downgrades in the overall compliance level.

“The impact this will have will depend on the organisation and its contractual obligations in respect of BEE. Some tenders contractually require the successful bidders to maintain or improve their BEE levels and a drop in a level or levels could possibly result in the contracts being reviewed or even cancelled,” Machado cautions.

Further, in some instances, organisations rely on licences to operate and they need to ensure that they maintain the requisite minimum com-pliance requirements to avoid losing their licence. This will require knowledge and planning to ensure they do not drop a level and potentially lose their licence to operate, Machado adds.

Major Revision
With the amended codes, all organisations with a yearly turnover of R10-million or less are considered exempt microenterprises, which are automatically made Level 4 BEE contributors and are further considered Level 2 if they are at least 51% black-owned and Level 1 if they are 100% black-owned.

Qualifying small enterprises (QSEs) – organ-isations with a yearly turnover of between R10-million and R50-million – have to comply with all five elements of the scorecard and at least two priority elements to avoid being downgraded one level.

Machado says QSEs that are at least 51% black-owned are deemed Level 2 contributors and those that are 100% black-owned are deemed Level 1 contributors; these QSEs will not need to comply with any of the scorecard elements. However, they will have to submit a sworn affidavit confirming their turnover and percentage of black ownership.

Brun believes the revision of the codes will have a significant impact on all companies in all sectors of the economy.

“The amended codes have placed the challenge of transformation squarely on the shoulders of businesses with less than 51% black shareholding, or large businesses with a yearly turnover of more than R50-million, irrelevant of shareholding quota. Controversially, this removes racial and gender transformation requirements for a large number of South African companies,” she says.

Brun adds that it will be interesting to review the impact of this policy change in a few years’ time, with regard to the small to medium-sized businesses, as these businesses are relied upon to grow the economy.

She says new strategies must be developed to meet the more stringent requirements of the amended codes and entities must accept that their BBBEE scores will in all likelihood drop numerous levels. She predicts that achieving a Level 7 compliancy in the amended codes will be quite challenging.

Further, Brun notes that it is clear that the intention of the amended codes is to lower the BBBEE status level of all entities, adding that despite entities achieving high BBBEE scores, it has been acknowledged that limited transformation had actually occurred.

She stresses that some of the requirements are now extremely difficult to attain, fostering a sense of despondency, and adds that it is of concern that many organisations are now exempt from the transformation imperatives of the country.

“Transformation will always be a part of the landscape, as there will always be segments of our society which are inequitably represented in the workforce and economy. BBBEE must ensure it remains relevant and through regular reviews, adapt its rules and regulations to ensure that the intended beneficiaries are those who need the most help in society,” she concludes.