The new B-BBEE codes, which have been keenly awaited by business ever since a first draft was issued over a year ago, have been announced. The codes provide the basis on which the B-BBEE rating of a company is calculated.
Here are the implications of the new B-BBEE codes
According to a BDlive report, the new codes contain five rather than seven elements and provide for penalties should an enterprise fail to reach the minimum standard in three areas: ownership; enterprise development and procurement and skills development.
Failure to achieve in these areas will lead to an automatic one-notch discount of their ratings level.
The report further explains that the formula to calculate ownership levels has also been tightened to encourage companies to retire the debt of their BEE partners more quickly. Companies must show that black shareholders have an effective net equity value of 40%.
A third element that's been tightened is the definition of an empowered supplier. To qualify, a company must add value through local manufacturing as opposed to importing products.
In addition, small black-owned companies will also no longer be required to be rated by empowerment ratings agencies, which Davies said had been a financial burden. To prove their credentials all that the DoL requires is the presentation of an affidavit attesting to their ownership, BDlive reports.
If you want to refresh your memory on how the new codes differ from the old ones, you can read all about it here.
But why have the B-BBEE codes changed?
The move to revise the codes is because the B-BBEE policies are seen as not achieving their true objectives.
'The government hopes that giving established companies incentives and disincentives — through the codes — to pull new black entrants into their supply chains will foster the growth and capacity of black manufacturers,' BDlive reports.
President Jacob Zuma who spoke at the summit yesterday is quoted as saying 'we can't talk about BEE forever. We will become prisoners of our past. We need to get over this (stage) and talk about small business. But we can't do that unless we succeed. I'm saying this because we come from a racially divided South Africa and we must come to a point where the mention of race is not an issue. The problem is that if we don't level the playing field we can't move beyond that point.'
Now that you know what the new codes are. Make sure you comply. Remember, ignorance of the law is no excuse. We'll keep you updated about the codes when they're published in the Government Gazette next Friday.