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Amended Codes from May 1. Does your company need to be B-BBEE rated?

by , 28 April 2015
Rob Davies, minister of Trade and Industry (DTI), explained recently that he can't extend the B-BBEE deadline again so that means the revised codes will come into effect on May 1.

Althought industries have stated that they aren't ready to comply with the new BEE codes, , officials at the DTI have continued headstrong towards their own self imposed deadline.

According to Davies, the sector codes are a process and will be finalised. As a direct consequence, the recent amendments will make most businesses register lower scores and this will substantially limit their competitiveness in the market place.

The same source explains that alternative activities to earn points, such as changing suppliers, might require a radical directional change in business thinking and processes. In addition, spotting points scoring activities while simultaneously eliminating weaknesses seems to be vital for anyone striviting to keep a satisfactory scorecard.

But should your company really be BEE rated?
BEE rating: What it does for your business

Read the following and you'll understand why you need to comply. First of all, the scorecard is a tool designed to measure your BEE compliance status and is based on seven elements (see table below). Each element is measured based on a points scoring system. The complexity of the scorecard is determined by the turnover/revenue of a company.

Note that the smallest companies – EME (Exempt Micro Enterprise) – are exempt from all forms of BEE compliance. Their annual turnover is less than R5 million and they are automatically allocated a good BEE score that is level 4, or level 3 if they are black owned.

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Small companies - QSE (Qualifying Small Enterprise) – are enterprises with an annual turnover of between R5 million and R35 million. They will need to prepare a BEE Scorecard, but can choose the 4 best elements out of the 7 elements.

The large, generic companies with an annual turnover above R35 million will need to comply with all seven elements of broad-based black economic empowerment.

(Remember, B-BBEE is about broad-based activities that benefit black people. This includes African black, coloured or Indian people who ARE South African citizens by birth or became a South African citizen before 27th April 1994. NB the definition of coloured now also includes Chinese.)

According to Econobee.co.za, BEE compliance is measured by means of a scorecard (a broad based scorecard). The scorecard is based on various elements and your company is measured out of a maximum of 100 points (in some cases it is possible to obtain more than 100 points).

Thus, the BEE Codes of Good Practice is a government document that describes how the scorecard works. Note that the elements on which you are rated is what make BEE broad-based. It covers various aspects of the economy, society and the company.

Here are the seven elements in the new BEE code

1. Ownership – this measures the percentage of shares in the business that are owned by black people (as per the definition above).
2. Management – the directors and top management of the business.
3. Employment equity - the employees in the business.
4. Skills development – this measures the amount of money spent of training of black employees.
5. Procurement – your suppliers and their scores.
6. Enterprise Development – your spend on helping other black owned enterprises.
7. Socio-Economic Development – your spend on assisting charitable organisations.

tTo earn BEE points on Preferential Procurement, your company will need to ask its suppliers for their BEE scorecard. In other words, one company will ask another company for their scorecard until all companies have a BEE scorecard of their own.

The only direct reason you will need a scorecard is because your customers are asking for one. If you don't respond you will not be penalised legally but rather potentially not get the business you desire, writes Econobee.co.za.

A Scorecard = business
Non Compliance = less business/no business.

Keep in mind that B-BBEE is a ten year process and that producing a scorecard isn't something you achieve in the blink of an eye, but in many years since it implies the idea of getting a score and improve it over a larger period of time.

"Remember – BEE and becoming BEE compliant is a long term goal, you can't become BEE compliant instantly. You need to prepare and work on the scorecard. When you are ready, becoming BEE compliant will become part of the daily running of your business," explains Econobee.co.za..

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