From June 2019, a multitude of articles have been posted online followed by updates on various social media platforms informing all companies operating in South Africa to take note of the B-BBEE Amendments to the 2013 General Amended Codes which are/were effective from 01 December 2019. These have subsequently been replaced with reminders on your financial period coming to an end and that compliance with these amendments are vital to maintaining or improving your overall B-BBEE Level, yet to date very few companies are aware of the impact the new amendments will have as well as what it means for your bottom line, budget and desired B-BBEE Level.
To assist, we have liaised with various SANAS accredited B-BBEE Verification Agencies to confirm their own interpretation and methodology as well as to obtain details of the feedback they have received from the DTI, The B-BBEE Commission and SANAS. Based on the past two months following the implementation of the new amendments and taking into account all the information received, we thought it best to compile a short summary highlighting the main changes and associated risks.
The New Amendments:
To recap, on 31 May 2019, the DTI issued four amendments all of which effective from 01 December 2019, being:
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Applicable to the general principles, the Amended Code Series 000, Statement 000,
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For the Skills Development element, the Amended Code Series 300, Statement 300,
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For the Enterprise- and Supplier Development element (which includes Preferential Procurement), the Amended Code Series 400, Statement 400 and
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In terms of all the definitions, the Amended Schedule 1.
Scope and Application:
Though the new amendments include element scorecards applicable only to Large Enterprises which are verified in terms of the 2013 General Amended Codes, the DTI has confirmed that the new amendments specifically in terms of the Amended Schedule 1 should also be applicable to Qualifying Small Enterprises (QSE’s) and Exempt Micro Enterprises (EME’s) i.e. if any phrase or term which was previously vague and/or not defined in detail, the Amended Schedule 1 will take precedence. Sector Codes remain unchanged however these will most likely in time be amended.
As such, any company verified in terms of the 2013 General Amended Codes need to be aware of the following changes in order to amend their B-BBEE policies and/or strategies as well as to make the required qualifying contributions needed to maintain their current B-BBEE level:
For Empowering Supplier Status:
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Despite the new amendments reintroducing Empowering Supplier Status and emphasizing the required criteria which need to be met by QSE’s and Large Enterprises, the DTI has confirmed that its notice issued on 28 October 2016 is still applicable and should be enforced. Notice 708 of 2016 allows for all companies verified on/after 01 May 2016 to be automatically recognised as being Empowering Suppliers.
For Skills Development:
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The definition of “Critical Skills” has been amended so that it specifically refers to those skills identified as being critical by the relevant SETA. Based on this it is vital that companies are vigilant when applying for discretionary grants, signing bursary agreements, contracting with external training providers to either upskill their own employees and/or to source unemployed Black disabled learners, as the said training programme would need to be identified by the applicable SETA as a critical and/or scarce skill. It is still unclear, whether every training programme and/or intervention needs to be listed as “critical” however, most SANAS B-BBEE Verification Agencies will (all depending on whether the required criteria has been fulfilled) still recognise a company’s skills claim if at least one training programme is listed by their applicable SETA as a critical and/or scarce skill, and
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In order to obtain the five bonus points available, “Absorption” has been defined to refer to long term employment of the Leaner, Intern or Apprentice once they have successfully completed the said training programme. The re-enrolment of the learner from an entry level learnership to a more advanced learnership (i.e. after successfully completing Business Admin NQF Level 1, the learner is re-enrolled on Business Admin NQF Level 2), extending the duration of the learnership programme to ensure that the learner can complete the programme successfully and/or a mere contractual promise stipulating that upon the successful completion of the current programme he/she will be re-enrolled, no longer qualifies.
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For Large Enterprises, the changes to the scorecard could provide some relief for those with either budget constraints or limited office space. With only one scorecard item referring to the number of Black People participating in Learnerships, Apprenticeships and Internships, there is no longer a need to differentiate between employed or unemployed learners nor is a large number of learners (employed and unemployed) required. For example, a company which operates nationally with 100 permanent employees on payroll previously needed to enrol 7 employed and 7 unemployed learners to obtain maximum points being 8.00 out of 8.00. Based on the new amendments, only 9 learners are required to obtain a perfect score of 6.00 points out of 6.00. The costs associated with the 5 additional learners and their learnership programmes, can therefore be utilised for other initiatives albeit skills related or not.
For the scorecard item Preferential Procurement:
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Unfortunately thus far only Large Enterprises will be affected by the changes to this applicable scorecard. For the line item referring to Procurement Spend with 51% or more Black Owned suppliers, the target has increased from 40% for 9.00 points to 50% for 11 points. Though the increase in itself is problematic, the end result will be ruinous for most companies. To clarify, being a priority element, a sub-minimum of 40% of the total points available (excluding bonus points), needs to be obtained in order to avoid the discounting principle whereby your company’s overall B-BBEE Level is discounted with one level i.e. a Level 4 becomes a Level 5. Obtaining and maintaining the points required to meet the initial 40% sub-minimum (being 10.00 points out of 25.00 points) was troublesome for most companies including multinationals and those working predominantly with parastatals or state owned entities, meeting the new sub-minimum being 10.80 points out of 27.00 points, will be an impossible feat resulting in a magnitude of companies being discounted.
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With this element being the driving force behind B-BBEE, adopting a Procurement Policy is the most logical yet essential tool that can benefit your company in not just keeping track of its local suppliers and what their respective B-BBEE level is, but also to assist your company in its document management by keeping record of the actual B-BBEE Certificates and Amended Codes Affidavits obtained thus far.
For the scorecard items Enterprise- and Supplier Development:
It is important to note that the beneficiaries for both scorecard items have been redefined i.e.:
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A potential or current beneficiary is an EME, QSE or a Large Enterprise with at least 51% direct Black and/or 51% direct Black Women Ownership provided that when the Large Enterprise was assisted, it qualified as either an EME or a QSE (this provision is applicable for five years from the date of when the beneficiary was first assisted).
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For Supplier Development, the beneficiary needs to be an actual supplier whereas for Enterprise Development, the beneficiary can be any company formally trading and/or operating as a business but it should not be listed as a supplier at the time of the Enterprise Development contribution.
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If a company is first assisted in terms of Enterprise Development, after some time loaded as a supplier and then thereafter assisted in terms of Supplier Development, it is possible for the same company to qualify as a beneficiary under both scorecard items as the contributions and timeline thereof will support a claim for the one bonus point for “Graduation”. This scenario including the associated benefits are however once off and limited to your company’s measured financial period, if utilised a new Enterprise Development beneficiary will need to be identified for the next financial period.
In closing, it is important to note that the DTI has not issued any form of an Interpretive Guide or Manual. As such working closely with your B-BBEE Consultant as well as your selected B-BBEE Verification Agency is critical to maintaining your current B-BBEE Level as although all B-BBEE Verification Agencies are governed by the same accreditation body (SANAS), their respective interpretation and methodology differs from agency to agency.
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