B-BBEE - Broad Based Schemes
Karlien Dempsey, 03 Jun. 2015
Tags: bee codes, b-bee, broad based economic empowerment, bee codes, b-bee codes, bee amended codes, b-bee amended codes
On 8 May 2015 the Department of Trade and Industry (“DTI”) published its Statement on the Recognition of Broad-Based Schemes, Phase II of the Codes of Good Practice for Broad-Based Black Economic Empowerment (“the New Codes”), together with an additional Schedule with amendments and clarifications.
Statement on the recognition of Broad Based Schemes
The 8 May Statement was in response to the backlash from numerous sectors to the DTI’s 5 May 2015 Notice of Clarification published in Government Gazette No 38764 regarding Employee Share Ownership Programmes (ESOP) and Broad Based Ownership Schemes (BBOS).
Amongst other aspects (dealt with in our previous article) the Notice of Clarification stated that BBOS and ESOP are only eligible to score ownership points under the specific section for Economic Interest. The effect of this is that BBOS and ESOP schemes can only ever realise a maximum score of 3 points out of a total of 25 points under the Ownership element. Companies which have restructured their ownership by implementing BBOS and ESOP schemes, at great cost and allocation of resources, in order to comply with the Codes under the Ownership element, are left smarting.
In the 8 May Statement, the DTI noted the concerns relating to already implemented BBOS and ESOP’s schemes, and addressed the concerns by stating the following:
· The Notice of Clarification will not have retrospective effect. This means that B-BBEE deals where BBOS and ESOPS were concluded prior to 1 May 2015 will not be effected, and will still have full recognition;
· The DTI will appoint a Technical Task Team which will explore the appropriate balance between direct ownership and broad-based scheme ownership;
· This Technical Task Team will report to the Minister of DTI within 30 days;
· Upon the receipt of the recommendations, the Minister will provide further guidance. The final outcome may be to limit the ownership points attributable to BBOS and ESOP’s under the Codes.
Phase II, which came into operation on 1 May 2015, has recently been gazetted in Government Gazette 38766.
Phase II deals with the following:
· Code 000 Statement 003 – Developing and Gazetting of Sector Codes
· Code 000 Statement 004 – Scorecard for Specialised Enterprises
· Code 100 Statement 102 – Recognition of Sale of Assets, Equity Instruments and Other Businesses
· Code 100 Statement 103 – The Recognition of Equity Equivalents for Multinationals
· Code 600 Statement 600 – Measurement of Qualifying Small Enterprises (QSE)
Amendment of code 400: 5TH criterion for the empowering supplier
A Schedule was gazetted in Government Gazette no 38765. The Schedule came into operation 6 May 2015.
An Empowering Supplier, within the context of B-BBEE, is a B-BBEE compliant entity, which is also a good citizen, a South African entity, complies with all regulatory requirements of the country, and should meet at least three (if it is a large enterprise), or one (if it is a Qualifying Small Enterprise (QSE)) of the 4 criterion stipulated.
The Schedule introduces a 5th criteria: At least 85% of labour costs should be paid to South African employees by service industry entities. The addition of this criteria enables South African entities which conduct business locally to have a better chance of meeting the requirements of an Empowering Supplier.
Amendment of code 400: Eligibility as an EME
The DTI has published a standard form EME affidavit that EME’s can complete.
Now, an EME is required to obtain a sworn affidavit or Certificate issued by the Companies and Intellectual Property Commission (CIPC) on an annual basis confirming the following:
· Annual Total Revenue of R10 million or less and
· Level of black ownership
Amendment of code 400: Disclosure of discounting
If a Measured Entity does not meet the 40% sub minimum requirements in respect of any of the Priority Elements under the Codes, then only the discounted level shall appear on the face of the B-BBEE certificate, and not the level prior to considering compliance with the Priority Elements.
Amendment of code 400: Demographic representation of black people
The calculations for the demographic representation of Black People in Management Control and skills development has been updated.
These publications by the DTI have provided some extra clarity and assurance, but there are still many areas of concern which (hopefully) the DTI’s Technical Task Team’s findings and recommendations will address.
Once again, it will be a case of “watch this space” for further updates!
Internal Audit Manager at RSM Betty & Dickson Advisory Services (Pty) Ltd
Consultant: Henk Heymans, Editor in Chief: The Practical Accountancy Loose Leaf Service
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