The Minister of Trade and Industry, Rob Davies , unveiled the proposed revisions to the broad based black economic empowerment (BBBEE) codes of good practice yesterday and said they should help in speeding up the transformation of the South African economy.
The proposed revisions are out for public comment over the next 60 days and are expected to spark a robust debate as they come with radical changes which could see significant downgrading of BBBEE credentials of many corporations.
The changes include the tightening up of the BBBEE grading levels and introduction of sub minimums in three critical elements of the scorecard, including ownership, skills development and enterprise and supplier development. Corporations which fail to achieve sub minimums in the critical elements will have their overall score downgraded. The fact that the DTI propose to apply the codes retrospectively is likely to cause lots of noise in the markets.
Davies said the current generic scorecard contains seven elements and these have been reduced to five in order to align the elements more closely with the trajectory of the economic growth and development in the country, with a total of 105 points assigned to the five elements.
“All companies, except the exempted micro enterprises (EMSs) should comply with all the elements of the scorecard. There is also some adjustment to the points allocated and the qualification criteria. There is also an enhanced recognition of the status of black-owned micro enterprises,” said Davies.
Other critical changes include:
- Up scaling of the EME threshold from R5m to R10m
- Up scaling of the QSE band fromR5m-35m to R10-R50m
- Entities that are 100% black owned will automatically qualify for level 1 status
- Enterprise Development and Affirmative Procurement elements have been merged
He said BEE remains an imperative in South Africa. “Black economic empowerment is not just a social and political imperative. We need to make sure that in the country’s economy, control, ownership and leadership are reflective of the demographics of the society in the same way the political space does. That’s why we are saying BEE remains an economic imperative. We cannot expect to grow and develop as a country if the leadership of the economy is still in the hands of only a small minority of the society.”
He added that the talent pool that is available in the country will not be drawn in its totality if the majority of the country’s population was still excluded from the control of the economy.
“We will only be able to realise the number of benefits of the demographic and democratic changes when all our people have the opportunities which they ought to be having in terms of the values of our Constitution. So BEE is also an economic imperative,” added Davies.
Minister Davies said the revised Codes sought to amend the secondary legislation arising from the Broad-Based Black Economic Empowerment Act to make sure that people were truly and broadly empowered in South Africa, and genuine broad-based black economic empowerment took place. The amendment of the BEE Act and the revision of the Codes, said Minister Davies, would go a long way in plugging the gaps that businesses have taken advantage of such as fronting, “tick-box” compliance, and the exorbitant amounts of money that small enterprises have to pay to consultants to prove they were BEE compliant.
Davies said the launch of the Codes signalled the opening of a sixty-day period in which business and all other members of the public can submit their comments on the Codes for consideration before the amendments are finalised.
The proposed revisions were widely welcomed. Black Business Council (BBC) Xolani Qhubeka said the proposed revisions were a step in the right direction and warned that the codes should be the minimum standard for all sectors in the country’s economy. BEE analyst Ajay Lalu and the Black Management Forum jumped onto this point suggesting that the relationship between the codes and sector transformation charters was set to be a point of main contention. It seems that BEE activist are overwhelmingly in favour of making the codes to override charters.