The Basics of the Amended Codes of Good Practice: Part I

Going into the new year, Keith Levenstein, CEO of EconoBEE, a BEE advisory firm, discusses the key issues of the Amended BEE Codes expected to be implemented from October 2014.

On the 11th October 2013 the DTI issued the Amended BEE Codes. This was a long time coming and is seen as a new step for BEE in South Africa. The original BEE Codes of Good Practice were first gazetted on the 9th February 2007.

Government realised that the BEE Codes needed to be updated to address certain issues and loopholes that companies were exploiting. These are some of the important changes:

The codes no longer contain seven elements but rather five: Ownership, Management Control, Skills Development, Enterprise and Supplier Development, and Socio-Economic Development.

There are also new priority elements – these are Ownership, Skills Development, and Enterprise and Supplier Development. One of the most important aspects is that a company will drop one level if it does not achieve certain minimum requirements in the above three priority elements.

 

A Qualifying Small Enterprise (QSE), defined as having a turnover between R5-million and R35-million pa, must meet the minimum requirements in their main priority element, namely Ownership, as well as one other priority element, otherwise they will drop a level.

The turnover threshold to qualify as an Exempt Micro Enterprise (EME) has changed from R5-million to R10-million and for a Qualifying Small Enterprise it has changed from R35-million to R50-million.

If a company is an EME it is automatically a Level 4 contributor. If the company is more than 51% black-owned then it is a level 2 contributor and if the business is 100% black-owned then it is a level 1 contributor.

The recognition table has also changed. It is possible to earn the same points, or even slightly more, but it does mean that most companies may fall a level or two.

The DTI is attempting to use BEE to make a greater impact on the economy and to address issues such as unemployment. The Skills Development element has changed in that previously businesses were only allowed to train their employees. Now, businesses are able to train outside people, even unemployed people, for them to gain a qualification, skills or experience.

An interesting addition in regards to Skills Development is that if you assist unemployed learners with training to obtain employment in the industry, upon completion of their learnership, you will be allowed to claim additional bonus points for Skills Development.

BEE is a process and will be part of business in South Africa for many years to come. South Africa is still dealing with huge issues of unemployment and a struggling economy. BEE aims to address some of these issues in order to make South Africa a better and more prosperous place to live in.

We believe that implementing BEE shows that your company is committed to being a part of the positive change in South Africa.

About EconoBEE

BEE is a complex business task which consumes a considerable amount of time and resources. It needs a strategy planned with commercial logic, which is then properly implemented and monitored in a way that makes complete business sense. Choosing the appropriate competitive B-BBEE strategy is a sophisticated endeavour requiring knowledge and familiarity with the minute intricacies of the B-BBEE Act and Codes of Good practice. The lack of expertise in many companies countrywide hampers the successful implementation of the B-BBEE Codes in their operations.

EconoBEE’s managed services offer a high quality streamlined step-by-step approach to becoming BEE compliant.

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