KPMG: Increased pressure to be BBBEE compliant

The results of the seventh annual KPMG Black Economic Empowerment (BEE) Survey have highlighted the increasing pressure on companies to comply with Broad-Based Black Economic Empowerment (B-BBEE).

This pressure is largely coming from customers, with about 42% of companies surveyed indicating that a B-BBEE contributor status of Level Four is what is expected of them by their customers. In addition to this group, a further 51% of respondents indicated that their customers require them to have contributor levels of at least three or higher.

While the expectation on compliance to at least this level is mainly driven by customers, competitors and legislation are the additional drivers influencing businesses to aim for higher contributor levels.

The Department of Trade and Industry (dti) has indicated that it intends for the Revised Codes of Good Practice to be gazetted as early as June 2013.The intention of revising the Codes is to enhance the implementation of B-BBEE in a meaningful and sustainable manner. Principles and guidelines contained in the Revised Codes are intended to facilitate and accelerate the implementation of B-BBEE. If one considers that 75% of respondents indicated that BEE in its current format is not achieving, or is only partially achieving, its objectives, then the revision of the Codes seems to be well-timed.

If the Revised Codes are gazetted in June, this will still give companies a 12 month transitional period to comply with the changes. Ninety one percent of respondents to the survey indicated that the Revised Codes in their current format will result in a lower B-BBEE rating for their companies. This may be the result of the introduction of automatic discounting of the B-BBEE score should an entity fail to meet the minimum requirements of the so-called Priority Elements (defined as Ownership, Enterprise and Supplier Development and Skills Development). The renewed emphasis by the dti on these elements of the scorecard is set to make BEE compliance still tougher for companies. The impact of the changes on Job creation and Skills development has been varied with mixed reactions from respondents. Overall, companies are divided as to whether the Revised Codes will have a positive impact on Government’s priorities in these two areas as outlined in the National Development Plan.

The Broad-Based Black Economic Empowerment Act and the Codes of Good Practice seek to achieve the general aim of making it possible for Black people, as defined in the Act, to realise meaningful participation in the economy by redressing the effects of apartheid which had excluded Black people from participation in the economy. While the KPMG survey helps in highlighting some of the challenges that are faced by companies as they participate in this process, it is clear that the attainment of the underlying objectives are fundamental in making South Africa a better place for all.

 A KPMG Statement

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