THE
BEECHAMBER
CONSTRUCTION SECTOR CODE RULES OF ENGAGEMENT
FOR EXEMPTED MIRCO ENTERPRISES & QUALIFYING SMALL ENTERPRISES WITH AT LEAST 51% ‘BLACK’ OWNERSHIP
2022
Amended Construction B-BBEE Sector Codes of Good Practice
General
CONSTRUCTION SECTOR CODE
RULES OF ENGAGEMENT
FOR EXEMPTED MIRCO ENTERPRISES &
QUALIFYING SMALL ENTERPRISES WITH AT LEAST 51% ‘BLACK’ OWNERSHIP
The Construction Sector’s performance directly affects manufacturing,
mining, transportation, real estate and business services; thus, it significantly
contributes to GDP and job creation. Since publishing the Amended
Construction Sector Codes of Good Practice (CSC) on 1st December 2017,
there has been a negative downturn in public and private investment in the
sector. Adding to the sector’s plight were the Covid-19 restrictions that had a
devastating impact, resulting in 2020 being one of its worst-performing years. Recognising the sector’s plight, Finance Minister Enoch
Godongwana, in his budget speech in February 2022,
announced that the Government would accelerate its
investment in infrastructure with a provisional allocation of R17.5b.
According to the B-BBEE Commission’s annual National
State of Transformation and Trend Analysis Sectorial Report,
the construction sector performed consistently. It fared
well in meeting its transformation goals, despite
unprecedented challenges.
STATS SA revealed that between 2016 and 2020, there was a
steady decline in South Africa’s public sector capital expenditure.
Although local government capital recovered briefly during 2019,
there was an average decrease over the same period. During
this period, municipalities had less capital expenditure, mainly
due to the completion of large-scale projects in 2019. By
the same token, for many municipalities,
there was a decrease in capital
expenditure due to delays
in procurement, Covid-19
restrictions and protest action.
According to STATS SA, the
sector’s annual growth in industry
value and GDP revealed a negative percentage growth year-on year from 2017. Due to the impact of COVID-19 restrictions,
2020 declined by 19.8%. The sector fared better in 2021, with a
negative growth of 1.9%.Although total employment in South Africa decreased by
409,000 between the third quarter of 2020 and 2021, STATS
SA revealed an increase of 78,000 jobs in the sector. According
to the 2022 Construction Industry Outlook survey conducted
by RIB CCS in Africa and the Middle East, the forecast for the
sector is optimistic. Results confirm that in the final quarter
of 2021, 68% of respondents expect an increase in project
revenue. STATS SA for the same period revealed that the
value of recorded building plans passed - at current prices -
increased by 44,5%, that is R2 479,8m. Comparing January
2022 to the previous year, the selected building statistics of
the private sector, as reported by local government institutions,
shows that there was a consecutive 12-month growth.
The CSC aligns with the Amended Generic Codes of Good
Practice (Generic Codes); however, it holds additional requirements
to address the identified challenges in the sector. The objective
is to enhance the capacity of ‘Black’ Contractors, ‘Black’
Built Environment Professionals, ‘Black’ Material
Suppliers, Industry Workers and the community
at large to transform and increase productivity and
transformation in the sector.
The Construction Sector Charter Council (CSCC) was
established in 2009 with the mandate to oversee and monitor
the implementation of the CSC. Annually it provides a report
highlighting the progress of transformation in the sector. Construction Material Suppliers are measured against the same scorecard as Contractors. The measurement for both is against given
thresholds, targets, weighting points and methodology. However, an organisation can only measure Construction Material Suppliers and
Contractors against one another where it can prove that there is compulsory legislative compliance and/or a licensing requirement linked to
that specific sectorConstruction Material Suppliers & Contractors
Classification BO QSE ≥ 51% Larger EME EME
B-BBEE Certificate/Affidavit B-BBEE Certificate B-BBEE Certificate Affidavit
Financial Threshold > R10m but < R50m ≥ R3m but ≤ R10m < R3m
Automatic Levels Awarded /
Enhanced Recognition
100% BO = Level 1
≥ 51% BO but < 100% = Level 2
100% BO = Level 1
≥ 51% BO but < 100% = Level 2
≥ 30% BO but < 51% = Level 4
< 30% BO = Level 5
100% BO = Level 1
≥ 51% BO but < 100% = Level 2
≥ 30% BO but < 51% = Level 4
< 30% BO = Level 5
Scorecard Elements Applicable Ownership
Skills Development
Preferential Procurement &
Supplier Development
> Preferential Procurement
> Supplier Development
Ownership
Skills Development
Preferential Procurement &
Supplier Development
> Supplier Development
Ownership
Minimum requirements Must achieve 40% sub-minimum requirements for Skills
Development on the QSE Scorecard to avoid the application of
the Discounting Principle.
Enhancement opportunity of up to two Status Levels.
Discounting Principle not
applicable
Nominal Verification Fees apply
to Contractors as prescribed by
the CSCC.
* Recommended fees include all related
costs, including travel.
* Reasonable fees are justifiable for
complicated Ownership structures.
* Costs exclude VAT.
Cost for those opting not to enhance No cost for an Affidavit
R850 until Nov 2022
R900 Dec 2022 until Nov 2023
R850 until Nov 2022
R900 Dec 2022 until Nov 2023
Cost of a B-BBEE Verification in order to enhance
R4,000 until Nov 2022
R4,300 Dec 2022 until Nov 2023
R1,400 until Nov 2022
R1,470 Dec 2022 until Nov 2023
R850 until Nov 2022
R900 Dec 2022 until Nov 2023
Built Environment Professionals activities include, but are not limited to:
> Planning, designing and costing out of construction projects in a built environment;
> Project management and configuration of a construction value chain including the environment;
> Energy, industrial, property, transport and infrastructure; and
> Consulting engineering practices, architects, quantity surveyors and town planners. Does the Discounting Principle
apply to the CSC?
The Discounting Principle is triggered if an organisation does not
meet the 40% sub-minimum requirements for identified Priority
Elements. The application of the Discounting Principle means
an organisation loses one Status Level on its overall Scorecard.
If the Discounting Principle is applied, it must reflect on an
organisation’s B-BBEE Certificate.
The Discounting Principle does not apply to EMEs with a
turnover of less than R3m eligible to present its B-BBEE
Credentials on a prescribed Affidavit as outlined in the CSC.
Does enhancement of a Status Level
apply to the CSC?
All EMEs and BO QSEs may choose to be measured on a
complete QSE Scorecard to increase their Status Level and
Preferential Procurement Recognition. Alternatively, achieving
enhancement of up to two Status Levels can be done by opting
for one or both of the following methods
Enhanced Recognition all EMEs
The CSC affords enhancement to a more favourable Status
Level for all EMEs measured against the QSE Scorecard and
meeting the requirements. Alternatively, it may choose one or
both of the following avenues:
> One Status Level enhancement for achieving total
points, excluding Bonus Points for Skills Development
expenditure. The criteria for recognition appears as
indicator 1.1. in the QSE Skills Development Scorecard.
> One Status Level enhancements for achieving total
points for the Supplier Development Expenditure -
indicator 2.1 - of the QSE Preferential Procurement and
Supplier Development Scorecard.
Enhanced Recognition BO QSEs
Automatic enhancement is due to BO QSEs if they are
measured on the complete QSE scorecard and meet the
requirements. Alternatively, they can choose one or both of
the following avenues:
> One Status Level enhancement for achieving total
points, excluding Bonus Points against the Skills
Development indicators 1.1, 1.2, and 1.3 of the QSE
Skills Development Scorecard.
> One Status Level enhancements for achieving
total points against the complete QSE Preferential
Procurement and Supplier Development indicators
1.1, 1.2, 1.3, and 2.1
Ownership
The Ownership element is measured on the date of an
organisation’s B-BBEE Verification. The CSC awards all
EMEs and BO QSEs automatic Enhanced Recognition. The
calculation of ‘Black’ Ownership, in this case, must be through
the application of the Flow-Through Principle (FTP).
The CSC identifies African, Coloured and Indian People for
redress, collectively defined as ‘Black’ People’, a generic term
for those:
> Who are citizens of the Republic of South Africa by birth or
descent; or
> Who became citizens of the Republic of South Africa by
naturalisation -
i. Before 27th April 1994; or
ii. On or after 27th April 1994 and who should have been
entitled to acquire citizenship by naturalisation prior to
the date.
The CSC takes the Rights of Ownership held by ‘Black’ People
in South Africa.
The calculation for multinationals is the value of an
organisation’s South African operations only.
An additional requirement for BEPs is that their total
shareholding includes individuals that are both:
1 Professionally registered with any of the statutory
professional councils in the BEP environment in South
Africa, and
2 Form part of an organisation’s Executive Management
held within the ‘Top Management’ definition. In the
context of the CSC, Executive Management includes
‘Top Management’ as outlined in the Employment Equity
Regulations, which provide for ‘Executive Directors’ and
‘Other Executive Management’.
If a holding company has 50% ownership in a BEP, the
Ownership scorecard will only recognise the ‘Black’ Ownership
that meets the requirements in the aforementioned points 1 and
2. In not meeting these requirements, a BEP will not qualify for
Enhanced Recognition or to earn Bonus Points.
Providing training that aligns with the Learning Programme Matrix, typically held outside South Africa, done locally with foreign service
providers, meets the requirements. However, such training must align with the Skills Matrix for a ‘professional registration body’ and be
accredited or registered with a formal learning institution. All such foreign service providers must be accredited, registered or formally
approved as a statutory occupational or professional body in South Africa or abroad.
Preferential Procurement and Supplier Development
The QSE Preferential Procurement and Supplier Development Scorecards apply to Larger EMEs and BO QSEs:
Category Preferential Procurement
Weighting
Points Target
1. Preferential Procurement
1.1
*BO QSEs
B-BBEE Procurement Spend from all empowering suppliers based on the B-BBEE
procurement recognition levels as a percentage of the total measured procurement
spend.
13 60%
1.2
*BO QSEs
B-BBEE Procurement Spend from empowering suppliers that are at least 51% ‘Black’-
owned based on the B-BBEE procurement recognition levels as a percentage of the
total measured procurement spend.
5 17.5%
1.3
*BO QSEs
B-BBEE Procurement Spend from empowering suppliers at least 35% ‘Black’ Woman owned based on the B-BBEE procurement recognition levels as a percentage of the
total measured procurement spend.
4 7.5%
2. Supplier Development Contributions
2.1
*Larger EMEs/ BO QSEs
Annual value of all qualifying Supplier Development Contributions made as a
percentage of the target.
7 1% of NPAT
Total 29
Preferential Procurement
Like all other sets of Codes, the CSC approach to Preferential
Procurement is Total Measured Procurement Spend (TMPS)
driven. It relates to a total procurement spend during a
Measurement Period, whereby spend is either included or
excluded based on the nature of the procurement. This element
applies to BO QSEs when they opt for enhancement.
Spend which constitutes TMPS:
> Cost of Sales;
> Operational Expenditure;
> Capital Expenditure;
> Public Sector Procurement;
> Monopolistic Procurement;
> Third-Party Procurement;
> Labour brokers and independent contractors;
> Pension and medical aid contributions;
> Trade commissions;
> Empowerment related expenditure;
> Imports;
> Intra-group procurement; and
> All salaries, wages and allowances paid to non-South
African employees.
The Preferential Procurement Scorecard aims to support and
strengthen the localisation of the Preferential Procurement
Scorecard. Thus the following are exclusions allowed from an
organisation’s TMPS:
> Taxation;
> Salaries, wages, remunerations and emoluments;
> Pass-through third-party procurement;
> Empowerment related procurement;
> Imports of specific goods and services;
> Intra-group procurement;
> Non-discretionary procurement, whereby the requirement
is a pre-requisite to the contractual obligation. Procurement
from ‘Black’-owned and ‘Black’ Woman-owned EMEs
and BO QSEs is encouraged by the requirements of the
Preferential Procurement Scorecard. The objective is to
support job creation and participation.
Supplier Development Contributions
The Construction Sector Charter Council encourages
organisations to align with Supplier Development initiatives
to promote Government’s localisation vision, including value adding programmes within an organisation’s supply chain.
The recognition of these qualifying contributions is a percentage
of an organisation’s annual Net Profit After Tax (NPAT).