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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).


02 - Construction Sector Code - Rules of Engagement
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