Gazetted amendments tighten B-BBEE rulings
ITONLINE / 28 JUNE 2019 - 16.34 / STAFF REPORTER
The recently-gazetted amendments to the Amended Generic Black-Broad Based Economic Employment (B-BBEE) Codes of 2013 present immense potential for organisations to accelerate transformation whilst offering quality-education to enhance employment.
This is according to Roxanne Da Mata Gonçalves, transformation specialist and director of Strata-g Labour Solutions, who says: “The target for procurement from 51% Black-owned companies has increased from 40% of total procurement spend to 50% of total procurement spend, and the number of points awarded for such procurement has increased from 9 points to 11 points.
“This will see more organisations seeking business from 51% Black-owned suppliers and service providers, those reluctant to transform their organisations face losing out on a portion of their business and risk dropping two B-BBEE levels.”
But Da Mata Gonçalves says this approach may negatively affect certain industries where companies have no control over their procurement processes.
“Companies that operate in the import business often work through agents and cannot be selective of their suppliers. But this cannot be used as an excuse from inhibiting transformation. There are other areas in which transformation can take place, such as skills development,” Da Mata Gonçalves says.
The amended skills development target expenditure remains 6%, but the new changes have split the target into two. The first category includes 3.5% dedicated to learning programmes with a weighting which has been reduced from 8 to 6 points. A new sub-element for skills development expenditure on bursaries for Black students has also been introduced. The target for this sub-element is 2.5% for 4 points. Entities can also have 100% of their contribution towards the bursaries of Black people being recognised.
“The changes in the skills development category will encourage employees to seek quality career guidance and education. All sponsored skills development programmes must be registered with the Department of Higher Education, ensuring employees receive recognised quality education and are not there to simply be used as a tick-box exercise.
“This in conjunction with focusing on properly devised scarce skills will start addressing the assistances deficit in the market. Companies will no longer be checked against simply submitting training reports and plans, but will be scrutinised on whether they are performing critical and scarce expertise gap analysis.
But Da Mata Gonçalves says the government could also recognised companies which may not have sponsored the skills development of employees but hosted those workers through providing them with paid work experience.
She says organisations wishing to garner maximum points for skills development will have to reassess their internships and learnerships budgets to now also include bursaries, which had never been a focal point prior to the amendments.
“Recognition for skills development expenditure arising from informal and workplace learning programmes was previously limited to 15% of the total value of skills development expenditure. This limit has now been increased to 25%. The target for the number of Black people participating in learnerships, apprenticeships and internships as a percentage of total employees no longer includes a specific target for Black unemployed people and is now set at 5% for a total of 6 points,” says Da Mata Gonçalves.
Further amendments relate to the general principles of B-BBEE, where a deemed level two contributor status, which is available to 51% Black-owned exempted micro-enterprises (EME) or qualifying small enterprises (QSE) is now only available to such entities if they are at least 51% Black-owned on a flow-through-principle.
A flow-through-principle traces ownership measurement through the chain of ownership to a natural Black person (and not a Black-owned company), rather than the previous use of the modified flow-through principle which allowed for the participation of non-Black participants at one tier of ownership.
Similarly, the deemed level one contributor status, available to 100% Black-owned EMEs or QSEs are now only available to such entities if they are 100% Black-owned on a flow-through basis.
The previous definitions of B-BBEE had excluded 51% Black-owned companies that fell in the generic sphere (turnover of R 50 million and above) from being Enterprise Supplier Development beneficiaries. But the new amendments allow for the recognition of generic entities for a period of up to five years.
According to the Department of Trade and Industry, entities struggling with the 51% Black ownership structure can enter into the equity equivalence programme. Organisations would have to negotiate with the Department of Trade and Industry directly and be willing to spend 25% of their local revenue or 4% of the total revenue from its South African operations annually on programmes targeting investment or any other programme that promotes socio-economic advancement within the South African economy.
“The government is tightening its B-BBEE ruling to a point where transformation is no longer a mere buzzword but has become compulsory, with organisations that fall outside of a B-BBEE level one or two scorecard being disqualified from doing business with the state.
“If the gazetted amendments are effectively executed, the transformation will usher in quality education, addressing the various pitfalls in the job market whilst also fostering the country’s economic growth. The amendments are there to provide clarity, but navigating and applying the B-BBEE codes can prove tricky, but organisations can no longer afford to overlook transformation if they wish to continue doing business in South Africa,” Da Mata Gonçalves concludes.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER