Broad based black economic empowerment

*Source BDO (extract)

Please note that every effort has been made to ensure that the advice given in this educational material is correct. Nevertheless, that advice is given purely as guidance readers to assist them with particular problems relating to the subject matter of the educational material, and African Venture Group will have no responsibility to any person for any claim of any nature whatsoever that may arise out of, or relate to, the contents of this educational material.

Redress imbalance economy brought about by apartheid

The department of trade and industry (DTI) was tasked with bringing black people into the economy with the gazetting of the BEE Act in 2003. The first phase of BEE brought about targets for the involvement of black people in the ownership and management control of a company.


The Codes of Good Practice, gazetted 4 years later in 2007, looked at a broader involvement of black people, bringing in targets for employment equity, skills development, preferential procurement, enterprise development and socio economic development. The codes provided a scorecard that companies could use to measure their progress. Also, they legislated that SANAS be authorised to assess, monitor and accredit verification agencies who could audit and verify these scorecards.


In 2013, the DTI gazetted the amended codes of good practice, which aimed at increasing the speed of transformation, by increasing/strengthening the targets for those areas where progress was seen to be slow.


Sector scorecards

The codes allow for industry sectors to come together and create a sector scorecard, for the purpose of taking into account any specific industry challenges or for speeding up transformation in these sectors. These currently include tourism, transport, AgriBEE, construction, ICT, financial services, marketing, advertising and communication (MAC), forestry and property sectors. These scorecards may have different thresholds and targets to the general codes.


Who is who?

DTI – the department of trade and industry is the custodian of the codes and has been mandated to develop, monitor and manage the codes, in their efforts to promote enterprise growth, empowerment and equity in the economy.”


SANAS – the South African National Accreditation System has the mandate to accredit and monitor verification agencies, who are then authorised to verify and issue BEE certificates.


B-BBEE Commission – their mandate is to oversee, supervise and promote adherence to the BEE Act in the interest of the public, which includes monitoring and reporting on progress, trends and issues, dealing with complaints.


ABP – the association of BEE professionals has been approved by the South African Qualifications Authority (SAQA) as a professional body and was formed as an independent national Membership Organisation in an effort to lead the Black Economic Empowerment (B-BBEE) Verification Industry in the transformation of the South African economy.


How does BEE work?

A company is measured on their contributions against the targets set out in the codes, based on their financial year. An accredited verification agency collects data, samples and verifies it and issues a scorecard and certificate, which is valid for a 12 months from date of issue.


Key principles

Points can only be awarded where evidence is available to back up the contribution.

Contributions that take the form of spend are measured based on the contributions that took place in the annual financial period, i.e. spend on skills development, procurement, etc.


Measurements towards human capital are based on current data, i.e. employees at the time of verification.


There are different scorecards for different sized companies, based on turnover thresholds. The scorecard and targets attached in this document relate to Generic sized companies under the general scorecard.


Elements


OWNERSHIP


This is a priority element.


Points are awarded for shareholding/voting rights in the hands of black people and their ability to take part in economic interest/the ability to earn a dividend or return on their investment.


The target for ownership is 25% plus 1 vote in the hands of black people. Pro rata points can be awarded.


There are additional points awarded for the involvement of black women and under economic interest, for the involvement of minority groups such as black youth, or black people in rural areas, etc. Also, there are targets for black people represented in employee ownership schemes and broad based ownership schemes.


The priority target is based on the net equity value of the shares in the hands of the black owners, taking into account the current value of the shares after any acquisition debt. The target in this element is to achieve a 40% subminimum, which equates to 10% of the shares in the company. Ownership is measured live as at the date of verification.


MANAGEMENT CONTROL


This element looks at 2 main areas in the company

 Board and executive management

 Employees in senior, middle and junior management.


EAP targets

The targets for senior middle and junior management are indicated on the scorecard and further broken down by the economically active population (EAP) targets as supplied by the Department of Labour from time to time. This effectively breaks the target into specific requirements for proportional representation across the race and gender groups, after adjusting for the approximately 10-11% of white people in the economy. For example, if the adjusted economically active population of South Africa shows that 46% of the EAP is black males, 43% black female, 11% coloured male, 10% coloured females 4% Indian male, 3% Indian female then your target for junior management of 88% should be made up as close as possible in those proportions.


Prerequisites

Employment equity reports EEA4 and EEA4 need to be filed with Department of Labour.

Management control is measured live as at the date of verification, based on the current payroll.


SKILLS DEVELOPMENT


This is a priority element.


This element measures spend on employees for skills development.


The target is broken down in to 2 main areas:

1. Spend on employees and disabled people

2. Number of employees and disabled people participating in learnerships, apprenticeships and internships, including unemployed people


Points are also awarded if all or some of the unemployed learners are absorbed into employment after the training as been completed.


Spend on internal training, training facilities, trainers, skills development facilitators, related admin costs and travel can be included, but are capped.


If spend on trainees was incurred for B, C or B training, the salary of the learner can also be counted towards your skills spend target.


Training outside of the country is not recognised, unless SAQA aligned.


Prerequisites for the awarding of points include the submission of workplace skills plans and annual training reports, training of skills identified by the SETAs as priority – for black employees.


The priority target is achieved if at least 40 of the points are earned for the scorecard, excluding the bonus points for absorption.


Skills Development is measured based on spend that occurred the 12-month financial period being verified.


ENTERPRISE & SUPPLIER DEVELOPMENT


This is a priority element.


Spend targets are measured against the Total Measured Procurement Spend or TMPS. This is a count of all spend, less allowable exclusions, such as depreciation, salaries and wages and certain imports.


This element consists of 3 sub-elements


1) Procurement

This is a measurement of spend with BEE compliant suppliers, with a specific focus on spend with 51% black owed and 31% black women owned suppliers. The target is based on a % of your total measured percentage spend, which is a total of all spend, less allowable exclusions such as salaries and wages, pass through expenditure, depreciation and certain government or monopolistic suppliers.

The following is a summary of which imported goods and services may be excluded from measured procurement spend:

a) Imported capital goods or components for value-added production in South Africa provided that:

a. there is no existing local production of such capital goods or components; and

b. importing those capital goods or components promotes further value-added production within South Africa;

b) Imported goods and services other than those listed above, if there is no local production of those goods or services including, but not limited to, imported goods or services that:

a. carry a brand different to the locally produced goods or services; or

b. have different technical specifications to the locally produced goods or services.

The Amended Codes further state that exclusion of the items listed in b above are subject to a localisation plan, which should include: - Clear objectives - Priority interventions - Key performance indicators; and - A concise implementation plan with clearly articulated milestones.


2) Supplier development spend

This is spend other than procurement of goods and services, which is aimed at assisting an entity with a turnover under R50 million and at least 51% black owed. This must be a supplier. Assistance can include monetary or non-monetary contributions in the forms of grants, loans, overhead costs, professional services, or time of your staff.


3) Enterprise development

This is spend other than procurement, which is aimed at assisting an entity with a turnover under R50 million and at least 51% black owed. This can be a supplier, but could be a non-related entity. Assistance can include monetary or non-monetary contributions in the forms of grants, loans, overhead costs, professional services, or time of your staff.


Spend for Supplier Development and Enterprise Development (ED) cannot be double counted. E.g. if R100 is spent, R50 can be recognised against Supplier Development and R50 towards ED, but only once each.


The priority target is achieved if at least 40% of the points are earned for each sub-section on the scorecard, excluding the bonus points.


ESD is measured based on spend and contributions that occurred on the 12-month financial period being verified.


SOCIO ECONOMIC DEVELOPMENT


This is the feel good element of the scorecard. Monetary or non-monetary contributions can be made towards income generating activities for black beneficiaries. At least 75% of the benefit must accrue to black beneficiaries. Assistance can include monetary or non-monetary contributions in the forms of grants, loans, overhead costs, professional services, or time of your staff.


ESD is measured based on spend and contributions that occurred on the 12-month financial period being verified.


GLOSSARY


Black people refers to African, Coloured, Indian and Chinese persons who are South African citizens by birth or by descent, or who were naturalised prior to the commencement of the interim constitution in 1993, or who would have been able to acquire citizenship by naturalisation prior to 27 April 1994 had it not been for the presence of the Apartheid policy.


EAP – the economically active population is a measurement of the number of people of each race and gender group who are employed in any given province. Employment and training targets are pro-rated against the actuals in each area.


Empowering supplier – this is a measurement of a set of specified initiatives companies are achieving, resulting in recognition as an empowering supplier or not. This is currently granted automatically for all entities.


For more information on how we can help your B-BBEE requirements contact African Venture Group

African Venture Group

1 Nollsworth Crescent, Umhlanga, Durban, 4051

 

National:

078 115 6607

International:

+27 78 115 6607

Email: info@africanventuregroup.co.za

B-BBEE level 2 rating

  • LinkedIn
  • Facebook
Contact Us

© by African Venture Group