BROAD-BASED BLACK ECONOMIC EMPOWERMENT P R E S E N T E D BY A L E - - PowerPoint PPT Presentation

BROAD-BASED BLACK ECONOMIC EMPOWERMENT

P R E S E N T E D BY A L E X I S S A C K S 1 9 M A R C H 2 0 1 3

BROAD-BASED BLACK ECONOMIC EMPOWERMENT

• 1. What is B-BBEE?
• 2. Definition of Black People
• 3. Compliance Requirements
• 4. Codes of Good Practice
• 5. Scorecard Points and B-BBEE Recognition Level
• 6. The Seven Elements
• 7. Scorecards
• 8. The B-BBEE Calculations
• 9. Sector Charters
• 10. Fronting
• 11. Practical B-BBEE Tips
• 12. A summary of proposed changes

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DEFINITION OF BLACK PEOPLE

Black means African black, coloured or Indian people who are South African citizens by birth or descent or who became South African citizens before 27th April 1994. NB the definition of coloured now also includes Chinese.

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WHAT IS B-BBEE?

B-BBEE refers to Broad-Based Black Economic Empowerment. It encourages companies to help transform the country with broad-based activities that benefit black people by having access to more economic opportunities. By maximising your BEE status, you will be able to:

• Provide a competitive edge independent of your
• rganisation’s size,
• Encourage large companies to invest in a compliant company,
• Assist in unemployment and poverty in the long term.

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COMPLIANCE REQUIREMENTS

BEE compliance is measured by means of a scorecard. The scorecard is based on various elements and your company is measured out of a maximum of 100 points (in some cases it is possible to obtain more than 100 points). The BEE Codes of Good Practice describe the mechanisms of the scorecard. The seven rating elements make BEE broad-based. They cover various aspects of the economy, society and the company.

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CODES OF GOOD PRACTICE

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SCORECARD POINTS AND B-BBEE RECOGNITION LEVEL

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THE SEVEN ELEMENTS

1. Ownership - measures the percentage of shares in the business that are

• wned by black people.

2. Management – measures the black directors and top management of the business. 3. Employment Equity – measures the black employees in the business. 4. Skills Development - measures the amount of money spent on training of black employees. 5. Procurement – measures your suppliers and their BEE scores. 6. Enterprise Development - your spend on helping black owned enterprises. 7. Socio-Economic Development - your spend on assisting charitable

• rganisations with black beneficiaries.

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Qualifying Small Enterprise’s (QSE’s) Qualifying Small Enterprise’s (QSE’s) can select any four

• f the seven elements. Their annual turnover is typically

greater than R5 million but less than R35 million. Generic Enterprises need to comply with all seven elements of the scorecard. Their annual turnover is typically above R35 million. * The exceptions are highlighted in your notes for the different sector scorecards.

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SCORECARDS

SCORECARDS

Exempt Micro Enterprises (EME’s) Total Annual Revenue typically of R5m or less. Deemed to be a “Level 4 Contributor” (100% Recognition Level). If more than 50% is owned by Black people, the entity is promoted to Level 3 Contributor (110% Recognition Level).

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SCORECARDS The QSE Scorecard

The QSE scorecard has the following components and points available:

SCORECARDS The Generic Scorecard

The Generic Scorecard has the following components and points available:

THE B-BBEE CALCULATIONS

The calculations are simple – in each instance you have an

• indicator. The indicator will have a target and a number of

points available – you need to reach the target to earn the points. Calculation Example Socio-economic Development (SED): Target – spend 1% NPAT on black people for SED = 5 points; Actual – spent 0.5% NPAT Therefore, 0.5%/1% NPAT * 5 points = 2.5

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SECTOR CHARTERS

* The turnover thresholds are highlighted in your notes for the different sector scorecards.

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FRONTING

‘Fronting means a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes. Fronting commonly involves reliance on data or claims of compliance based on misrepresentations of facts, whether made by the party claiming compliance or by any other person.’ (South Africa. Department of Trade and Industry, no date)

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PRACTICAL B-BBEE TIPS

• 1. When verifying Socio-Economic Development, the following

evidence is required to support your claim for points: Proof of the contribution. A letter from the head of the beneficiary organisation confirming receipt and confirming the percentage black beneficiaries.

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• 2. When verifying Enterprise Development, the following

evidence is required: An agreement between both parties confirming the arrangement. Documentation confirming the B-BBEE status and qualifying category of the entity (e.g. BEE certificate, proof of turnover, proof of black ownership, etc) Documentation proving that the contributions have been made e.g. bank statements showing payments, receipts, letter of acknowledgement from beneficiary, etc.

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PRACTICAL B-BBEE TIPS

• 3. These are some of the most common ways to lose points on

your scorecard: Training takes place outside of the measurement period Lack of training for black employees Inadequate record keeping Unable to prove attendance at training No Learnership contracts Unable to prove amount spent on training No records of internal training

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PRACTICAL B-BBEE TIPS

A generic company must comply with the following to be rated for these elements:

Registration with applicable SETA Development of a workplace skills plan If you are a ‘designated employer’ according to the turnover thresholds for your industry (as indicated in Schedule 4 of the Employment Equity Act), no points will be awarded for Employment Equity, unless you have submitted the required EEA2 and EEA4 reports to the Department of Labour.

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PRACTICAL B-BBEE TIPS

• 4. Sector codes apply from the day they are gazetted as a

final sector code. This means that you need to be aware of any new codes in the final stages of gazetting, as they may affect your industry scorecard, retrospectively.

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PRACTICAL B-BBEE TIPS

• 5. Certain of the elements are time-based and certain are

based on the financial period. The elements of skills development, preferential procurement, enterprise and socio-economic development are based on the financial period. The remaining elements, ownership, management control and employment equity, are all measured at the date of verification.

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PRACTICAL B-BBEE TIPS

A SUMMARY OF THE PROPOSED CHANGES TO THE CODES OF GOOD PRACTICE

A QSE will now be defined as an entity whose turnover is between R10m and R50m. However, there will also now be little difference between the verification of a QSE or a Generic, other than the QSE will only be required to meet a minimum target of 40% of the compliance target on 2 of the 3 priority elements to avoid an automatic drop

• f 1 level in its Recognition Level.

The Generic Enterprise will be required to meet a minimum target

• f 40% of the compliance target on all 3 of the priority elements to

avoid an automatic drop of 2 levels in its Recognition Level.

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An EME will now be defined as an entity whose turnover is less than R10m and will still have an automatic Recognition Level of 4. Where the entity is more than 50% black owned, it will be granted an automatic Recognition Level of 2 and where the EME is 100% black owned, it will be granted an automatic rating of Level 1.

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A SUMMARY OF THE PROPOSED CHANGES TO THE CODES OF GOOD PRACTICE: OCTOBER 2012

There are some significant changes in the details and calculations in each element and the requirements for inclusion such as:

• The Recognition Levels will change and more points will be

required to be recognised at each Level other than Level 1.

• All businesses will need to achieve a minimum of 40% of the

compliance targets for the Ownership element that is 25 points of 105, as it is a priority element for QSE’s and Generics.

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A SUMMARY OF THE PROPOSED CHANGES TO THE CODES OF GOOD PRACTICE: OCTOBER 2012

• Junior Management will no longer be recognised as a category

for Management Control.

• The Preferential Procurement target for spend on all suppliers

will increase from 50% in February 2012 to 70% to 80%.

• Imports will no longer be allowed to be excluded from the

Preferential Procurement Spend calculation.

• Only Value-Adding Suppliers (an entity that is VAT registered

and whose NPAT plus salaries is greater than 25% of turnover) will be eligible for recognition in the Preferential Procurement Spend calculation?????????

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A SUMMARY OF THE PROPOSED CHANGES TO THE CODES OF GOOD PRACTICE: OCTOBER 2012

• 66% of the contributions to Enterprise Development must be

made to EME’s or QSE’s that are more than 50% black owned and who are in the company’s supply chain.

• The target for Skills Development spend will increase from 3%
• f leviable amount to 6% of leviable amount.
• Only training spend on black employees who are on formal

learning programmes that will be assessed by an accredited body will be eligible for rating.

• Informal training and on the job training costs will no longer

be included in the target spend.

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A SUMMARY OF THE PROPOSED CHANGES TO THE CODES OF GOOD PRACTICE: OCTOBER 2012