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Deadline Looming – Proposed Changes To B-BBEE

by on 04/12/12 at 2:00 pm
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The B-BBEE programme, through a system of Preferential Procurement, results in companies effectively applying pressure through their supply chains while measuring their own contributions. The programme is driven by companies’ Preferential Procurement Policies.

Government as procurer of goods and services is also applying its own Preferential Procurement Policies. This policy inevitably impacts on all companies through various business networks and supply chains. All Preferential Procurement Policies rely on companies’ B-BBEE certificates as evidence of contributions to transformation.

In other words, depending on the nature of your business and the industry in which you are operating, it is very likely that at some point you will be asked to provide a client or prospective client with a B-BBEE certificate.

The current legislation (including all sector codes) which is up for review in 2017 has been challenging. Even business people who have embraced transformation and have been committing substantial resources to the program have been finding it difficult to increase and maintain sustainable levels of contribution. Notwithstanding the challenge, Business South Africa has made substantial progress in terms of implementation of transformation initiatives.

On 5th October 2012 the Department of Trade and Industry published, for public comment, proposed amendments to the B-BBEE Codes of Good Practice. This means that South Africans can submit comments on the proposals in order to influence the outcome of any amendments.

The proposed amendments include aspects that could have positive results such as:

  • increased turnover thresholds (exceeding inflation factors);
  • penalization clauses to curb unbalanced scorecards (although the current proposal is unrealistic and harsh some form of this could be considered)
  • some expansion and refinement of Skills Development;
  • a more pragmatic approach to Enterprise Development.

Unfortunately these are overshadowed by various absolute barriers that could nullify all progress made in terms of socio-economic transformation over the last 18 years of democracy. Especially as far as the (mostly voluntary) contribution of business South Africa is concerned. In general, the proposed amendments will be received as enormously discouraging by Business in South Africa.

The proposed amendments include extreme provisions such as:

  • a reduction of recognition by two B-BBEE Status levels if minimum threshold targets are not met on Priority elements, which include Ownership, Skills Development and Preferential Procurement and Supplier Development;
  • unrealistic national demographic targets in terms of workforce representation and Skills Development;
  • the restriction of preferential procurement recognition to suppliers who are registered for Value Adding Tax;
  • Enterprise Development with a one sided emphasis on supplier development; and
  • the exclusive limitation of Socio-Economic Development contributions to beneficiaries who meet the definition of black people.

The risk is that the most devoted of supporters of the transformation program will simply find supporting the initiative too onerous, too expensive and unfeasible with very little expectation of reasonable, sustainable success.

We have prepared a brief summary of each of the changes, followed by some comments. Please add any comments, ideas and suggestions. We will include these in our own submissions which will be included in the submissions of various lobby groups.

The deadline for submission of public comments is the 5th December 2012.

Ideate is one of South Africa's biggest business blogs, with a team of authors all of whom have had entrepreneurial experience. Ideate is read by entrepreneurs thinking BIG. Follow us on Twitter here. View more articles by Staff Reporter.

Tags: BBBEE, Economic Transformation, empowerment, Race

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