PROPOSED CHANGES TO B-BBEE

Once again the Broad-Based Black Economic Empowerment [B-BBEE] Codes of Good Practice [Codes] have been brought under the spotlight.
On the 29^th March 2018, Draft Statement 000, Code Series 000 of 2018 for 60 Day Public Commentary was published by the Minister of Trade and Industry.
Four key amendments to the Codes were proposed:

1. The introduction of the Youth Employment Service [YES] Initiative and B-BBEE Recognition for company participation in it.
2. Principles for Unincorporated Joint Ventures.
3. Exempted Micro Enterprises [EME] and Qualifying Small Enterprises [QSE] – Enhanced Recognition.
4. The Enhanced B-BBEE Recognition Level for Generic Enterprises.

1. YES
This is an initiative to benefit black youth between the ages of 18 and 35 by creating work opportunities and providing experience for them within corporate and business environments. Once companies fully achieve the 40% sub-minimum in each of the B-BBEE priority elements of the scorecard – Ownership, Skills, and Enterprise & Supplier Development [ESD], or alternatively a 50% average across the three priority elements; they can then boost their recognition levels by up to two levels by meeting YES targets, which will score additional B-BBEE points under Skills Development and ESD.
2. UNINCORPORATED JOINT VENTURES
Unincorporated Joint Ventures [UJV] companies will be required to compile a consolidated verification certificate from each partner’s verified compliance data.  This means that joint venture partners will have to be measured as if they were a single entity. Each partner entity will be weighted proportionately according to their share in the joint venture so that when combined together they will result in a score of 100.
B-BBEE certificates will be valid for 12 months and will only be applicable to the particular project for which the joint venture has been formed.
3. EME AND QSE – ENHANCED RECOGNITION
4. GENERIC ENTERPRISES – ENHANCED RECOGNITION
The changes to both points 3 and 4 give indication towards a more aggressive drive of transformation through the enforcement of more black ownership and control whilst point 1 shows a drive to reward meaningful contribution to education and reduced unemployment.
The most significant proposed changes to the B-BBEE Codes would be:

• EME and QSE businesses would no longer qualify for enhanced B-BBEE recognition levels if their Black ownership is measured on the application of the modification flow-through principle.
• Generic enterprises (large businesses with an annual turnover of R50 million or more) with at least 51% Black ownership, would automatically qualify for a Level 2 B-BBEE rating without having to comply with the remaining elements of the B-BBEE Codes.
• Generic enterprises with 100% Black ownership, would automatically qualify for a Level 1 B-BBEE rating without having to comply with the remaining elements of the B-BBEE Codes.
• Generic enterprises would not qualify for enhanced B-BBEE recognition levels if they use any of the following to calculate their Black ownership:
  • The modified flow-through principle
  • The exclusion of ownership by organs of state or public entities
  • The exclusion of any B-BBEE facilitators
  • Private equity funds as contemplated in the B-BBEE Codes
  • The exclusion of mandated investments
  • The sale of assets, equity instruments and other instruments
  • Ownership following the sale/exit by black shareholders

Companies that have relied on the modified flow-through principle to gain points on their Ownership may now have to look to the other elements for additional points in order to retain or enhance their scores.
Have you considered the impact on your business?  Contact us on 0861 737 263 today to set up a meeting to discuss your B-BBEE.