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Impact of Amended B-BBEE Codes to South African Businesses

February 4, 2014

The amended Broad-Based Black Economic Empowerment (B-BBEE) Codes published on 11 October 2013 will prove problematic to the current BBBEE status of many South African businesses. This is according to John Botha, Labour Law Specialist.

The recent amended Codes include a number of provisions that are likely to place pressure on businesses’ B-BBEE verification scores as they attempt to retain their current status. The provisions which may prove challenging for businesses include:

•    The B-BBEE levels and the corresponding points required have been recalibrated. As an example, a score of 86 that once measured a level 2 will now be classified as a level 4.
•    An ownership fulfilment provision means that black shareholders must have serviced a significant portion of their debt. If they have not, the entity dilutes by one B-BBEE level.
•    A failure to achieve a 40% sub-minimum on the Skills Development and Enterprise & Supplier Development elements will also result in a dilution of 1 B-BBEE level.
•    The management control aspect of the B-BBEE rating now includes employment equity. Targets are based on the demographics of SA, not only in respect to black and white persons, but rather sub-categories of African, Indian, Coloured and Caucasian persons.
John adds, “It is our view that the average business will dilute by at least two to three levels unless they approach these codes, which will be of full force and effect on 11 October 2014, with due care and strategic intent.”
However, businesses that make use of Temporary Employment Services (TES) could stand to benefit in the following ways:
•    Preferential Procurement from Empowered Suppliers carries 25 points in total and TES contribute directly to eighteen of these points.
•    Skills development spend as a percentage of payroll has been increased from 3% to 6%. The fact that TES invoice the client allows for lower payroll amounts and hence lower spend requirements on skills development.
•    Similarly, a total of 5% of workforce spend must be on learnerships, internships and apprenticeships and using a TES means that fewer learners are required.

The above dynamics mean that clients can save between 5% and 15% of their payroll on B-BBEE compliance by using a TES.
In order to prepare and adapt to the amended B-BBEE codes, businesses need to make sure they are adequately informed.

Businesses wishing to review their B-BBEE credentials according to the new amendments can visit Adcorp’s recently launched labour law application http://www.re-act.co.za. Following this assessment, the application will provide a tailored report on suggested areas for improvement, as well as supporting documentation expanding on certain matters.

While the amended B-BBEE codes may bring its share of challenges and opportunities for South African businesses come October 2014, it can be said with certainty that those businesses educated on the changes stand to gain the most.

Source: Cape Business News

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From → BBBEE, Opinion

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