What you need to know about changes made to BEE Codes

What they mean for small companies, multinationals, local companies and verification agencies.

Dikatso Mametse - Moneyweb
13 February 2007

Probably one of the most interesting developments around the Broad Based Black Economic Empowerment Codes of Good Practice since the draft codes were released two years ago is around the sale of ownership by BEE shareholders.

According to Theo Lombard, MD of BEE rating agency Empowerlogic a "continuing consequence"ť has been added which looks at retentions of BEE score even if the BEE ownership is lost.

Lombard says that for as long as the BEE ownership was held for three years, and it created value for the BEE shareholders, plus if broad based BEE is at a good level, companies can in fact retain the BEE score for ten years.

"They are a way of calculating whether or not a company can keep that BEE score,"ť he said.

Other developments included in the gazetted Codes of Good Practice are interim targets for five years as well as ten-year targets as far as employment equity and preferential procurement are concerned.

As far as employment equity is concerned 50% of the workforce has to be black in five years, and 70% in ten years. This is similar for preferential procurement as well.

Gavin Levenstein, a consultant from EconoBEE says that the Department of Trade and Industry (DTI) has expanded the definition of preferential procurement to exclude some imports.

"For example it appears that oil importers need not include crude oil as part of eligible procurement,"ť he said.

As far as multinationals go, the equity equivalent has been clearly stated.

"The equity equivalent is based on the value of the SA operations. They have to contribute 25% of the value of their SA operations to black enterprise development or CSI type donations,"ť Lombard said.

As far as small and micro companies are concerned, Levenstein said that companies that have a turnover of less than R5m would be exempt from having to comply with the codes.

However, these exempt micro enterprises are encouraged to participate in the BEE arena and can therefore get additional points for their efforts.

Qualifying small enterprises, companies with an annual turnover of between R5m and R35m, are allowed to pick any four of the seven elements of empowerment. Previously they were expected to pick five of the seven elements. 

The DTI also encourages the use of rating agencies, but these are not mandatory.

"Self-rating appears to be acceptable, as long as the scorecard is signed by the business fiduciary and an auditor or accountant,"ť Levenstein said.

Lombard said agencies would have to be accredited by the South African National Accreditation System.

"The batch of applications have to be sent in within 30 days, and will not take longer than six months to get temporary approval,"ť Lombard said.