B-BBEE: When will the new Codes actually take effect?

On 18 March 2014 the transitional period in respect of the new B-BBEE Codes of Good Practice (which commenced on 11 October 2013) was extended to 30 April 2015. At first glance it would therefore seem that from that date all measured entities will have to apply the new Codes. Unfortunately, as is often the case with B-BBEE matters, it is not that simple…

Imagine a company that has its financial year end in December. Such a company may very well have its financial statements ready by March the next year, which means that it is ready to undergo a B-BBEE verification and obtain its new scorecard for the financial year ahead. At that stage, one will still be in the transitional period. In theory one would be afforded the opportunity to plan ahead and prepare the new scorecard based on the new Codes even before 30 April. In practice, however, the DTI has unlawfully forbidden verification agencies from complying with key aspects of the new Codes during the transitional period – in other words, the company will not be able to properly prepare a scorecard under the new Codes until after 30 April 2015.

Just to complicate matters a little further, the new Codes do not apply retrospectively. This means that, at least according to accepted legal principles, the company’s scorecard that is prepared in March 2015 will have to be accepted under the old Codes for at least another financial year. But it gets even more complicated than that…The new Codes contain certain concepts that fundamentally depart from the old Codes, such as the concept of an “Empowering Supplier.” In the example above, our company should be able to still use a scorecard under the old Codes until December 2015. However, many of its customers or clients, who have their financial year ends in June, will be obliged to use the new Codes, which means that they will demand that our company be an “Empowering Supplier.” Because our company’s scorecard under the old Codes did not measure for this status, its scorecard will essentially be useless to its customers for procurement and supplier development purposes and they will insist that the company prepares a scorecard under the new Codes. Even if this were not the case, the company would have difficulties with its scorecard, as the new Codes contain new recognition levels. So if the company’s legitimate, completely legal scorecard prepared in March 2015 reflects it as a Level 4, it may suddenly become a Level 6 on 1 May 2015, even though its scorecard should still be valid until December 2015. No attempt has been made in the new Codes to “translate” the old recognition levels into new recognition levels, which would have fixed this problem.

Presumably therefore the DTI must be of the opinion that every entity will be forced to prepare a new scorecard under the new Codes by 1 May 2015, or else the whole house of cards will come tumbling down. Some companies will be penalised by this purely because of the month in which their financial year end falls. They will be forced to prepare a scorecard under the old Codes to cover the “gap” during the transitional period that is legally recognised but practically not enforced and will then after only one or two months have to prepare another scorecard under the new Codes. Funnily enough, when we recently raised this issue with one of the verification agencies, they did not seem to think this was a problem worthy of some further thought – no doubt the thought of earning double fees in the span of a few months is an exciting prospect for them.

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