B-BBEE: DTI publishes further additions to the new Codes for comment

On 10 October the DTI published some fairly fundamental additional statements to the new Codes, which are open for public comment until 14 November. These include the long awaited scorecard for Qualifying Small Enterprises (entity’s with an annual total revenue of more than R10 million and less than R50 million), as well as a framework for the development of sector codes to bring them in line with the new generic Codes and new rules for equity equivalent programmes for multinationals. More worryingly, the gazette also includes a completely new scorecard for “Specialised Enterprises.” What this amounts to is a requirement that all non-profit organisations who own equity stakes in measured entities will be required to obtain B-BBEE certificates in the future based on this new scorecard, which includes all of the elements of the generic scorecard, save ownership, which will be based on the beneficiary base of the organisation. This is particularly reprehensible as it means that many charitable institutions will now have to spend considerable amounts of their already scarce resources on elements such as Skills Development and Enterprise and Supplier Development (which includes Procurement), which are not really appropriate in the non-profit sector – at least not for all non-profits. We are hoping that this new scorecard will be omitted from the final version.

As far as the proposed QSE scorecard is concerned it is interesting to note that the breakdown of racial groupings based on demographic requirements in the new regulations to the Employment Equity Act will not apply to QSE’s. This will no doubt come as something of a relief to small businesses. Unlike the previous QSE scorecard, where companies could choose a number of elements to comply with, under the new scorecard they must comply with all five elements. The weightings for the different elements are also no longer equally distributed like they were under the previous QSE scorecard, but conform more or less to the new generic scorecard.

For a detailed briefing on the new proposed QSE scorecard we would strongly recommend that clients contact us to arrange a consultation. Although this draft scorecard has only been published in now, there is every indication that it will come into effect on 1 May 2015 with the new generic Codes, which means that QSE’s have very little time to adapt their B-BBEE programmes to the new requirements.

B-BBEE Amendment Act comes into effect

The B-BBEE Amendment Act, which for the first time introduces a comprehensive definition of fronting, came into effect on 24 October. The Amendment Act makes provision for the enforcement and policing of fronting activities by a B-BBEE Commission, which will fall under the authority of the DTI. The Commission will have wide ranging powers, including the authority to investigate and prosecute (in conjunction with the NPA, SAPS and SARS) and allegations of fronting. The Commission will, amongst other things, have the power to summon and interrogate witnesses or people implicated in fronting practices and subpoena any relevant documents to an investigation, subject to certain limitations relating to confidential information. The penalties for contraventions of the Amendment Act, including fronting practices, are quite severe. A person who is found guilty of fronting may be sentenced to 10 years’ imprisonment. If the perpetrator is a juristic person, a fine of up to 10% of its annual turnover may be imposed and its name must be recorded in a “register of tender defaulters” and no organ of state or public entity may do any business with that entity for a period of 10 years after conviction.

Interestingly the so-called “trumping provisions” of the Amendment Act, which provides that the B-BBEE Act will trump all conflicting provisions in other legislation where matters of B-BBEE are concerned, will only come into effect in a year’s time. This is no doubt to provide the mining, fisheries and oil and gas industries time to bring their own separate transformation programmes which do not comply with the accepted “mainstream” B-BBEE programme, in line with central policy so that there will be uniformity across all industries in the application of B-BBEE in the future.

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