Laws change at such a rapid pace that it’s no wonder business owners find themselves struggling to juggle day-to-day economic realities, and the challenges of staying abreast of new legislation. Just when you think you have all your ducks in a row, along comes a new set of rules that change everything – which is what the new B-BBEE (Broad-Based Black Economic Empowerment) Codes are set to do.
Government has introduced more stringent B-BBEE measures and companies have until 30th April 2015 to ensure that they are in line with these measures.
How the new Codes will impact your business
Exempted Micro Enterprise (EME):
- The threshold for qualifying as an EME has increased to R10 million or less (from R5 million or less) of the total annual income.
- EMEs that are 100% black-owned will automatically be granted a Level 1 B-BBEE status, while those that are 51% black-owned receive Level 2, which is encouraging in terms of procurement opportunities.
- EMEs that are less than 51% black-owned receive a Level 4 B-BBEE status, without having to comply with any of the five elements on the scorecard.
- The new Codes favour small businesses in this category as, regardless of ownership, they are automatically considered an “Empowering Supplier”. This status is essential because without it, B-BBEE certificates are almost meaningless.
Qualifying Small Enterprise (QSE):
- To qualify as a QSE your total annual turnover must fall between R10 million to R50 million (previously between R5 million to R35 million).
- This is beneficial for companies with a turnover above R35 million (but less than R50 million) as they now fall into this category.
- QSEs that are 100% black-owned automatically receive a B-BBEE Level 1 status, while Level 2 is awarded to those enterprises with 51% black ownership.
- Companies that are more than 51% white-owned will have to comply with all five elements of the new Codes (previously they could select four elements): ownership, management control, skills development, enterprise and supplier development, and socio-economic development.
- QSEs will automatically be downgraded in their B-BBEE status if the minimum requirements are not met.
Please note that EMEs and QSEs will no longer need a certificate from a B-BBEE verification agent to confirm their B-BBEE status. All that is required is an affidavit certifying total annual income and level of black ownership.
The consequences of not meeting Code targets
Not meeting the targets means not obtaining the maximum number of available B-BBEE points. Priority elements under the new Codes are Ownership, Skills Development and Enterprise and Supplier Development and the following minimum requirements must be complied with:
- 40% of the ‘net value’ targets for the Ownership element. ‘Net value’ measures the ‘debt free’ portion of the B-BBEE ownership of a firm;
- 40% of the total weighting points for the Skills Development element;
- 40% for each of the three subcategories of the Enterprise and Supplier Development element (being Preferential Procurement, Supplier Development and Enterprise Development).
Large Enterprises with a total annual income greater than R50 million are obliged to comply with all the priority elements – should they fail to comply with all three of the minimum requirements as set out above, their B-BBEE status will automatically be downgraded by one level (e.g. from Level 4 to Level 5).
April 30th is only a few short weeks away, but you don’t have to panic because LEAP is here to help you. We will offer you guidance, establish your B-BBEE strategy and assist you in putting the right processes into place to help you reach your goals.