Draft new BBBEE codes could hit companies hard

Safiyya Patel of Webber Wentzel explains

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Oudtshoorn. 3 October 2012. 06h00. Introduction of sub-minimum targets for priority elements could see firms lose empowerment ratings

Draft new BBBEE codes could see companies losing empowerment ratings under controversial amendment

The draft revised broad based black economic empowerment (BBBEE) codes unveiled by the Department of Trade and Industry (DTI) earlier today contain a controversial amendment which could result in a reduction companies empowerment ratings.

Safiyya Patel, partner and BEE expert at corporate law firm Webber Wentzel, said that the most sweeping proposed amendment is likely to be the introduction of sub-minimum targets for “priority elements”.

Priorty elements include ownership, enterprise and supplier development and skills development.

“If the amendments are processed in their current form, companies will be required to achieve a minimum compliance of 40% of the targets for the priority elements.

“If they do not achieve the minimum compliance for any of the priority elements, their overall contributor status will be reduced by 2 levels if they are large entities or by 1 level if they are qualifying small enterprises. ”

Patel noted that this means that companies – particularly large companies – that have until now overlooked any black shareholding requirements and have focussed on all the other elements of BBBEE will be seriously and adversely impacted. 

“For example, a large company that may have 7% black ownership, but is a level 3 contributor, will be automatically reduced to a level 5 contributor because it does not meet the 10% minimum black ownership target,” she added.

Under the revised codes, the thresholds for exempted micro-enterprises and qualifying small enterprises have been increased. 

Entities with a turnover of less than R10m (currently R5m) will now qualify as exempted micro-enterprises and enterprises with a turnover of between R10m to R50m (currently R5m to R35m) will qualify as qualifying small enterprises.

Exempted micro-enterprises that are 100% black-owned will automatically qualify as level 1 BEE contributors. If they are more than 50% black-owned, they will automatically qualify as level 2 contributors.

The draft revised BBBEE Codes will be open for public comment for a period of 60 days.

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One thought on “Draft new BBBEE codes could hit companies hard

  1. This system has not yielded the desired results as very little value is added to companies, enhances corruption with tenders as ‘window dressing” does not achieve its intended purposes. As long as a predatory elite rules, this “hand out system”, enslaving black people, stripping them of their human dignity will continue to damage both citizenry, companies and the country’s economic growth as a whole

    What it might inadvertently do is force the establishment of more micro enterprises, unbundling until the predatory elite gets their greedy and corrupt hands onto these successful micro enterprises too, finally killing the gooses that lay the golden eggs, forming the back bone of our economy – then all will finally be FINISHED !

    Ever thought why Jewish businesses are so successful after centuries of opression with no “BBEE”sytem ever awarded them. Show us ONE country where BBEE has succeeded and spurred growth, sustainability, profitability and prosperity, just ONE !!
    I rest my case !!

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