Safiyya Patel of Webber Wentzel explains
News with intent!
Your advertising is only as good as the people who see it – repeatedly! You want to do business with OO readers – people with money and control of corporate budgets. Click here
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.