The 1st of May 2015 marked the implementation date of the Amended Codes of Good Practice for Broad-Based Black Economic Empowerment. Just short of a week later, on 5 and 6 May 2015, the DTI released a further three pieces of legislation affecting B-BBEE compliance;

Notice 396 of 2015, released on 5 May was subsequently repealed and replaced by Notice 444 just 10 days later. The notice, which attempted to clarify the practical implementation of the Amended Codes and deal with issues surrounding the alignment of the Sector Codes, also introduced a controversial clause which indicated that black ownership points arising from Broad-Based Ownership Schemes (BBOS) and Employee Share Ownership Programs (ESOPs) would be limited to the indicator 2.2.3 concerning these types of schemes, and should not count towards the main black ownership percentage of the Measured Entity. This clause was repealed in Notice 444, while the DTI appoints a task team to deal with the implications that this might have on businesses.
What is clear from this notice is that 1. Certificates issued prior to 1 May 2015, and for verifications still taking place for entities with financial years ending before 30 April 2015, the old codes can still be applied. 2. The Sector Codes have an additional 6 months to align with the Amended Codes; thereafter if not aligned by 30 October 2015 they may be repealed. 3. Any valid certificate issued on the ‘old’ code, or the Sector Codes, gives the holder “Empowering Supplier Status” for the duration of that certificate.

Notice 407 of 2015 is the first in what is expected to be a number of clarification notices, which should help to explain some of the issues or missing information from the Amended Codes. The first thing the clarification notice did (possibly erroneously) is add a fifth criterion to the Empowering Supplier status definition, specifically for service industry entities, due to the confusing wording of the first criterion which did not take adequate cognizance of the service industry. The notice further made allowances for certificates to be issued by the Companies and Intellectual Property Commission (CIPC) when a business is registered for the first time (all Start-Up Enterprises have automatic EME status). Most importantly, the notice repealed the EAP-based formula contained in Annexe 200(A) and Annexe 300(B) of Statement 200 and 300 respectively, which was erroneous, and replaced it with a detailed calculation of how the compliance targets should be split into the EAP weightings for each indicator.

Finally, Notice 408 of 2015, Gazette No. 38766, contains the much awaited Amended QSE scorecard, as well as the final versions of the statements that were left out of the Amended Codes, gazette 36928; including the Specialised Entities Scorecard, Recognition of the Sale of Assets and Recognition of Equity Equivalents.

Look out for our next article on the Amended QSE Codes, to be posted soon

What are the 10 most important things you need to know about the new codes and how they will affect you?

1. The introduction of Priority Elements and the Discounting Principle.
2. There are 3 Priority elements for Large Enterprises and 2 for Medium Size Enterprises.
3. The Threshold Levels have changed and it now requires 80 points to achieve a Level 4 B-BBEE status.
4. Management Control incorporates the Employment Equity element and is now measured as per percentage of Economically Active sub-race group and gender (Black further divided into African, Indian and Coloured).
5. Skills Development target increased to 6% of leviable amount and now includes both employees and non-employees.
6. Procurement targets have increased and the EME and QSE categories have been further divided.
7. Suppliers have to be deemed Empowering Suppliers for their B-BBEE Status to be deemed valid for calculation purposes.
8. The Codes now require that 2% of Net Profit after Tax (NPAT) is spent on Supplier development and 1% on Enterprise Development.
9. Socio-Economic Development is now calculated annually and not cumulatively and you will need to monitor the NPAT to ensure full points are scored.
10. A Black owned and controlled business is now one that has at least 51% black voting rights and economic interest compared to 50.1% in the previous Codes.