The Department of Trade and Industry (DTI) on Tuesday said 80% of the broad-based black economic empowerment (BBBEE) Codes of Good Practice had been implemented on May 1.

In a statement, the DTI said it wanted to “set the record straight” regarding the implementation of the amended BBBEE codes in terms of the BBBEE Amendment Act 46 of 2013.

“Trade and Industry Minister Dr Rob Davies gazetted Phase I of the codes on October 11, 2013, with a transitional period of 18 months, up to April 30, in preparation for implementation on May 1,” it said.

Phase I covered about 80% of the entire codes. Phase II, which would be gazetted by Thursday, would cover the remaining 20%.

Some of the sector charters had submitted the aligned score codes to Davies for consideration. They had also requested more time from the Minister to finalise their alignment processes and the Minister was considering the requests, the DTI stated.

BEE consultancy EconoBEE clarified that if a company’s financial year was prior to April 30, then they had to be verified using the old codes.

“If your financial year is after May 1, you must be verified using the new codes. All those companies that rushed to be verified before April 30 have wasted their time – they could have delayed for another year or more and could have been verified next year. Those who tried to be proactive are being punished,” the company said in a statement.

It added that companies that did beat the deadline would now feel “quite irritated” that others, who were late, could still get verified.

However, advisory firm Mazars East London managing partner Tony Balshaw felt that despite the clarity, the codes would negatively impact the economy.

“Government has failed to recognise and respond to the outcry of business that the amended codes, as gazetted in 2013, will be hugely detrimental and damaging to doing business in South Africa and, one assumes, has not considered the unintended consequences; which include reduced contributions to socioeconomic development as businesses walk away from complying voluntarily with the draconian amended codes.”

Further, Mazars pointed out that the transition period for the alignment of the sector codes had been extended to October 31. If sector codes were not aligned by November 1, then “a consideration shall be made for them to be repealed”.

For the first year of the Amended Codes of Good Practice, all valid BBBEE certificates issued under the old codes, as well as the relevant sector codes, remained valid and should have been treated as empowering suppliers.

Balshaw said that a further devastating aspect to this notice is the amendment that stated that black participants in broad-based ownership schemes and employee share ownership programmes holding rights of ownership in a measured entity only needed to score the three points under paragraph 2.2.3 under the ownership scorecard.

“This means that a company that is 100%- or 25%-owned by a broad-based or employee ownership scheme will not earn points under any other indicator on the scorecard than 2.2.3, which is worth one point on the old codes, and three on the new.

“This very clear statement implies that no other points for economic interest or voting rights may be earned. Economic interest is the indicator to help calculate net value, so no entity will achieve any net value score,” explained EconoBEE.