Trade and Industry Minister Dr Rob Davies has gazetted the second phase of the amended broad-based black economic-empowerment (BBBEE) Codes of Good Practice for public comment.

The Department of Trade and Industry (DTI) had previously committed to reviewing and gazetting the outstanding statements of the codes for public comment, as well as to finalise these codes before the end of the transitional period of the Generic Amended BBBEE Codes of Good Practice, on April 30, 2015.

The outstanding statements of the codes now gazetted included the Qualifying Small Enterprise (QSE) statements and scorecards, the statement for specialised entities, the statement on development and gazetting of sector charters, the recognition in the sale of assets and the recognition of equity equivalents for multinationals.

Davies noted the amended QSE code comprised five elements, which accounted for 100 points and provided a measurement framework, and scorecards with targets and weighting points for enterprises that fell into this category.

South African Chamber of Commerce and Industry senior policy consultant Pietman Roos told Engineering News Online that it was positive that the new BBBEE codes recognised that smaller enterprises had to receive certain exemptions.

However, EconoBEE CEO Keith Levenstein said that while the QSE scorecard was slightly more lenient than the generic scorecard, QSEs would find it difficult to get a reasonable score, owing to the harsher points to level table.

“The competitive advantage that QSEs enjoyed over generics using the 2007 codes has disappeared,” he said.

Levenstein noted that the amended QSE codes would come into effect on May 1, 2015, adding that only businesses that were less than 51% black-owned would be affected by this new scorecard, as businesses that were 100% black owned were automatically granted a Level 1 status, while those who were more than 51% black-owned were automatically on Level 2.

Meanwhile, BBBEE verification agency Veri-Com CEO Deon Oberholzer explained that in terms of the new QSE scorecard, companies had to be compliant on all five elements of BBBEE – ownership, management control, skills development, enterprise and supplier development and socioeconomic development.

He added that the penalties on priority elements remained as Veri-Com had previously understood it. Meaning that QSEs would drop one level as a penalty for achieving less than the 40% subminimum targets in the ownership element and one other of the priority elements of skills development and supplier development.

Further, Oberholzer said that, according to the new codes, black-owned QSEs only had to be empowering suppliers, but did not have to be scored, while white-owned QSEs would have to deal with aspects of ownership and skills development to get a decent score.

He noted that, in terms of ownership, which accounted for 25 points, the QSE scorecard was similar to that for large companies, including black-owned, black women-owned and those owned by designated groups.

“However, the implication is that the current option of black men only, will only give you [up to] 18 points so many of the BEE deals that have been done with black male individuals will have to be reconsidered,” he said.

Further, in terms of management control and employment equity, which accounted for 15 points, the new codes no longer awarded points for black staff.

“This is unfortunate as it often opened the door for workplace diversity at staff level,” he said.

According to the new codes, there were only two management categories, namely executive (top) management with five points being awarded for 50% black management, and all other management, where six points would be awarded for 60% compliance. If 50% of the two categories’ targets were made up of women another two points would be added.

“This will force white-owned QSEs to consider the construct of top management as well, and as nonexecutive directors are not top management, many QSEs will have to restructure their top executives,” Oberholzer said.

Meanwhile, in terms of skills development, which accounted for 25 points, Oberholzer stated that it was a pity that an element for learnerships was not included.

He said that as potential feedback to the DTI, he would suggest adding four bonus points to the skills development category if learnerships were provided to 2.5% of a company’s staff, with an additional four bonus points to be added for a 100% absorption rate of a company’s learnership target.

Further, in terms of the procurement, enterprise and supplier development category, which accounted for 30 points, Oberholzer said the restriction on procuring only from empowered suppliers would have a detrimental impact on many small companies that did not have the option to change their suppliers.

He suggested that the DTI add four more bonus points under procurement for procurement from black-owned companies, and another four bonus points for procurement from black women-owned QSEs and exempted microenterprises.

Meanwhile, Roos also noted that it was important to recognise that there had to be a system in place to support the transformation sought by the BBBEE codes.

He said the schooling system and training institutions had to support transformation to a greater extent, as businesses were already doing their best.

The second-phase amended BBBEE codes commentary period would end on November 14, Davies said, adding that the DTI would engage stakeholders during this period, as well as receive written comments.

OPERATION KHUSELA
Meanwhile, the DTI had also embarked on an operation to clamp down on illegal verification agents issuing fraudulent BBBEE and company registration certificates.

The initiative, under the name “Operation Khusela” led by Deputy Trade and Industry Minister Mzwandile Masina targeted illegal agents in and around Sunnyside, Pretoria.

Masina pointed out that the operation coincided with the release of the amended codes of good practice showing how serious government was about BBBEE.

He stated that those who sold fraudulent BEE and company registration certificates were crippling businesses in South Africa and harming the economy.

“Our economy is bleeding, people are losing tenders due to such activities because if it is detected that the certificate is fraudulent there is no way the State will award a tender to that business, which might have had the capability to deliver. Innocent people are falling prey to these dealings and it is important that, as the State, we put an end to it,” Masina said.

He noted that the illegal certificates, which could be obtained for about R800, were very similar to those issued by South African National Accreditation System accredited agencies, making it difficult for people to notice the difference.

“[During the operation] our people were able to get these certificates without even producing identity documentation and financial statements to verify whether they are even owners of the companies they claimed to own,” he added.

Masina said Operation Khusela’s intention was also to demonstrate the importance of being properly regulated and that it was important for government to reclaim the verification space.