A summary of the Proposed changes to the Codes of Good Practice: October 2012

The proposals are far reaching for all businesses but particularly for QSE’s who have always enjoyed a more flexible scorecard.

A QSE will now be defined as an entity whose turnover is between R10m and R50m, however, there will also now be little difference between the verification of a QSE or a Generic, other than the QSE will only be required to meet a minimum target of 40% of the compliance target on 2 of the 3 priority elements to avoid an automatic drop of 1 level in its Recognition Level, whilst the Generic Enterprise will be required to meet a minimum target of 40% of the compliance target on all 3 of the priority elements to avoid an automatic drop of 2 levels in its Recognition Level.

In all other respects, the compliance criteria will be no different between the Enterprises and all businesses will be rated on all the elements including ownership, management control (adjusted by employment equity targets), skills development (adjusted by employment equity targets), supplier and enterprise development and socio-economic development. The priority elements are ownership, skills development and supplier and enterprise development.

There are some significant changes in the details and calculations in each element and the requirements for inclusion such as:

  • The Recognition Levels will change and more points will be required to be recognised at each Level other than Level 1.
  • All businesses will need to achieve a minimum of 40% of the compliance targets for the Ownership element that is 25 points of 105, as it is a priority element for QSE’s and Generics.
  • Junior Management will no longer recognised as a category for Management Control.
  • The Preferential Procurement target for spend on all suppliers will increase from 50% to February 2012 to 70% to 80%.
  • Imports will no longer be allowed to be excluded from the Preferential Procurement Spend calculation.
  • Only Value-Adding Suppliers (an entity that is VAT registered and whose NPAT plus salaries is greater than 25% of turnover) will be eligible for recognition in the Preferential Procurement Spend calculation.
  • 66% of the contributions to Enterprise Development must be made to EME’s or QSE’s that are more than 50% black owned and who are in the company’s supply chain.
  • The target for Skills Development spend will increase from 3% of leviable amount to 6% of leviable amount.
  • Only training spend on black employees who are on formal learning programmes that will be assessed by an accredited body will be eligible for rating. Informal training and on the job training costs will no longer be included in the target spend.

An EME will now be defined as an entity whose turnover is less than R10m and will still have an automatic Recognition Level of 4. Where the entity is more than 50% black owned, it will be granted an automatic Recognition Level of 2 and where the EME is 100% black owned, it will be granted an automatic rating of Level 1.

The next step would be for the various sectoral charters to be brought in line with the proposals, but those will continue to apply in their current format until such time as they are revised.

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