Latest Changes to Amended B-BBEE Codes of Good Practice (Part 1)

The controversial clarification notices released this week are clarified below:

  • The Amended Codes of Good Practice, gazette No 36928 come into effect on the 1st May 2015 and all B-BBEE verifications conducted using the financial year ending after the 1st May 2015 must be verified using the Amended Codes of Good Practice, with the exception of the Sector Codes
  • All B-BBEE verifications conducted using the financial year ending before 30 April 2015 can be verified using the old Codes of Good Practice, gazette No 29617. This means that you can still use the old Codes for your next verification if you have not been verified based on your last financial year end before 30 April 2015.
  • The period for the alignment of Sector Codes has been extended to the end of October 2015. From the 1st November 2015 Sector Codes that are aligned shall be effective – if the financial year period is prior to 1st November 2015 they will use the old Sector Codes, if post the 1st November 2015 the new Sector Code will take effect.
  • Any Sector Codes not aligned and ready for gazette by the end of October 2015, may be repealed and then the General Amended Codes will apply to that Sector. We have already been advised that the ICT Sector Code will most likely be repealed.
  • For the inaugural year of the Amended Codes of Good Practice, all valid B-BBEE certificates issued under the old Codes of Good Practice Gazette No 29617, as well as the relevant Sector Codes remain valid and must therefore be accepted and treated as empowering suppliers. This does not mean that Generic and Qualifying Small Enterprises (QSE’s) rated using the Amended Codes also have automatic empowering supplier status.
  • All EME (Exempted Micro Enterprises) certificates issued are automatically recognised as Empowering Suppliers.
  • Black participants in Broad-Based Ownership Schemes (BBOS) and Employee Share Ownership Programmes (ESOP) holding rights of Ownership in a Measured Entity can only score 3 points under the Ownership scorecard and therefore not contribute to Black Ownership status and the priority element requisite. 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 Participants in broad-based schemes” which is worth 1 point on the old Codes, and 3 on the Amended Codes. 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 the entity will achieve any net value score with BBOS’s or ESOP’s.  In terms of the Media Statement dated 8th May 2015, the B-BBEE deals concluded before 1 May 2015 will not be affected and will still be included in the total ownership calculation.

The following Turnover Threshold Table will assist you in determining which certificate applies to the financial period to be used for rating purposes:

 

Old Codes: Financial year ends up to and including 30 April 2015

Turnover

Proof of rating/Scorecard allowed Amended Codes: Financial year ends after 30 April 2015
Turnover
Proof of rating/Scorecard allowed
Exempt Micro Enterprise (EME) < R5m Certificate < R10m Affidavit*
Qualifying Small Enterprise (QSE) >= 51% black shareholding >= 5m and < R35m Certificate >= 10m and < R50m Affidavit
Qualifying Small Enterprise (QSE) < 51% black shareholding >= 5m and < R35m Certificate >= 10m and < R50m Certificate
Generic Enterprise >= R35m Certificate >= R50m Certificate

* A Certificate may only be issued by the Companies Intellectual and Property Commission (CIPC)

Please note that different thresholds apply to Sector Codes and the Sector Codes will continue to be applied to 31 October 2015. An Affidavit cannot be issued for an EME or QSE falling into a Sector Code.

Part 2 will include the highlights and impact of the latest publications on the amendments to Phase I of the codes and the gazetting of the phase II of the Codes of Good Practice:

  • Gazette 38765:          Amendments to Phase 1 of the Codes
  • Gazette 38766:          Gazetting of Phase II of the codes – (includes the QSE scorecard)
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