Amended B-BBEE Codes of Good Practise 2019
September 03 2019 By Beth Cook
On 31 May 2019 the DTI announced the gazetted amendments to the B-BBEE Codes of Good Practice, which will come into effect on 1 December 2019. Beth Cook, Founder and CEO of Progression, takes a look at the most significant changes, which are likely to have considerable implications on the B-BBEE policies and strategies for many businesses in South Africa.
The target for Skills Development expenditure on learning programmes (as per the Learning Programme Matrix) for Black People has been reduced from 6% to 3.5% (with a weighting that has been reduced from 8 to 6 points).
A new category of Skills Development expenditure on bursaries for Black students at higher education institutions has been introduced with a target of 2.5% of the Leviable Amount for 4 points.
The target for the number of Black People participating in learnerships, apprenticeships and internships has been increased from 2.5% to 5% with an increase in total points from 4 to 6 (The previous reference to the number of Black UnemployedPeople participating in learnerships, apprenticeships and internships has been deleted in its entirety).
The uncertainty around absorption has now been clarified and in order to receive the 5 bonus points at the end of a learnership, the learner must be offered a long-term employment contract. A long term contract is defined as "a legal agreement between an individual and an entity that this individual would work for until his or her mandatory date of retirement", therefore merely advancing the learner onto a further learning programme will no longer qualify. The absorption points are also no longer confined to learnerships, but now also pertain to internships and apprenticeships.
The sub-minimum requirement for compliance under the Skills Development element, in order to avoid discounting by one BEE level, remains at 40% of the applicable weighting points, but now explicitly excludes the bonus points.
Expenditure in respect of informal and workplace learning programmes is now capped at 25% of the total value of Skills Development expenditure, which is an increase from the previous 15%.
Enterprise and Supplier Development
As with the Skills Development element above, in order to meet the 40% minimum threshold to avoid discounting by one BEE level for Enterprise and Supplier Development, the calculation of the 40% cannot include bonus points. Therefore, in order to meet the overall sub minimum, an entity must achieve 40% of the total weighting points for each of the three categories (Procurement, Supplier Development and Enterprise Development) within the Enterprise and Supplier Development element.
The target for procurement from 51% Black owned companies has increased from 40% to 50% of total procurement spend, and the weighting has increased from 9 points to 11 points.
If a company procures from a QSE or EME, it will be entitled to apply a multiple of 1.2 when calculating its B-BBEE procurement spend from the supplier. In addition, this principle has been extended to also include procurement from a large enterprise that is 51% Black-owned as measured in terms of the flow through principle (and not the modified flow through principle).
If an entity procures from a large enterprise that is 51% Black-owned (measured in terms of the flow through principle), this can now be recognised as procurement from an EME or QSE, provided that the supplier was a QSE or EME on the date that procurement first took place, and such recognition will be limited to a period of five years from the date of first procurement.
A large enterprise that is 51% Black-owned (measured in terms of the flow through principle) may now also be recognised as an Enterprise and Supplier Development beneficiary provided that the enterprise was an EME or QSE at the time when it first received assistance from the measured entity. The measured entity will only be able to recognise it as an enterprise or supplier development beneficiary for a maximum of five years from the date on which the measured entity first provided assistance to the enterprise.
The amount of any guarantee which can be recognised as Supplier Development spend has increased from 3% to 50%
An Enterprise Development beneficiary cannot be a supplier.
The scorecard is already heavily weighted towards Ownership and is likely to become even more so with the above amendments to the Preferential Procurement, Enterprise and Supplier Development element, which will put even more pressure on increased activity to attain 51% Black ownership.
The element of Socio-Economic Development still has a very low weighting on the scorecard and does not reflect the urgent and mammoth task of encouraging and developing economic activity amongst the most disadvantaged of South Africans.
Progression has always viewed education and skills development as fundamental drivers of social and economic transformation. However, this is sadly not reflected in the scorecard, which only allocates 25 points to the critically important element of Skills Development.