Make sure that you are aware of the new changes to the BBBEE codes and how they could impact your business.
The new broad-based black economic empowerment (B-BEE) Codes of Good Practice were recently amended, causing a stir in the business world as small businesses find themselves short on points they once thought they had.
Related: BEE codes & scorecards
This change comes in the wake of President Zuma highlighting the low number of black owned and controlled businesses on the JSE, however bigger companies seem to go unscathed as the ‘little man’ bears the brunt of the changes.
Here’s what small businesses should expect:
New method of scoring
According to the new scorecard only three points can be earned for black owned, employee share ownership schemes and broad-based of the total 25 points on the scorecard. Additionally, these cannot count towards black voting rights.
Qualifying Small Enterprises
With the old codes a business could be entirely white-owned and still achieve good BEE levels through achieving in other areas like corporate social investment, skills development and employment equity and preferential procurement. However the new codes have condensed the categories from seven to five.
According to Nicolene Schoeman, from SchoemanLaw Inc, a Qualifying Small Enterprises (QSE) must achieve 40% of the points for two of the three priority elements, namely ownership, skills development and enterprise and supplier development, with ownership being compulsory. Non-compliance with the thresholds for the above priority elements will result in a penalty by one level on the QSE scorecard.
“So, where businesses do not comply with ownership or any of the priority elements they will be penalised,” says Schoeman. “This could now result in many non-compliant businesses. We will now see compliant businesses and non-compliant businesses and nothing in-between.”
Exempt Micro Enterprises (EMS) with turnover of less than 10 million per annum come away unscathed as scoring and issuing a certificate is done by way of an auditor’s certificate or affidavit.
For companies that are an EME, or a QSE and are black-controlled (which is classified as 51% or more black ownership), you will automatically receive a level 2 broad-based BEE status.
Why the change
According to chief director of the Department of Trade and Industry, Takalani Tambani, the idea behind the change was to ensure that black ownership was given greater priority by the businesses.
Related: What B-BBEE Codes changes will require from large companies and growing SME’s
"The message is government views the ownership as important to transform the economy. For us to effectively do that, we want to see black people participating meaningfully in the core of the economy,” says Tambani. “Passive shareholding will not be able to transform this economy. Passive shareholders are not the real drivers of the business.”
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