The amended Codes of Good Practice for Broad-based Black Economic Empowerment that came into effect on 1 May 2015 will significantly reduce current compliance levels – by two to three levels. It is imperative that companies measure themselves in terms of the revisions then plot their path to return to former levels.
The revisions were gazetted in 2013 but are being implemented now and represent a further wave in the BEE legislation of the Department of Trade and Industry. Initially, narrow-based empowerment (ownership and management only) was followed by broad-based empowerment, which incorporated seven elements: ownership, management control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development.
Now the number of elements is being reduced to five: ownership, management control, skills development, enterprise and supplier development and socio-economic development.
The main difference though is that the revisions go a step further by identifying priority elements on which companies should concentrate: ownership, skills development and enterprise and supplier development. Failure to comply with a 40% sub-minimum in any of these priority elements leads to an automatic reduction of one level in your contribution level.
There is a sharp focus on the human resource aspects of the scorecard, with real emphasis being placed on employment equity and skills development – with black females now carrying their own, separate measurement indicators. Both elements also use the Economically Active Population racial split to ensure that there is equitable representation based on these statistics. Skills development now takes into account the training of employees as well as unemployed people who could then be employable.
The procurement element is heavily weighted towards procuring from black-owned businesses as opposed to the highest-rated businesses. Because there are relatively few black businesses that service other businesses, there is an expectation that most companies will score poorly on this element. We have also noted a trend of companies working on new ownership transactions to ensure that they become black owned and thus be counted in the procurement scorecards of their clients. Finally, socio-economic development contributions are now fully focused only on support that facilitates income-generating activities in the hands of the beneficiaries.
Summary of the 2013 new codes.