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BBBEE

BBBEE CODES – THE VERY BASICS EVERY BUSINESS NEEDS TO KNOW

On 11 October 2013 the revised Broad-Based Black Economic Empowerment (BBBEE)Codes were published  by the Minister of Trade and Industry (DTI). In October 2014 these (new) Codes will come into operation thereby replacing the existing BEE Codes of Good Practice. Accordingly, it is crucial for businesses to not only understand these codes, but also to consider strategies that would facilitate compliance simultaneously with the new codes becoming effective in October 2014. That way, businesses would comply, remain competitive and not run the risk of losing clients or work (suffering losses) due to not being compliant.

Broadly speaking, the most important change – is that the new codes reduce the existing seven scorecard elements (generic scorecard) to five. This is illustrated by the below generic scorecard:

 

ELEMENT WEIGHTING CODE SERIES REFERENCE
Ownership 25 points 100
Management Control 15 points 200
Skills Development 20 points 300
Enterprise and Supplier Development 40 points 400
Socio-Economic Development 5 points 500

 

1.    Ownership:

This interpretation of the meaning of this scorecard element remains un-changed but the weighting has been adjusted.

 

2.    Enterprise and Supplier Development:

Essentially, this newly introduced element represents the merger between what was previously known as enterprise development and preferential procurement. The interpretation of this element has accordingly changed as follows :

To measure the extent to which the business procurers or purchases/supports other businesses in buying / supporting suppliers who are BBBEE compliant. Furthermore, it also measures the extent to which enterprises and supplier development initiatives are intended to assist the growth and the sustainability of black enterprises (interpreted in line with the BBBEE Act broadly, see item 3 below).

 

3.    Management Control:

Essentially, this newly introduced element represents the merger between what was previously known as management control and employment equity. This element measures the effective control of the entity by black people (i.e people from designated groups in terms of the BBBEE Act, importantly people from designated groups means black in the broad sense).

 

4.    Skills Development:

This element essentially measures the extent to which employers carry out initiatives designed to develop the competencies of employees belonging to the aforementioned designated groups. It furthermore relates to employees internally and to persons being trained or skills otherwise developed externally (in relation to the business). Accordingly, the interpretation of the meaning of this scorecard element remains un-changed.

5.    Socio-Economic Development:

In many circles it is also known as the  CSI (corporate social investment ) element of the scorecard. Essentially this measures the support (financial or otherwise) by the business towards more philanthropic causes. Naturally, the causes in this context must again benefit persons from the designated groups aforementioned and as such should be distinguished from donations to PBO’s that would qualify for an income tax deduction. Although it should be distinguished from deductions in terms of income tax, a donation in this context could very well benefit both the businesses’ BBBEE scorecard (under this element) in addition to being income tax deductible.