Transcript Summary of Revised BEE Codes of Good Practice and

Summary of Revised BEE Codes
of Good Practice and Key
Implications
Substantial changes are suggested in
the Revised Codes, which will require
companies revise their current BEE
strategies to insure future compliance
Key Change
1.
Change to thresholds:
a)
b)
c)
d)
e)
f)
g)
All entities (except EME’s) will need to comply with all elements of the scorecard;
40% Subminimum requirements for ownership, Skills Development and Enterprise and
Supplier Development;
Generic entities will need to comply with all 3 priority elements;
QSE’s will need to comply with at least 2 priority elements – Ownsership is compulsory;
EME’s with more then 50% Black Ownership will qualify as a Level 2 contributor;
EME’s with 100% Black Ownership will qualify as a Level 1 contributor;
Targets for level Contributor status have been dropped, which impacts companies to
drop at lease 2 levels
Threshold for EME’s have been increased from R5million to R10millon;
Threshold for QSE’s have been increase from R35million to R50million, therefore the
bracket will be between R10 million and R50million
2. Revised Scorecards and Thresholds
a)
b)
c)
d)
e)
f)
Number of elements are reduced from 7 to 5;
Total weighting on the scorecard is increased from 100 to 105;
Enterprise Development and Preferential Procurement is combined to
create an Enterprise and Supplier Development element ;
Management Control and Employment Equity are combined to form one
element (the indicator for Junior Management is removed);
Ownership is broadened to include Broad – based Black groups and
Black new entrants;
Management Control and Skills Development has been amended to align
with EAP targets, broken down in terms of race and gender;
3. Revised Qualification Points for BEE Status
a)
b)
-
Enhanced recognition for Black owned and Black women owned entities
(including EME’s);
Entities that do not meet the subminimum requirements for priority
elements will be discounted;
Generic entities will be discounted 2 levels;
QSE’s will be discounted 1 level.
Revised Framework:
•
Ownership
– Now a priority element and
therefore subminimum is
applicable: 40% of annual target
for Net Value Calculations;
– Broad based groups and black
entrants now incorporated into
scorecard;
– Weighting for element increases
from 20 points to 25 points;
– Collapsed ownership fulfillment
and net asset value points
– New entrants qualifying criteria
increased from R20million to
R50million
•
Management Control
– Measures increased involvement
of Black people and black women
in Top Management positions;
– Targets has increased from Senior
(to 50%) and Top Management (to
60%);
– Element includes Employment
Equity (senior and middle
management);
– Board participation of Black
people has been adjusted;
– Adjusted Recognition for gender
will no longer be applicable, as
specific targets for Black people
and Black women has been
indicated
– Weighting increases from 10
points to 15 points
•
Skills Development
– Target increase from 3% to 6% of
Levi able amount ;
– Element is priority element and
has subminimum requirements of
40% for the overall element;
– Learnerships are now focused on
the absorption of employees and
unemployed Black people into
formal economy;
– A revised learnership matrix
makes for recognition of targeted
training only;
– Weighting increased from 15
points to 20 points
•
Enterprise and Supplier Development
– Targets are increased from 70% to
80% BEE expenditure ;
– Enhanced recognition for
procurement form Black new
entrants, Black QSE’s and Black
EME’s for a 3 period;
– Only “Value-Adding Suppliers” will
be awarded points on the
scorecard;
– This element is a priority element
and 40% subminimum is
applicable;
• Subminimum is applicable to
procurement overall;
• Subminimum also applicable
to Enterprise Development
and Supplier Development
indicators/contributions
respectively
• Weighting for the element is a
set of 40 points
• Targets and points for Black
owned and Black Women
owned procurement has
increased
Impact of the Changes
• Ownership
– Current ownership structures will need to be reassessed
• To ensure involvement of Black new entrants and broad-based
groups; and
• That 40% vesting takes place relative to the Net Value Targets
– Failure to reach the subminimum requirements of 40% will result
in level discounting
– Empowerment deals may have to be restructured or refinanced
to ensure compliance with the Revised Codes;
– The Revised Codes will be applicable retrospectively to exisiting
BEE deals
• Management Control
– Possible difficulty meeting EAP targets due to
demographic representation;
– No benefits from Junior Management indicator;
– Increased targets make compliance difficult;
• Skills Development
– Increased targets for training on Black employees
means that the budget for training will effectively need
to double;
– Seperate indicators for Black women training (based
on EAP);
– Subminimum must be met to avoid discounting levels;
– Informal training (Category G) will no longer count for
Skills Development expenditure;
– Ensuring that jobs are available for learners after
completion of learnership programs will be essential
• Enterprise and Supplier Development
– Only “Value-Adding Suppliers” will qualify for points on the
scorecard;
– Imports are no longer allowable exclusion;
– Permissible exclusions are now limited;
– Increase in compliance targets will result in difficulty in achieving
the subminimum requirements;
– Failure to meet subminimum requirements will result in
discounting of levels;
– Target of 2% NPAT is set for supplier development (within own
supply chain)
– Target of 1% NPAT is set for Black owned companies (outside of
own supply chain or industry specific initiatives);
– Focus will have to shift to finding black owned and black women
owned entities as suppliers in order to achieve the subminimum
requirements
• Socio Economic Development
– No major structural changes
Levels of Qualifying Scores and Procurement Recognition
Values
There is a possibility of non-compliance due to level discounting
Level:
“Old Score”
“New Score”
Procurement
Recognition Level
1
100+
100+
135%
2
≥ 85 < 100
≥ 95 < 100
125%
3
≥ 75 < 85
≥ 90 < 95
110%
4
≥ 65 < 75
≥ 80 < 90
100%
5
≥ 55 < 65
≥ 75 < 80
80%
6
≥ 45 < 55
≥ 70 < 75
60%
7
≥ 40 < 45
≥ 55 < 70
50%
8
≥ 30 < 40
≥ 40 < 55
10%
Non Compliant
≥ 0 < 30
≥ 0 < 40
0%