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Phatshoane Henney Training Academy enrols 100 disabled persons in learnership programmes

11 November 2015
Tags:  BEE

As part of the commitment to socio-economic development, the Phatshoane Henney Group of Associated Law Firms established the Phatshoane Henney Training Academy in 2014 as a joint venture project with accredited training provider LFP Group Holdings. The intent thereof is to utilize funding leveraged from firms in the Phatshoane Henney Group to fund formal accredited learnership programmes for black disabled learners - and so help address dire skills shortages within our country, and in particular amongst disabled persons. To date the success of the Phatshoane Henney Training Academy has far exceeded the initial expectations, enabling the enrolment in just over one year of the 100th disabled black learner in a formal accredited learnership programme 

“We are overjoyed at the success of our Training Academy,” remarks Douglas Henney, Director and Chair of Phatshoane Henney Attorneys and the Phatshoane Henney Group of Associated Law Firms. “We knew it would take time to get the Training Academy off the ground, but never expected to reach our 100th learner in such a brief period of time. We can only thank each and every firm that has supported the Training Academy and allowed this level of support to persons with a need and will to improve themselves. In this small way we, as a group of law firms, have demonstrated our commitment to the betterment of our county. Of that we should all be proud!”

The Phatshoane Henney Training Academy has focused initially on training learners in business administrative services programmes. “By completing these programmes the learners are equipped with an in-demand accredited qualification on their CVs, allowing them to confidently apply for a competitive position in the workplace,” explains Louis Pulzone, CEO of LFP Group Holdings. “As learners funded through the Phatshoane Henney Training Academy suffer from various forms of physical disability, we have focused our programmes to be specifically geared towards disabled persons, with the aim of enabling said learners to successfully compete in the job market. We also help these learners to partake successfully in our programmes by including travel support, wheelchairs, on-site medical support and more to help limit the physical challenges these learners often face in completing these programmes. As a further value-add we have developed strong relationships with industry partners to recruit and appoint learners completing our programmes, and have had great success with such placements.”

The Phatshoane Henney Training Academy will in September hold its first graduation ceremony of learners who have finalized their learnership programmes through the academy.

Public tenders and EME’s: Who will qualify as an EME?

11 November 2015
Tags:  BEE

My business has a turnover of around R6 million. I understand that companies under R10 million will qualify as an EME under the new BEE Codes and do not have to be verified. However a government official recently told me that for tender purposes the Preferential Procurement Regulations only recognises a company as being an EME if its turnover is less than R5 million. Is this correct and will I have to rate my business?

Significant amendments to the BEE compliance framework has been introduced over the last year, commencing with changes to the Broad-Based Black Economic Empowerment Act (“BBBEE Act”) in 2014 and more recently with the promulgation of significant amendments to the BEE Codes of Good Practice (“Revised BEE Codes”). In terms of these changes an Exempt Micro Enterprise (“EME”) is now any company with an annual total revenue (turnover) of less than R10 million, increasing the threshold to qualify as an EME from R5 to R10 million. EME’s need not be formally verified and can receive an automatic level four BEE recognition, with level four being a highly competitive BEE level under the Revised Codes which will assist EME companies to be BEE compliant and BEE competitive. Under the Revised BEE Codes an EME also does not need a formal BEE certificate, and is only required to provide either a sworn affidavit or certificate issued by the Companies and Intellectual Property Commission which confirms that its annual turnover is less than R10 million.

The increase of the threshhold for EME’s will however give rise to problems when it comes to government tenders, until such times as the regulations to the Preferential Procurement Policy Framework Act 5 of 2000 (“PPPFA”) have been updated to be aligned with the Revised BEE Codes.

Government procurement must be conducted in terms of the PPPFA and its regulations. In terms of the PPPFA certain preference points are awarded to tenderers based on their BEE level, with an accredited BEE certificate being used to evidence the points that can be claimed for BEE compliance by a tenderer. The current PPPFA regulations still determine that an EME is any tenderer with an annual total revenue of R5 million or less and that such an EME, to prove its status and obtain points for its level four status, must submit a certificate issued by a registered auditor, accounting officer (as contemplated in section 60(4) of the Close Corporation Act, 1984) or an accredited verification agency. 

This creates the discrepancy that the Revised BEE Codes allow any company under R10 million turnover to be recognised as an EME without having to undergo formal verification, whereas the PPPFA only recognises companies with a turnover of less than R5 million. Additionally the requirements for proving your EME status also differs between the Revised BEE Codes and the PPPFA, calling into question whether an EME affidavit under the Revised BEE Codes will be acceptable under the PPPFA.

This contradiction between BEE legislation and procurement legislation is not new. With the advent of the first BEE codes similar discrepancies were encountered between the requirements of government procurement regulations and the specific requirements of BEE legislation, and it took a few years before the government procurement was effectively aligned with the BEE certificate system. We are again facing a similar situation with adjustments having to be made to the procurement regulations to address the new aspects introduced by the Revised BEE Codes. How long this will take is anybody’s guess, but hopefully this alignment will be far quicker than the initial introduction of the BEE certification into the preferential procurement framework. 

In short, you are both right. Your company should qualify as an EME under the Revised BEE Codes, but the government official is also not wrong to only be allowed to accept certificates for companies that meet the current requirements of the PPPFA. For now, until the position has been addressed, we can only advise that you specifically confirm the BEE requirements for each tender and what will be acceptable for the relevant department - and depending on the importance of the tender for your business, consider obtaining a BEE certificate even if this means undertaking a BEE rating despite qualifying for exemption therefrom.

BEE requirements as a condition to prospecting rights?

11 November 2015
Tags:  BEE

“My business partner and I have embarked on a new endeavour to explore the possibility of mining chrome on land owned by myself and some of our neighbouring farms. We have been advised that we need to apply for prospecting rights. We submitted our application, but have now been advised that our application cannot succeed due to the fact that we are non-BEE compliant. Is this legally correct?” 

Rights to the exploitation of mineral and petroleum resources in our country are governed by legislative measures, with the State acting as the custodian of these resources and regulating prospecting rights in respect of these resources. Unfortunately, despite the legislative framework, there often appears to be uncertainty regarding the requirements, conditions and procedures for applying for prospecting rights, including to what extent BEE compliance is a specific requirement or condition for success.

Prospecting rights are governed by the Mineral and Petroleum Resources Development Act (“Act”). This Act prescribes the procedure to be followed when applying for prospecting rights and sets out the other requirements that have to be met in order to obtain prospecting rights. In respect of BEE compliance, the Act prescribes the following: 

Before breaking ground, an applicant must submit an application for evaluation to the Minister of Minerals and Energy for consideration. The Minister will only grant a prospecting right to an applicant if all requirements of the Act have been met, one of these requirements specifically being that the applicant has given effect to the objects referred to in the Act, which includes “to substantially and meaningfully expand opportunities for historically disadvantaged persons, including women and communities, to enter into and actively participate in the mineral and petroleum industries and to benefit from the exploitation of the nation's mineral and petroleum resources.”

The Act further states that the Minister may, having regard to the type of mineral concerned and the extent of the proposed prospecting project, request an applicant to give effect to the objectives referred to above.

From the above it is clear that the Minister will not grant a prospecting right if such application does not promote equitable access to mineral resources for historically disadvantaged people, and it can therefore be construed that BEE compliance is indeed a requirement without which a prospecting right cannot be granted.

Much of the confusion surrounding BEE compliance stems from the original Act prior to amendment thereof. In its pre-amended form, the Act simply stated that the Minister must approve an application if the applicant is not in contravention of any relevant provisions of the Act. It contained a further provision that the Minister may request the applicant to give effect to the specific objective of expanding opportunities for historically disadvantaged persons to enter into, actively participate in and benefit from the mineral and petroleum industries. The confusion arose as to whether the last mentioned provision was merely a discretionary request, or whether it was a requirement or pre-condition.
With the amendments to the Act being effective from 7 June 2013, the confusion has now been addressed with the fulfillment of the above objective now listed as a clear requirement for the granting of a prospecting right.

Accordingly, even though the Act does not expressly refer to any specific BEE requirements as a condition to prospecting rights, examining the Act as a whole reveals the necessity of promoting and expanding opportunities for historically disadvantaged persons to benefit from prospecting and will include BEE compliance. This is not to say that any condition relating to BEE compliance can be imposed by the state, but rather that generally imposing conditions relating to BEE compliance is allowable. 

It is accordingly advisable to seek the assistance of a BEE consultant to assist you with advice on how you can ensure that your new venture is BEE compliant before embarking on the application process for prospecting rights.

Is it really out with the old and in with the new when it comes to BEE?

11 November 2015
Tags:  BEESector Codes

“I run a family business, and we have been blessed with steady growth mainly because of one big client. Although we support transformation, we’ve never really needed to obtain a BEE certificate. Our big client has now informed us that unless we obtain a BEE certificate, they will not be able to do business with us anymore. We want to comply, but we are unsure about where to start, particularly because it appears as if there is also a lot of uncertainty regarding the new BEE requirements on the way?”

Your experience with your big client is part of the cascade effect that the BEE legislation in South Africa envisages to ensure that companies indirectly (or directly as in your case) place pressure on their suppliers to comply with BEE legislation. 

Right now, as you rightly remarked, there is uncertainty in the market surrounding BEE with companies finding it quite challenging to do their planning effectively. The uncertainty has largely been created by the advent of the Amended BEE Codes of Good Practice (“Amended Codes”), the Old BEE Codes of Good Practice (“Old Codes”) and the various Sector Codes of Good Practice (”Sector Codes”) that apply to specific industry sectors. Businesses are wondering whether they should still plan for compliance under the Old Codes, the New Codes or even the Sector Codes, particularly as the goals are not the same under the various codes. I will attempt to better explain the confusion:

Currently, the Amended Codes are in force (as from 1 May 2015), but a 12 month window has been granted for companies to still report under the Old Codes if they report using their financial period ending before 1 May 2015. This means that companies can still conditionally report under the Old Codes until 30 April 2016. Companies can of course also already report under the Amended Codes should they have to or choose to. This decision is the first problem which arises for many companies. 

The New Codes also make provision for certain companies to obtain “automatic” levels without going through a formal verification procedure. These companies are Exempt Micro Enterprises (“EME’s”) (under R10 million annual turnover) and all companies (including EME’s) under R50 million annual turnover with at least 51% black ownership. If companies choose to make use of this “automatic” level recognition option they only have to provide an affidavit confirming their status, but cannot as of yet obtain a BEE certificate from an accredited verification agency that confirms their automatic BEE level. This is the second problem as many companies or institutions (including government) still only accept an accredited BEE certificate and not an affidavit. To address this, such companies can apply for a BEE certificate but will then have to go through a formal verification procedure and be verified to obtain a certificate, thereby losing the benefit of an automatic level recognition and possibly also receiving a worse BEE level than they would receive with the automatic level recognition.

The third problem and area of confusion relates to the relationship between the Amended Codes and the Sector Codes. Companies that derive the majority of their income from sectors that have a Sector Code applicable to it such as construction, transport, agriculture etc. will have to report and be verified under the current Sector Codes until such time as the current Sector Codes are aligned to the Amended Codes. These Sector Codes must be aligned to the Amended Codes by 1 November 2015. But until then, the current Sector Codes will apply and companies falling within a Sector Code will not have the option of reporting under the Amended Codes and applying for “automatic” level recognition available under the Amended Codes – at least not until the Sector Codes are amended to possibly cater for this. 

In light of this confusion, it is strongly advised that you obtain the assistance of a BEE consultant that can help you understand which rules apply to your business and can guide you in establishing whether you should report under the Old Codes, Amended Codes or a Sector Code, and then assist you with the necessary planning and guidance through the verification process so that you can obtain a BEE certificate.

Revised BEE Codes Transitional Period extended

19 March 2014
Tags:  BEEBEE Codes

Minister Rob Davies of the Department of Trade and Industry on 18 March 2014 announced the extension by a further 6 months of the transitional period provided for in the new BEE Codes of Good Practice from 11 October 2014 to 30 April 2015. This provides enterprises and verification agencies with a further period of 6 months in which BEE verifications will be conducted under the old BEE codes and presumably provides the DTI time to address the myriad of questions and uncertainties still being levelled at the new BEE Codes.

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