On 29 March 2018, the Minister of Trade and Industry issued the General Principles and Skills Development Statements respectively, in which changes have been proposed to such statements of the Codes of Good Practice on Broad Based Black Economic Empowerment of 2013. The public was able to submit written comments on the proposed amendments within 60 days from the date of publication and the proposed amendments were met with a mixed response.
Some of the most important (and most controversial) suggested amendments are summarised below:
Draft General Principles Statement
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51% Black-owned and 100% Black-owned Exempt Micro Enterprises and Qualifying Small Enterprises that seek to benefit from the enhanced recognition principles in terms whereof it can qualify as automatic Level 2 and 1 contributors to B-BBEE can no longer utilise the modified flow through principle in doing so. |
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Enhanced recognition for Generic Enterprises (i.e. enterprises with an annual total revenue of R50 million or more) that are 100% Black owned (measured using only the flow-through principle) and large enterprises that are at least 51% Black-owned (measured using only the flow-through principle) to Level 1 and 2 contributors respectively. Such large enterprises will only be required to obtain B-BBEE verification certificates verifying their ownership. |
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Enhanced B-BBEE recognition, in terms whereof participating entities could move up 1 or 2 B-BBEE recognition levels on the generic scorecard, for the achievement of targets in respect of the YES Initiative, which is aimed at job creation for Black youth (ages 18 to 35). In order for a measured entity to be eligible for enhanced B-BBEE recognition through the YES Initiative it must meet certain qualification criteria, such as, in the case of a large enterprise, achieving the sub-minimum for each priority element or an average of 50% across all three priority elements and ensuring that it maintains or improves its B-BBEE status level. A further qualification criterion of needing to achieve full points under a specific sub-element of the skills development element was dropped due to great resistance and criticism from the business community in response thereto. |
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All companies participating in the YES Initiative must determine its YES target for new job creation based on various criteria stipulated in the Draft General Principles Statement. Entities that are unable to create a sufficient number of new jobs in order to meet their targets may also sponsor new placements in Exempt Micro Enterprises or Qualifying Small Enterprises. |
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Draft Skills Development Statement
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Skills development expenditure on bursaries for Black students at Higher Education Institutions is proposed as a separate sub-element under the skills development scorecard. The compliance target is 2.5% of the leviable amount (an amount roughly equal to an entity’s annual payroll) for 4 weighting points. |
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The target for skills development expenditure on learning programmes in the learning programme matrix will be reduced from 6% to 3.5% of the leviable amount for 6 weighting points in order to accommodate the aforementioned sub-element aimed at bursaries for higher education. |
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The provision that legitimate training costs such as accommodation, catering and travelling cannot exceed 15% of the total value of skills development expenditure will no longer find application to the target for bursaries for Black students at Higher Education Institutions. |
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Reaction and way forward
The 60-day period for public commentary has now lapsed and it will be interesting to monitor developments in this regard as the proposed amendments have attracted major reactions from opposing sides. The proposed amendments, specifically pertaining to enhanced recognition for Black owned Generic enterprises, have been met with widespread criticism from various role players in the business and BEE sphere and has been termed as a proposal for “The death of Broad- Based BEE”. It is expected that some further dialogue will have to take place on this sensitive matter between the DTI and relevant industry role players. The proposals regarding the YES initiative and recognition for bursaries to Black students under the skills development were much more positively received and it is expected to be formally included into the amended BEE Codes in the near future.
From a Siyandisa perspective, the proposals regarding Higher Education Institution bursaries for Black students are especially positive as Siyandisa has, through the Siyandisa Foundation’s highly successful schools project, been a big driver behind more financial and mentoring support for Black Students at secondary and tertiary level for some time. Where contributors to this project could only qualify for social economic development points in the past, the amendments will now enable all contributors to qualify for points under the skills development element thereby further encouraging and promoting the development and investment in Black youth.