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The DTI has been silent for many months, but we have suddenly experienced an eventful 2 weeks where the DTI has gazetted various sets of B-BBEE legislation and clarification notices within a 2-week period, of which one of those gazettes is a retraction and replacement of a notice gazetted just days earlier.
The latest uproar is the retraction of the gazette regarding the Ownership element, which stated that Broad-Based Ownership Schemes and Employee Ownership Schemes will only count a maximum of 3 points on the ownership scorecard. This has been withdrawn and full recognition will still be given under the Ownership element for entities with these types of Ownership schemes. Confusion reigns as various news articles are now published with headings reading “Minister Rob Davies withdraws BEE change…” leaving the industry with the perception that the entire Amended Codes have been withdrawn. This is not the case, and only one paragraph has been withdrawn which is the aforementioned Ownership paragraph concerning entities with Broad-Based Ownership Schemes and Employee Ownership Schemes.
However, the recently gazetted documentation have brought upon some fundamental changes to the calculations in certain areas of the Amended Codes of Good Practice.
I have obtained and studied all the latest gazetted documents and would like to report back only on the main newly gazetted changes:
Extension of the Sector Codes
The Sector Codes have received further extension and now has until the 30th October 2015 to align with the Amended Codes of Good Practice. This is misleading because entities falling within Sector Codes are under the impression that they currently don’t have to comply with the Amended Codes of Good Practice. The practical application however is that during an entity’s next B-BBEE audit in 2016, entities will be measured on the activities implemented during the financial year preceding the audit (which is the current financial year), but measurement will take place using the Amended Sector Code Scorecard – the Sector Codes will not provide a transitional period as done previously. Therefore the strategy for a company falling within a sector code would be to align itself with the already gazetted Amended Codes of Good Practice and once the relevant Sector Code has been gazetted, the additional targets and criteria should be identified and any gaps should then be addressed. Entities will therefore only have 2 – 4 months to identify and address any shortfalls should the Sector Code be gazetted at the end of October 2015, depending on the financial year end. The B-BBEE Act clearly states that all Revised Sector Codes must be based on and aligned with the Amended Codes of Good Practice, which means that this is the basis to use to proactively strategise for alignment.
EAP Target Calculations
The DTI has also released some complex calculations under the Management Control and Skills Development elements, incorporating the Economically Active Population (EAP) Targets published by Stats SA. Demographic representation is imposed by the introduction of individual targets, per management level, per gender and race group (targets for African Males, Indian Males, Coloured Males, African Females, Indian Females and Coloured Females). The score per sub-calculation is capped per race and gender.