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Broad-Based BEE Verification Agency

BEE Rated Newsletter – 5th Edition 2011

1.    BEE RATED:  end of year!

We wish everyone an enjoyable and well-earned festive season, as well as all the best in business and personal lives. 

We also want to thank all for their support in getting BEE RATED up and running. Kim and I are happy to say that our growth since the beginning of the year when we started has actually exceeded our expectations. Our client base at present stands at some 155 clients, including 40 Generic enterprises, 70 QSE’s, and 45 EME’s!

We look forward to continuing our working relationship with all our clients, providing a professional and reliable verification service.

2.    Review of the BEE Legislation and refocus of the BEE Codes

“The year 2011 promises to deliver a major shake-up in the black economic empowerment (BEE) space on the back of increased calls for an overhaul of the prevailing BEE framework.” (New Age, 04 January 2011).

Well, it’s taken almost a year, but the major review of the BEE legislation and the Codes of Good Practice has now been completed, and the Cabinet has just approved significant amendments. These will be gazetted for comment soon, and thereafter will become law, during the new year. Such changes (Business Day on 24/11/11) appear to be:

  • Minimum thresholds have been set for each scorecard element (not just Employment equity and procurement as is the case at present – see also below point 6.).
  • The targets for Ownership, Preferential Procurement and Enterprise Development are to be adjusted.
  • The Ownership element to be broadened to include designated groups in the main points. T
  • The Employment Equity element will be (more) aligned with the Employment Equity Act.
  • The Skills Development element will be aligned to the government’s new skills development strategy and New Growth Path, which aims to create 5-million jobs in 10 years.
  • An elevation in the status given to Enterprise Development and Preferential Procurement in the scorecard.
  • Certain elements will be made mandatory on the QSE scorecard, as opposed to the present choice being allowed.
  • The thresholds for EME’s will be reviewed and adjusted.
  • Penalties have also been included for non-compliance with these requirements, as have penalties for other forms of non-compliance, including fronting, which will range from 2% to 5% of turnover.

2.1  A big No! No! to fronting

The Chief Director for BEE at the Dti, Nomonde Msatywa, says the new draft legislation envisages fines of up to R10 million or 10 years in jail. Those convicted will be banned from doing business with any organ of the state, and the state will be able to cancel unilaterally a contract awarded on the basis of false information. So beware!

A number of fronting incidents have been reported over the years where, eg, a low-level employee has been cited as CEO or part owner of a company without their knowledge, and without benefiting from such claims of employment or ownership. Or, where “Black-owned” companies are set up for the specific purpose of acting as the front for a white-owned one operating in the background.

3.   Reminder:  Alignment of the Preferential Procurement regulations with the BEE Legislation as of 07 December 2011

The Preferential Procurement Regulations, 2011, are applicable to organs of state and all public entities. Below are some of the key requirements when tendering for work with the state/state owned entities. If you would like the detailed Implementation Guide provided by the National Treasury, these are obtainable on its website, or contact us and we’ll forward to you.

3.1  Preference point systems

a.   The 80/20 preference point system is applicable to bids with a Rand value equal to/above R30 000 and up to a Rand value of R1 million (all applicable taxes included).

b.   The 90/10 preference point system is applicable to bids with a Rand value above R1 million (all applicable taxes included).

3.2  Verification Certificates

  • Bidders are required to submit original and valid B-BBEE verification certificates or certified copies thereof together with their bids, to substantiate their BEE rating claims.
  • Bidders who do not submit BEE certificates or are non-compliant contributors to B-BBEE do not qualify for preference points for BEE but should not be disqualified from the bidding process. They will score points out of 90 or 80 for price only and zero (0) points out of 10 or 20 for BEE.
  • A trust, consortium or joint venture must submit a consolidated BEE certificate for every separate bid.
  • Public entities and tertiary institutions must also submit BEE certificates together with their bids.

4.  Reminder:  New BEE Targets in 2012.

Unless, of course, the new amendments approved by the Cabinet also make changes to the dates and the targets that are already in place, then it is prudent to start preparations for the below increased targets.

4.1   Dti Generic Codes

Please take note:  the targets will increase significantly from February 2012 for the Dti Generic and QSE Codes, so it important to start making provision now for the following elements:  Employment Equity, and Preferential Procurement. Targets in this 2nd phase will be:

BEE Element

Generic Codes

QSE Codes

Employment Equity

–   Senior Management: from 43% to 60%  

–   Middle Management: 63% to 75%

–  Junior Management: 68% to 80%

–  Disabled Employees: 2% to 3%

–  Management: from 40% to 60%

–  Total Employees: 60% to 70%

Preferential Procurement

– Total BEE procurement: 50% to 70%

–  QSE/EME procurement: 10 to 15%

–  Black owned procurement: 15% to 20%

–  Total BEE procurement: 40 to 50%

To ready for these changes in the Preferential Procurement element, please note that your organisation will be measured against the new targets for financial years commencing after 09 February 2012.

4.2   Tourism Sector Code

If your organisation falls within the Tourism Sector, then the increased targets will apply as of 23 May 2012.  In most cases this means companies with financials beginning from 01 July.

6.3   Other Sector Codes

Other sector codes are due for various increases at later dates, so there is more time to prepare:

–          Construction:   June 2013

–          Forest:   June 2014

–          Transport (Road Freight, Forwarding & Clearing, Maritime Transport & Services):   August 2014  

Please contact us if you need further clarity and/or information so that you can start readying yourselves for these developments.

7.   Interpretive Guide:  ensuring proper preparation for a BEE Verification and Rating

As there continue to be issues on interpretation of the Dti Codes, compounded by the introduction of the various Sector Codes, we have decided to include a section in our Newsletter that addresses these questions of interpretation. What we say is based on our best understanding, so we welcome comments, queries and requests for clarification. To start with, some definitions.

Definitions: (see Schedule 1 of the Codes of Good Practice)

BEE Owned Company”: a juristic person having more than 50% economic interest (ie, enjoying a return on ownership, such as dividends).

BEE Controlled Company”: a juristic person with a shareholding, and having more than 50% exercisable voting rights.

Black people”:  South African citizens by birth or descent; or by naturalisation before the commencement of the 1993 Constitution; or after the commencement, those persons who were prevented from qualifying for naturalisation due to the apartheid legislation.

Black Designated Groups” (in the Ownership element)  include:

–  “Youth”:  anyone between the ages of 14 and 35 years.

–  “Disabled”: see below.

–  “Unemployed”: not attending and not required by law to attend educational institutions.

–  “Rural and Under-developed”: Black people living in such areas.

Disabled people”:  persons with a medical condition that is long term or recurring, and which substantially limits their ability to perform the functions in their chosen field of employment, and which limits their prospects of entry into or advancement in employment.

–  An impairment is substantially limiting if, in the absence of reasonable accommodation by the employer, a person would be either totally unable to do a job or would be significantly limited in doing the job. (Note:  some impairments are easily controlled, corrected or lessened, so having no limiting effects. For example, a person who wears spectacles does not have a disability even though their vision may be substantially impaired.)

–  An assessment as to whether the effects of impairment are substantially limiting must consider if medical treatment or other devices would control or correct the impairment so that its adverse effects are prevented or removed.

We will continue addressing other issues in future editions of the newsletter.

Questions and Comments are welcomed – please send to BEE RATED:   Tony Kruger at tony@beerated.org;    Kim Odell at kim@beerated.org

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Contact us:

Physical Address:
Suite 2,
2 Fairways Avenue,
Fairways Park,
Mt Edgecombe
Tel: 031 539 3033
Fax: 086 750 2119
Members: A. Kruger; K. Odell

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