BROAD-BASED BLACK ECONOMIC EMPOWERMENT P R E S E N T E D BY A L E X I S S A C K S 1 9 M A R C H 2 0 1 3
BROAD-BASED BLACK ECONOMIC EMPOWERMENT 1. What is B-BBEE? 2. Definition of Black People 3. Compliance Requirements 4. Codes of Good Practice 5. Scorecard Points and B-BBEE Recognition Level 6. The Seven Elements 7. Scorecards 8. The B-BBEE Calculations 9. Sector Charters 10. Fronting 11. Practical B-BBEE Tips 12. A summary of proposed changes ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
DEFINITION OF BLACK PEOPLE Black means African black, coloured or Indian people who are South African citizens by birth or descent or who became South African citizens before 27th April 1994. NB the definition of coloured now also includes Chinese. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
WHAT IS B-BBEE? B-BBEE refers to Broad-Based Black Economic Empowerment. It encourages companies to help transform the country with broad-based activities that benefit black people by having access to more economic opportunities. By maximising your BEE status, you will be able to: • Provide a competitive edge independent of your organisation’s size, • Encourage large companies to invest in a compliant company, • Assist in unemployment and poverty in the long term. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
COMPLIANCE REQUIREMENTS BEE compliance is measured by means of a scorecard. The scorecard is based on various elements and your company is measured out of a maximum of 100 points (in some cases it is possible to obtain more than 100 points). The BEE Codes of Good Practice describe the mechanisms of the scorecard. The seven rating elements make BEE broad-based. They cover various aspects of the economy, society and the company. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
CODES OF GOOD PRACTICE ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SCORECARD POINTS AND B-BBEE RECOGNITION LEVEL ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
THE SEVEN ELEMENTS 1. Ownership - measures the percentage of shares in the business that are owned by black people. 2. Management – measures the black directors and top management of the business. 3. Employment Equity – measures the black employees in the business. 4. Skills Development - measures the amount of money spent on training of black employees. 5. Procurement – measures your suppliers and their BEE scores. 6. Enterprise Development - your spend on helping black owned enterprises. 7. Socio-Economic Development - your spend on assisting charitable organisations with black beneficiaries. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SCORECARDS Qualifying Small Enterprise’s (QSE’s) Qualifying Small Enterprise’s (QSE’s) can select any four of the seven elements. Their annual turnover is typically greater than R5 million but less than R35 million. Generic Enterprises need to comply with all seven elements of the scorecard. Their annual turnover is typically above R35 million. * The exceptions are highlighted in your notes for the different sector scorecards. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SCORECARDS Exempt Micro Enterprises (EME’s) Total Annual Revenue typically of R5m or less. Deemed to be a “Level 4 Contributor” (100% Recognition Level). If more than 50% is owned by Black people, the entity is promoted to Level 3 Contributor (110% Recognition Level). ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SCORECARDS The QSE Scorecard The QSE scorecard has the following components and points available:
SCORECARDS The Generic Scorecard The Generic Scorecard has the following components and points available:
THE B-BBEE CALCULATIONS The calculations are simple – in each instance you have an indicator. The indicator will have a target and a number of points available – you need to reach the target to earn the points. Calculation Example Socio-economic Development (SED): Target – spend 1% NPAT on black people for SED = 5 points; Actual – spent 0.5% NPAT Therefore, 0.5%/1% NPAT * 5 points = 2.5 ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
SECTOR CHARTERS * The turnover thresholds are highlighted in your notes for the different sector scorecards. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
FRONTING ‘Fronting means a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes. Fronting commonly involves reliance on data or claims of compliance based on misrepresentations of facts, whether made by the party claiming compliance or by any other person.’ (South Africa. Department of Trade and Industry, no date) ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS 1. When verifying Socio-Economic Development, the following evidence is required to support your claim for points: � Proof of the contribution. � A letter from the head of the beneficiary organisation confirming receipt and confirming the percentage black beneficiaries. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS 2. When verifying Enterprise Development, the following evidence is required: � An agreement between both parties confirming the arrangement. � Documentation confirming the B-BBEE status and qualifying category of the entity (e.g. BEE certificate, proof of turnover, proof of black ownership, etc) � Documentation proving that the contributions have been made e.g. bank statements showing payments, receipts, letter of acknowledgement from beneficiary, etc. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS 3. These are some of the most common ways to lose points on your scorecard: � Training takes place outside of the measurement period � Lack of training for black employees � Inadequate record keeping � Unable to prove attendance at training � No Learnership contracts � Unable to prove amount spent on training � No records of internal training ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS � A generic company must comply with the following to be rated for these elements: � Registration with applicable SETA � Development of a workplace skills plan � If you are a ‘designated employer’ according to the turnover thresholds for your industry (as indicated in Schedule 4 of the Employment Equity Act), no points will be awarded for Employment Equity, unless you have submitted the required EEA2 and EEA4 reports to the Department of Labour. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS 4. Sector codes apply from the day they are gazetted as a final sector code. This means that you need to be aware of any new codes in the final stages of gazetting, as they may affect your industry scorecard, retrospectively. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
PRACTICAL B-BBEE TIPS 5. Certain of the elements are time-based and certain are based on the financial period. � The elements of skills development, preferential procurement, enterprise and socio-economic development are based on the financial period. � The remaining elements, ownership, management control and employment equity, are all measured at the date of verification. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
A SUMMARY OF THE PROPOSED CHANGES TO THE CODES OF GOOD PRACTICE A QSE will now be defined as an entity whose turnover is between R10m and R50m. However, there will also now be little difference between the verification of a QSE or a Generic, other than the QSE will only be required to meet a minimum target of 40% of the compliance target on 2 of the 3 priority elements to avoid an automatic drop of 1 level in its Recognition Level. The Generic Enterprise will be required to meet a minimum target of 40% of the compliance target on all 3 of the priority elements to avoid an automatic drop of 2 levels in its Recognition Level. ______________________________________________________________________ BROAD-BASED BLACK ECONOMIC EMPOWERMENT
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