Impact of New BBBEE Legislation on NPO’s
HGG Financial Group • The HGG Financial Group - establishment by Hendrik Gerryts in 1998. • Since then, the company has grown into a formidable force in the financial services arena – offering forward-thinking finance. • Our range of services has been carefully selected to meet our clients’ current and future financial needs.
HGG Financial Group • HGG Professional Accountants • HGG Wealth • HGG Trust • HGG NPO Sustainability Solutions • HGG Consult • HGG BEEadvised • HIB / Helderberg Insurance Brokers
History of BBBEE
BBBEE Codes
Classification per the codes 2013 • Exempted Micro Enterprise (EME) = < R 10 million • Qualifying Small Enterprise (QSE) = R 10 million ≤ R 50 million • Generic Enterprises = ≥ R 50 million
QSE Scorecard Indicator Indicator QSE Scorecard Weighting Target Ownership (Priority) 25% of 25 Equity Management Control 15 50%-88% Skills Development (Priority) 25 6% Enterprise & Supplier Development (Priority) 30 • Preferential Procurement 20 80% • Supplier Development 5 2% • Enterprise Development 5 1% Socio-economic Development 1% 5 100
Generic Scorecard Indicator Indicator Generic Scorecard Weighting Target Ownership (Priority) 25% of 25 Equity Management Control 19 50%-88% Skills Development (Priority) 20 6% Enterprise & Supplier Development (Priority) 30 • Preferential Procurement 25 80% • Supplier Development 10 1% • Enterprise Development 5 1% Socio-economic Development 1% 5 109
REVISED BBBEE POINTS • The amendments to the Codes significantly changed the manner in which a firm’s BBBEE status (or level) is calculated, as the number of BBBEE points required to achieve a particular BBBEE level has been increased.
Sector Codes ector Codes Effective date Agri-BEE Charter 8 December 2017 Construction Sector Charter 8 December 2017 Financial Sector Charter 26 November 2012 Information and Communication Technology (ICT) 07 November 2016 Charter Property Sector Charter 1 June 2012 Chartered Accountancy Sector Code 10 May 2011 Integrated Transport Sector Codes 21 August 2009 Forest Sector Code 12 June 2009 Marketing, Advertising and Communication (MAC) 01 April 2016 Sector Code Tourism Sector Code 20 November 2015
NPC/PBO EME NPC/PBO under 10m t/over deemed: • 75%+ black beneficiaries – Level 1 , 135% recognition • 51-75% black beneficiaries – Level 2 , 125% recognition • <51% black beneficiaries – Level 4 , 100% recognition
NPC/PBO QSE NPC/PBO R 10m-R 50m t/over deemed : • 75%+ black beneficiaries – Level 1 , 135% recognition • 51-75% black beneficiaries – Level 2 , 125% recognition • <51% black beneficiaries – use Specialised QSE scorecard
EME & QSE Affidavit To access deemed status as EME or QSE, each year senior director of NGO signs and swears to an affidavit: • turnover for the past year is R 10m/less OR • R 50m/less; and • % of black beneficiaries
Key Objectives of the Revised Codes • Drive growth of SMME black owned enterprises • Encourage job creation • Drive local manufacturing and processing • Accelerate representation of Black woman, rural and youth in the economic activities • Encourage to be pro-active not re-active
BBBEE Commissioner • Functions: – Oversee, supervise & promote adherence to the Act – Safeguard the objectives of B-BBEE – Receive, Investigate & respond to complaints relating to B-BBEE – Maintain a registry of major BEE transactions (above a certain threshold) • Penalties – 10% of annual turnover or – up to 10 years imprisonment for those convicted of the offence of fronting
Fronting: B-BBEE Act No. 46 of 2013 • Black people appointed to a company & discouraged from substantially participating in the core activities of the company; • Economic benefits received as a result of BEE status of an enterprise do not flow to black people in the ratio specified in the relevant legal documentation • Conclusion of a legal relationship with a black person to achieve a certain level of BEE compliance without giving that black person the economic benefits that would reasonably be expected to be associated with the status or position held by that black person • Conclusion of an agreement with another enterprise in order to achieve or enhance BEE status in where: – (i) there are significant limitations on the identity of suppliers , service providers, clients or customers; – (ii) the maintenance of business operations is reasonably considered to be improbable , having regard to the resources available; – (iii) the terms and conditions were not negotiated at arm’s length and on a fair and reasonable basis.
BBBEE Scorecards
Ownership - QSE
Ownership – Generic
Management Control - QSE
Management Control: Generic
Skills Development: QSE
Skills Development: Generic
SKILLS DEVELOPMENT • This is a priority element, meaning an entity will drop a level should it fail to meet or exceed 40% of the total weighting points • The scorecard uses an approach similar to Employment Equity with targets that are based on racial demographics provided in the Employment Equity Act and Commission on Employment Equity Report • Bonus points are awarded for the absorption of unemployed black learners after the completion of the learnership programs • Unemployed people who receive training reflected on the learning matrix will also be accounted for under skills development
Skills development (Priority Element) 20,0 Indicator Indicator GENERIC SCORECARD weighting target Skills development spend for black people as a percentage of leviable amount (Refer learning programme 8,0 6,00% matrix) Skills development spend for black employees with disabilities 4,0 as a percentage of leviable amount (refer learning programme 0,30% matrix) Black employees participating in Learnerships, Apprenticeships 4,0 2,50% and Internships as a % of all employees Black unemployed people participating in training specified in 4,0 2,50% learning programme matrix as a % of all employees Bonus points: Black people absorbed by the measured and 5,0 100% industry entity at the end of the learnerships programme
Learning Program Matrix – Summary • Category A: Bursaries – Full-time study. Degree: University, college, school or ABET provider • Category B: Internships – Mixed mode institutional instruction and supervised workplace learning. Degree: University, college, school or ABET provider • Category C: Learnership – Registered structural experiential learning in the workplace after achievement of a qualification • Category D : Apprenticeship: Work based learning that requires formal contract. SAQA registered qualification • Category E : Work-integrated learning: Work based learning that does not require formal contract but is formally assessed. • Credits for unit standards, CPD, Performance Development Programme
Learning Program Matrix – Summary • Category F: Informal Training – Informal instructional progams. Workshops, seminars, conferences and short courses. • Category G: Informal Training – Work based informal progams in the workplace. On the job training. • Category A to E programmes are recognised in full. • Category F and G are capped at 15% of total SD expenditure
Recognisable Training Expenses • Course fees, bursaries and scholarships • Salaries, wages or stipends paid to a learner participating in Learnership, Internship or Apprenticeship • Cost of trainers • Cost of training facilities • Administration costs • Cost of Skills Development Facilitator or training manager • Ancillary costs such as accommodation, travelling and catering but cannot exceed more than 15% of total SD expenditure
Enterprise and Supplier Development • Preferential Procurement and Enterprise Development were merged to form an element to be known as Enterprise and Supplier Development • Exempt Micro Enterprises (EME) and Start-Ups are automatically recognised as Empowering Suppliers
Enterprise and Supplier Development
Enterprise and Supplier Development • Enterprise Development contributions are monetary or non monetary initiatives made with the objective of contributing to the development, sustainability and financial and operational independence of EMEs or QSEs which are at least 51% black owned • Supplier Development contributions are identical except the beneficiaries are existing majority black owned suppliers to the corporate • These two sub elements both form part of a priority element. Failure to achieve 40% of the points in each will result in discounting by one level
Enterprise and Supplier Development
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