Clarification upon clarification likely when it comes to the implementation of revised B-BBEE Codes
Commenting on the recent clarification notices issued by the Department of Trade and Industry (DTI) relating to the now active revised B-BBEE codes, Nhlanhla Sigasa, Director at SizweNtsalubaGobodo believes that going forward even more clarification will be required.
"The DTI in its clarification notice on 5 May 2015 (which was withdrawn and replaced by a clarification notice on 15 May 2015) indicated that organisations with a financial year ending on or before 30 April 2015 will be measured according to the old codes. While organisations with a financial-year ending on or after 1 May 2015 on the other hand, will be measured in terms of the amended codes. This clarification is still noted as such in the clarification notice of 15 May 2015.
"However what the DTI has failed to take into consideration here is the fact that the financial year-end and what is referred to as the measurement period within individual organisations are often not aligned. In these instances government will need to clarify according to which timeframe organisations will be measured,” he explains.
Sigasa says further confusion caused by the 5 May 2015 clarification (which was withdrawn on 15 May 2015) relates to the BEE points attributable to Broad-Based Ownership Schemes (‘BBOS’) and Employee Share Ownership Schemes (‘ESOPs’) in terms of the ownership scorecard.
"This would have put a cap on the points received by companies who have BBOS and ESOPs within their ownership structures. The cap would have been 3 points out of the total 25 points available under the ownership scorecard. The withdrawal in my opinion is positive as BEE should be biased to Broad Based rather than Narrow Based,” he adds.
Also requiring further clarification according to Sigasa is the additional criteria added to the new ‘Empowering Supplier’ status in the revised codes.
"While the clarification notice issued on 6 May 2015 stipulates that in order to obtain the Empowering Supplier status, at least 85% of labour costs must be paid to South African employees by service industry entities, it fails to mention whether this is South African employees in general, or in fact black South African employees. This has unfortunately therefore caused more confusion than clarification,” he says.
For Sigasa, other widespread confusion surrounds the DTI’s stipulated ‘good citizen’ status to qualify as an Empowering Supplier. "What does ‘good citizen’ actually mean? Does it mean you pay your taxes or that you simply submit your annual returns on time? Government will need to elaborate on what organisations will be required to do to be considered ‘good citizens’,” he stresses.
Sigasa believes going forward another likely amendment as opposed to clarification will be the timeline set around the alignment of sector codes to the amended codes. "Considering the 31 October 2015 deadline means an effective five month period for the necessary alignment to take place, this would require that it be gazetted for public comment by next month in order for the necessary legislative process to take its course. In my opinion this is unlikely and hence the timeframe seem unrealistic,” he concludes.