B-BBEE NEWS AND VIEWS

On 29 October 2024, the Legal Practice Council (LPC) issued a notice to all legal practitioners, providing clarification on the Legal Sector Code as we await the establishment of the Legal Charter Council. The Legal Sector Steering Committee confirmed key updates, which are outlined below:

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Exemptions from Compliance with the Legal Sector Codes

The following legal practitioners and law firms are exempt from compliance:

• Law Firms:some text
  • Annual revenue between R0 to R5 million.
  • Annual revenue between R5 million to R25 million, with more than 51% Black Ownership.
• Advocates:some text
  • Annual revenue between R0 to R3 million.
  • Black Advocates with annual revenue between R3 million to R15 million.

To qualify for exemption, these entities need only submit an Affidavit or CIPC Certificate confirming their turnover and level of Black Ownership. This determines their automatic B-BBEE Status level.

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Priority Elements for Compliance

Large Entities

Large entities must meet the sub-minimum targets for the following elements to avoid being discounted by one B-BBEE level:

• Ownership
• Skills Development
• Enterprise and Supplier Development

Qualifying Small Enterprises (QSEs)

• Compliance Requirements:
  QSEs are required to comply with Ownership and either Skills Development OR Enterprise and Supplier Development to avoid being discounted.
• Exemptions for Black-Owned QSEs:
  QSEs with 51% or more Black Ownership do not need to comply with priority elements unless they opt to be measured under the QSE Scorecard.

Transition Period for Verification

• Existing B-BBEE Certificates:
  Certificates issued before the gazette remain valid for the period stated on the Certificate.
• In-progress Verifications:
  If a verification process began before 20 September 2024, it can be finalized and issued under the Generic Scorecard.
• Legal Sector Measured Entities:
  All other entities will be verified based on the new Legal Sector Codes.

This poses challenges for entities with December year-ends, as they have limited time to plan and implement initiatives under the new standards. The lack of clarity from the Charter Council, which is still being set up, adds to this difficulty.

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Stay Informed and Plan for Compliance

These updates reflect significant changes designed to drive transformation within the legal profession. It’s vital for law firms and legal practitioners to understand these obligations and take action to ensure compliance.

For more details or to schedule a consultation, contact Elevate Advisory Partners at info@elevateadvisory.co.za.

To BEE or Not to BEE? That Is the Question

The question of whether to pursue B-BBEE compliance can be a source of frustration for many business owners. We've encountered numerous companies that have spent thousands of Rands on professional B-BBEE advice, only to discover that they didn't actually need a B-BBEE certificate in the first place.

First Things First: Do You Need It?

Before diving into the complexities of B-BBEE, it's crucial to ask yourself why you need it. Is it for a tender? Are your clients pressuring you to get certified? For instance, if you're an au pair trading as a sole proprietor, you likely don't need a B-BBEE certificate. In such cases, an affidavit, easily obtainable from the DTI website, might suffice.

Understanding Your Enterprise Type

Your business's annual turnover determines whether you're classified as an EME (Exempted Micro Enterprise), QSE (Qualifying Small Enterprise), or a Generic Enterprise. This classification will guide whether you can simply sign an affidavit or if you need to undergo the SANAS B-BBEE certification process.

Annual Turnover Thresholds by Sector

Here’s a breakdown of the thresholds across different sectors:

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When an Affidavit Is Enough

In most sectors, an affidavit will suffice if you are classified as an EME. For companies that are more than 51% black-owned, you can also complete an affidavit if you're a QSE.

Special Note for Construction Entities

Construction entities should be aware that a SANAS certification process is required once their turnover exceeds R 3 million for contractors and R 1.8 million for BEPs.

Need More Guidance?

If you require further assistance, feel free to contact us at info@elevateadvisory.co.za or visit our website at www.elevateadvisory.co.za. We're here to help you navigate the complexities of B-BBEE compliance

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A Broad-Based Black Economic Empowerment (B-BBEE) affidavit is a crucial document for companies operating in South Africa. It allows you to declare your B-BBEE status, which can significantly influence your business opportunities. Many clients or partners require B-BBEE compliance to ensure they are working with certified companies. Therefore, completing your B-BBEE affidavit accurately is essential to maintain compliance and fully leverage the benefits of your B-BBEE status.

Step 1: Verify Eligibility

Before you start, it’s important to confirm that your company qualifies to complete a B-BBEE affidavit. Under the Generic Codes of Good Practice, only companies classified as Exempted Micro Enterprises (EMEs) with an annual turnover of R10 million or less, or Qualifying Small Enterprises (QSEs) with an annual turnover between R10 million and R50 million and 51% or more black ownership, are eligible to complete a B-BBEE affidavit.

Step 2: Choose the Correct Template

Make sure you select the appropriate template for your company's classification (EME or QSE) and sector. Not all sectors use the same B-BBEE affidavit, as compliance requirements can vary by industry. There are different Sector Codes that you need to be aware of.

Here are some key points regarding different Sector Codes:

• Transport Sector: Companies with a turnover exceeding R5 million must provide a SANAS Accredited B-BBEE certificate instead of an affidavit.
• Property Sector: There are different thresholds for Asset-Based Companies, Service-Based Companies, and Estate Agencies/Broking and Valuation companies.
• Construction Sector: This sector is divided into Contractors and Built Environment Professionals (BEPs). Contractors can only use an affidavit if their turnover is below R3 million, and BEPs if their turnover is below R1.8 million.
• Tourism Sector: Exempted Micro Enterprises (EMEs) with an annual turnover of R5 million or less, or Qualifying Small Enterprises (QSEs) with an annual turnover between R5 million and R45 million and 51% or more black ownership, qualify for an affidavit.

Step 3: Gather the Required Information

To complete the B-BBEE affidavit, you will need the following details:

• Company Details: Your company’s name, registration number, and contact information.
• Turnover: The annual turnover of your company, based on the last financial year-end, not just any 12-month period.
• Ownership: The percentage of black ownership and black female ownership.
• Black Designated Group Ownership: Specify the breakdown of ownership among different groups, such as:some text
  • Black Youth
  • Black People with Disabilities
  • Black Unemployed People
  • Black People living in Rural Areas
  • Black Military Veterans
• Financial Year-End Date: Enter the complete date, for example, 29 February 2024.

Step 4: Signing the Affidavit

The affidavit must be signed by the deponent and commissioned by an independent Commissioner of Oaths who is not part of your organization. Ensure that the signatures of both the deponent and Commissioner are on the same date.

Step 5: Renew Annually

A B-BBEE affidavit is valid for 12 months from the date of issue. Therefore, it needs to be renewed annually. It’s best to complete and submit your affidavit shortly after your company’s financial year-end to ensure the financial information is up-to-date and accurate.

Final Note

Remember, a B-BBEE affidavit that is incorrectly completed or not based on the correct Sector Codes is invalid and cannot be used for B-BBEE verification.

Engaging with a B-BBEE consultant can help you determine whether you qualify for a B-BBEE affidavit and guide you if you need to provide a SANAS Accredited B-BBEE certificate.

For more information or assistance, contact Elevate Advisory Partners at info@elevateadvisory.co.za.

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In South Africa, Broad-Based Black Economic Empowerment (BBBEE) is a government policy designed to address historical imbalances in the economic landscape. Its primary goal is to encourage businesses to embrace transformation and promote the economic advancement of previously disadvantaged groups, particularly Black South Africans.

The BBBEE Verification Process: What You Need to Know

The BBBEE verification process is a thorough assessment of a company's compliance with BBBEE criteria. This process is usually conducted by accredited verification agencies. Here’s a breakdown of the steps involved:

1. Choosing an Accredited Verification Agency
Companies must select a BBBEE Verification Agency that is accredited by the South African National Accreditation System (SANAS) to conduct their verification.

2. Preparing Documentation with an Advisory Firm
Companies often collaborate with an advisory firm to prepare the necessary documentation for verification. This preparation includes gathering Financial Statements, Employment Equity Reports, procurement data, and other relevant records. It's crucial that the advisory firm operates independently from the Verification Agency.

3. On-Site Verification
The Verification Agency then conducts an on-site visit to verify the company's BBBEE practices. The main objective of this visit is to confirm the accuracy and authenticity of the information provided. This involves evaluating Ownership, Management Control, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development, and Socio-Economic Development. Interviews with shareholders, directors, management, employees, and learners involved in skills development initiatives are also part of the process.

4. Timeline for Verification
The duration of the BBBEE verification process varies depending on several factors. The complexity of the organization’s operations, the responsiveness of the company, and the workload of the Verification Agency all influence how long it takes to issue a BBBEE certificate.

5. Verification Report and Certificate Issuance
After the on-site verification, the agency compiles its findings into a Verification Report. This document summarizes the agency’s assessment of the company’s BBBEE compliance based on the information gathered. Following this, the Verification Agency issues a BBBEE certificate, which indicates the company’s Level of Compliance, rated from Level 1 (highest) to Level 8 (lowest).

6. Sharing Your BBBEE Certificate
The BBBEE Certificate can be shared with various stakeholders, including clients, government agencies, and customers, to demonstrate compliance with BBBEE requirements.

Improve Your BBBEE Rating

Engaging with a B-BBEE Advisor can help you develop strategies and action plans to address any compliance gaps and improve your overall BBBEE rating.

For more information or assistance, contact Elevate Advisory Partners at info@elevateadvisory.co.za.

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In South Africa, the automotive industry has the opportunity to benefit from a Production Incentive, specifically designed for final manufacturers of motor vehicles, automotive tooling, and components. This incentive, managed by The International Trade Administration Commission (ITAC), aims to enhance value addition within the automotive component industry and ultimately stimulate job creation across the automotive value chain.

Understanding APDP 2 and Its B-BBEE Requirements

In July 2021, ITAC introduced regulations under APDP Phase 2, outlining eligibility criteria for the Production Rebate Certificate. A key requirement is that component and tooling manufacturers, excluding material suppliers, must be B-BBEE compliant according to the B-BBEE Codes.

However, following industry consultations, amendments were made to these regulations, providing more clarity on specific B-BBEE level requirements. The automotive industry, which comprises many multinational companies, expressed the need for more time and flexibility in implementing B-BBEE initiatives. As a result, companies now have two compliance options:

1. Achieve Level 4 B-BBEE Compliance by January 2025
2. Contribute to the Automotive Industry Transformation Fund (AITF)
   Companies opting for this route must achieve at least a Level 6 B-BBEE compliance by 2025. Additionally, they must contribute 2.75% of their annual turnover over a ten-year period. This contribution is split as follows:some text
   • 32% Cash Portion: Contributed directly to the AITF.
   • 68% Procurement Spend: Allocated to qualifying black-owned suppliers.

New Manufacturing Enterprises and B-BBEE Compliance

New manufacturing enterprises in South Africa are given a grace period of 36 months from the start of production to become B-BBEE compliant.

The Role of the Automotive Industry Transformation Fund (AITF)

The AITF was established to support multinational companies that face challenges in meeting the required B-BBEE levels, particularly in terms of ownership changes. Companies can join the Fund anytime before the end of 2035 and may exit before the ten-year contribution period concludes.

Compliance and Consequences

Manufacturers that do not meet the required B-BBEE levels or fail to contribute to the Fund will face exclusion from value-addition benefits. Additionally, ITAC holds the authority to withdraw eligible production certificates or revoke production claim applications if these requirements are not satisfied.

How Elevate Advisory Partners Can Help

To ensure your company meets the B-BBEE requirements ahead of the January 2025 deadline, contact Elevate Advisory Partners for a GAP Analysis and Strategy. We'll help you navigate these regulations and position your business for success.

Contact:
Adriani - adriani@elevateadvisory.co.za

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Understanding Supplier Development in the B-BBEE Framework

In the current B-BBEE landscape, Supplier Development stands as a priority element across all industries. However, its application in the Construction Industry is unique. It’s crucial for the appointed ESD (Enterprise and Supplier Development) Champion of your business to fully grasp the specific aspects of Supplier Development within this sector.

What Makes the Construction Industry Different?

The B-BBEE Construction Sector Charter places significant emphasis on Supplier Development, particularly in implementing programs that not only support beneficiaries but also foster long-term relationships through ongoing progress monitoring and development.

One of the key differences in the Construction sector is the qualification criteria for beneficiaries. Specifically, a beneficiary's revenue for its most recent financial period must not exceed 30% of the measured entity’s total annual revenue for that period.

Supplier Development in the Construction Codes is a priority element, meaning that 40% of the points must be achieved to avoid a one-level downgrade.

Pre-Requisites for Choosing a Beneficiary

When selecting a beneficiary, a Construction Company must adhere to several pre-requisites:

• The measured entity may not hold more than 20% equity in the beneficiary company.
• The qualifying beneficiary must employ a minimum of three permanent employees.
• The qualifying beneficiary must possess a valid tax clearance certificate.
• The qualifying beneficiary must have a sworn affidavit or B-BBEE certificate that was valid at the time of entering into the agreement.

Evidence for a Qualifying Supplier Development Program

To qualify as a Supplier Development Program, the following evidence must be provided:

• A written agreement signed by both parties (Supplier Development Agreement).
• A needs analysis signed by both parties.
• A documented Supplier Development Plan, signed by both parties, which must include:some text
  • Clear Objectives: Development of at least three needs identified in the needs analysis, from at least two targeted areas for development. These could include skills transfer, establishment of administrative systems, tendering assistance, legal compliance, loan assistance, and more.
  • Priority Interventions: Address the objectives identified above.
  • Qualifying Supplier Development Contributions: Specify the value of contributions allocated.

Role of the ESD Champion

It’s important to appoint an ESD Champion at the Senior Management level or higher within the measured entity. The ESD Champion must be suitably qualified and experienced to monitor progress and compile a portfolio of evidence for verification.

Qualifying Initiatives for Supplier Development Points

Various interventions can help your company earn supplier development points, including:

• Grant contributions, direct costs incurred, discounts, overheads, standard or interest-free loans, professional time spent, or services rendered at a discount or no cost.
• Shorter payment methods, such as paying invoices within 15 days of issue, can also contribute, although they will only account for 75% of the total Supplier Development points.

At Elevate Advisory Partners, we specialize in ensuring B-BBEE compliance, particularly in navigating the complex Construction Sector Codes. If you need assistance aligning your compliance needs, feel free to contact us

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In the realm of procurement, it’s essential for businesses to grasp the regulations surrounding import exclusions, particularly within the framework of South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) Act. Understanding how to exclude imports from the Total Measured Procurement Spend (TMPS) can significantly impact a company’s B-BBEE compliance and contribute to local economic development. This article will clarify when imports can be excluded from TMPS without needing an Enterprise & Supplier Development (ESD) Plan, as well as when such a plan becomes necessary.

Exclusion Criteria without an ESD Plan

The Codes of Good Practice, under section 9 (1) of the B-BBEE Act, allow for certain imports to be excluded from TMPS without requiring an ESD Plan. Specifically, imported capital goods or components that are essential for value-added production within South Africa can be excluded, provided that:

• No Local Production Exists: There is no existing local production of the capital goods or components in question.
• Promotion of Local Production: Importing these goods promotes further value-added production within South Africa.

When an ESD Plan is Necessary

For imports that don’t meet the criteria outlined above, an ESD Plan is required to exclude them from TMPS. This includes scenarios where:

• No Local Alternatives: There are no local production alternatives available.
• Different Brands or Specifications: The goods carry different brands or have technical specifications that differ from locally produced items.

The ESD Plan should include clear objectives, priority interventions, key performance indicators, and a detailed implementation plan with defined milestones. Without an ESD Plan, a company will not be permitted to exclude these imports during their B-BBEE verification process.

Navigating Designated Sectors

It’s important to note that designated sectors identified by the Department of Trade and Industry (DTI) may impose limitations on import exclusions, which can affect procurement strategies. For instance, in sectors with local content thresholds, only a certain percentage of the imported spend may be excluded from TMPS. Businesses must carefully assess sectoral dynamics and align their procurement practices with regulatory requirements to maximize the benefits of import exclusions.

Impact Analysis

Let’s consider an example involving Galvanized and Coated Steel Pipe fittings, classified as 80% local content spend. In this scenario, only 20% of the total spend on the specific supplier can be excluded from TMPS. For instance, if a company imports R1 million worth of these fittings, the allowable import value for exclusion would be R200,000, calculated based on the local procurement threshold.

In conclusion; Understanding the nuances of import exclusions in procurement is crucial for businesses aiming to comply with regulatory frameworks like the B-BBEE Act. By implementing a well-structured ESD Plan, companies can navigate procurement processes more effectively while fostering local economic growth. However, special attention is needed when dealing with designated sectors to optimize procurement outcomes.

For expert guidance in navigating the provisions of the BBBEE Act and for support in developing and implementing an ESD Plan, feel free to reach out to Elevate Advisory Partners.

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Preferential Procurement is a key component in South Africa’s journey towards economic transformation and inclusive growth. This practice involves giving priority or preference to certain suppliers, vendors, or contractors based on specific criteria, which are defined by various B-BBEE codes. The exact criteria may vary depending on the sector code that the Measured Entity is evaluated under.

Why is Preferential Procurement Important in B-BBEE?

Preferential Procurement plays a vital role in promoting economic transformation, making it a critical focus in the B-BBEE (Broad-Based Black Economic Empowerment) framework. During a B-BBEE verification, the Verification Agency meticulously examines a company's procurement practices to ensure compliance with B-BBEE requirements.

The Verification Process for Preferential Procurement

Understanding the verification process for Preferential Procurement is crucial for companies aiming to maximize their B-BBEE score. Below is a breakdown of the steps involved:

Step 1: Submission of Claim by Measured Entity

The process begins with the Measured Entity submitting a supplier list to the Verification Agency. This list must be comprehensive, detailing each supplier’s name, the expenditure for the financial period under review, and each supplier’s B-BBEE credentials.

Tip: Regularly update your suppliers' B-BBEE credentials, especially before their B-BBEE certificates expire, to ensure you have accurate information when submitting to the Verification Agency.

Step 2: Sampling

Once the supplier list is submitted, the Verification Agency will provide the Measured Entity with a list of sampled suppliers. This sampling covers all the indicators on the applicable B-BBEE Scorecard.

Step 3: Submission of Evidence

For each sampled supplier, the following evidence must be submitted to the Verification Agency:

• Supplier’s valid B-BBEE Certificate or affidavit: This document is valid for one year. If it has expired by the time of verification, it remains valid for the measured entity's financial period.
• Supplier’s largest invoice issued during the measured entity’s financial year: Ensure that the supplier’s company registration and/or VAT number is visible on the invoice, as this is used to verify the accuracy of the BEE Certificate/Affidavit.
• Detailed supplier ledger: This should be provided in Excel format for the measured entity’s financial year.

Step 4: Verification of the Evidence

The Verification Agency will carefully review the following details on each submitted document:

• BEE Certificate or Affidavit:some text
  • BEE Status Level (ranging from Level 1, the highest, to Level 8, the lowest)
  • Type of company (EME, QSE, Generic)
  • Ownership percentage
  • VAT Number and Registration number
  • Certificate/Affidavit expiration date
  • Verification agency accreditation (SANAS accredited)
• Supplier’s Invoice:some text
  • Supplier’s name
  • VAT/Company registration number
  • Invoice date (must fall within the measured entity’s financial year)
  • Invoice amount (should match the detailed ledger)

The Impact of Preferential Procurement on Your B-BBEE Score

Preferential Procurement is a significant element on the B-BBEE Scorecard, offering many points. Moreover, it is a Priority Element, meaning that failure to reach the 40% Sub-minimum threshold could result in a level downgrade.

Need Help?

Navigating the complexities of Preferential Procurement and B-BBEE compliance can be challenging. Engaging with a B-BBEE consultant can help you develop strategies and action plans to close any compliance gaps and enhance your overall B-BBEE rating.

For more information or assistance, contact Elevate Advisory Partners at info@elevateadvisory.co.za.

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The Employment Equity Act (EEA) is a cornerstone of promoting fairness and equality in the workplace. At the heart of implementing this Act effectively is the Employment Equity Committee (EEC). This committee plays a pivotal role in ensuring that organizations comply with the EEA, especially in fostering diversity and addressing historical inequities in the workforce.

Establishing the Employment Equity Committee

Forming an Employment Equity Committee is a mandatory requirement for all designated employers under the EEA. A "designated employer" typically refers to businesses with 50 or more employees or those with an annual turnover exceeding a specified threshold determined by the Department of Labour (DOL). The process of forming this committee is stipulated by the DOL and is crucial that this process is followed.

Selection of Members
The committee should represent the entire workforce, including members from various occupational levels and designated groups (such as Black people, women, and persons with disabilities). Employee representatives are usually nominated and elected by their peers, ensuring the committee mirrors the organization’s diversity.

The Role of the Employment Equity Committee

The Employment Equity Committee has several critical functions, all geared towards promoting fair and equitable treatment within the organization. These functions include:

Development of the Employment Equity Plan
One of the committee’s core responsibilities is to assist in developing the Employment Equity Plan. This plan outlines specific strategies and actions the organization will take to prohibit discrimination and achieve workplace equity through diversity. The committee collaborates with management to identify barriers to employment equity and develop affirmative action measures to address these challenges.

Monitoring and Evaluation
The committee continuously monitors the implementation of the Employment Equity Plan, regularly reviewing progress towards the set goals, the effectiveness of affirmative action measures, and areas needing further attention. It ensures the organization remains aligned with its equity targets.

Communication and Consultation
Serving as a vital communication channel between management and employees on employment equity issues, the committee ensures employees are informed about the organization’s equity objectives, initiatives, and progress. It also provides a platform for employees to raise concerns or suggestions regarding equity matters.

Advising Management
The committee offers advice and recommendations to management on various employment equity issues. This includes suggesting adjustments to the Employment Equity Plan, recommending new initiatives, and advising on the allocation of resources for equity programs.

Reporting and Compliance
The committee plays a crucial role in helping the organization comply with the EEA’s reporting requirements. This includes assisting in preparing and submitting the Employment Equity Report to the Department of Employment and Labour, which details the organization’s progress towards achieving its equity goals.

Conclusion

The Employment Equity Committee is a cornerstone of an organization’s efforts to comply with the Employment Equity Act and foster a fair and inclusive workplace. By actively participating in the development, monitoring, and evaluation of the Employment Equity Plan, the committee ensures that all employees have equal opportunities to succeed and that the organization’s workforce reflects the diversity of broader society. The effective functioning of this committee is essential for achieving true workplace transformation and fostering an environment where every employee feels valued and respected.

For more information contact us at info@elevateadvisory.co.za

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On a B-BBEE (Broad-Based Black Economic Empowerment) scorecard, bursaries play an important role in the Skills Development element. Companies earn points by providing bursaries to Black South Africans who study at institutions registered with the Department of Higher Education. These bursaries count toward the company’s skills development spend, which is required to be 2.5% of the company’s annual payroll (leviable amount). By offering bursaries, particularly in critical skills areas, a company can improve its B-BBEE score, thereby enhancing its overall compliance and empowerment level.

The Impact of EAP Targets on Bursaries

The Economically Active Population (EAP) targets significantly affect how points are allocated for bursaries on the B-BBEE Scorecard. It's essential for companies to apply the correct EAP targets when planning their bursary spend. There are specific EAP targets for each province, as well as national EAP targets for companies operating in more than one province. These targets are further divided by gender and various racial demographics, including African, Indian, and Coloured. Focusing on EAP targets helps promote equity and supports broader transformation goals by increasing educational opportunities for these groups.

Requirements for a B-BBEE-Compliant Bursary

To qualify on the B-BBEE scorecard, a bursary must provide financial assistance to students to support their education. Typically, bursaries are awarded based on financial need, academic merit, or specific eligibility criteria, such as belonging to a historically disadvantaged group.

The costs covered by a B-BBEE bursary can include partial or full payment of course fees, laptops, textbooks, other learning materials, food, and accommodation during the period of study.

However, according to the B-BBEE Codes, a company cannot claim bursary spend if certain criteria are not met:

1. Scholarship and bursary expenses for black individuals don’t qualify as Skills Development Expenditure if the company can recover the funds or if there are conditions attached. The grants must be given to students at schools or universities recognized by the Department of Basic Education or Higher Education & Training.
2. If the recovery conditions or responsibilities of the employee include either of the following, the expenses can still be counted:some text
   1. Successfully completing their studies within the given timeframe.
   2. Remaining employed by the company after completing their studies for a period that doesn’t exceed the duration of their studies.

Evidence Required for Verification

To verify bursary spend under the B-BBEE framework, companies need to provide the following evidence:

• Invoice within the measurement period.
• Proof of payment.
• Proof of registration of the institution at the Department of Higher Education and Training (DHET).
• Proof of registration of the learner at the institution.
• A Bursary Agreement, ensuring the conditions align with those outlined in the BEE codes.

Closing the Gaps with Expert Guidance

Engaging with a B-BBEE Advisor can help develop strategies and action plans to address any compliance gaps and improve your overall B-BBEE rating. For more information or assistance, contact Elevate Advisory Partners at info@elevateadvisory.co.za.

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The Amended Tourism Sector Code No. 39430 has been in effect since 20 November 2015, becoming the first sector code to align with the Department of Trade and Industry’s (DTI) Amended Codes of Good Practice. This blog will highlight the key differences between the Tourism Sector Codes and the Generic Codes of Good Practice.

Scope of Application

The Generic Codes of Good Practice apply to all sectors unless a specific sector code, such as the Tourism Sector Code, governs them. The Tourism Sector Codes apply to businesses involved in:

• Accommodation
• Hospitality & Related Services
• Travel & Related Services

Companies operating within this scope must adhere to the unique requirements of the Tourism Sector Codes, which are designed to meet the needs of the industry.

Qualification Requirements for EME, QSE, and Generic Enterprises

There are significant differences in the turnover thresholds used to classify Exempted Micro Enterprises (EMEs), Qualifying Small Enterprises (QSEs), and Generic Enterprises in the Tourism Sector Codes and the Generic Codes.

• Tourism Sector Codes:some text
  • EMEs: Enterprises with an annual revenue of R5 million or less.
  • QSEs: Enterprises with an annual revenue between R5 million and R45 million.
  • Generic Enterprises: Enterprises with an annual revenue exceeding R45 million.
• Generic Codes of Good Practice:some text
  • EMEs: Enterprises with an annual revenue of R10 million or less.
  • QSEs: Enterprises with an annual revenue between R10 million and R50 million.
  • Generic Enterprises: Enterprises with an annual revenue exceeding R50 million.

This means that the Tourism Sector Codes enforce stricter turnover thresholds for classification, particularly for EMEs and QSEs.

Ownership

The ownership compliance targets differ between the two codes.

• Tourism Sector Codes:some text
  • 30% for Exercisable Voting Rights and Economic Interest held by Black People.
  • 15% for Black Women.
  • 10% for Black New Entrants.
• Generic Codes:some text
  • 25% + 1 vote for Exercisable Voting Rights.
  • 25% for Economic Interest held by Black People.
  • 10% for Black Women.
  • 2% for Black New Entrants.

Employment of Black Disabled People

The Tourism Sector Codes emphasize the employment of black disabled individuals more strongly than the Generic Codes. While both set a 2% compliance target for black disabled employees, the Tourism Sector Codes offer additional incentives. If a company employs black disabled individuals as 3% or more of its workforce, it can earn 2 bonus points, allowing it to score up to 4 points on the Management Scorecard.

Skills Development Spend

The Tourism Sector Codes place specific focus on sector-related training programs. Tourism companies must invest in skills development programs that are directly related to:

• Accommodation
• Hospitality & Related Services
• Travel & Related Services

In contrast, the Generic Codes do not impose restrictions on the types of training programs that companies can support. However, tourism companies must align their skills development spend with sector-related needs.

Enterprise and Supplier Development Benefit Factor Matrix

The Enterprise and Supplier Development Benefit Factor Matrix also varies between the Tourism Sector Codes and the Generic Codes. For example, the Tourism Sector Codes have lower contribution percentages in some areas than the Generic Codes. One notable difference is in the recognition of minority investments in Enterprise Development and Supplier Development beneficiaries:

• Tourism Sector Codes: Cap recognition of the investment amount at 70%.
• Generic Codes: Allow for 100% recognition of such investments.

Conclusion

In summary, the Tourism Sector Codes impose more industry-specific requirements than the Generic Codes. Differences in turnover thresholds, a focus on sector-specific skills development, and a stronger emphasis on employing black disabled individuals demonstrate the unique focus of the Tourism Sector Codes.

For more information or assistance navigating the Tourism Sector Codes, feel free to reach out to Elevate Advisory Partners for expert guidance.

Attention all Legal Firms: New B-BBEE Legal Codes

Attention all legal firms! The Broad-Based Black Economic Empowerment (B-BBEE) Legal Sector Code was Gazetted on 20 September 2024, bringing immediate changes that could impact your firm.

No Transition Period: Immediate Compliance Required

The new B-BBEE Legal Sector Code does not include a transition period, Certificates issued before 20 September 2024 will however still be valid up to expiry date. This means that legal firms and advocates need to act now. Planning for compliance under the new codes is essential to avoid any disruption.

Key Changes: Revenue Thresholds and Compliance Requirements

One major change involves the annual revenue thresholds that determine whether legal firms and advocates can make use of a Sworn Affidavit instead of undergoing full verification. Here’s a breakdown of the new thresholds:

For Attorneys:

• Annual Revenue: R 0 – R 5 million
  Attorneys falling within this revenue range are fully exempt from the Legal Sector Codes. A Sworn Affidavit will suffice, and the following procurement recognition levels apply:some text
  • Level 1: 100% Black Owned Firms
  • Level 2: More than 51% Black Owned Firms
  • Level 4: Less than 51% Black Owned Firms

Firms can enhance these levels by contributing to the Legal Sector Transformation Fund, Skills Development, or Enterprise Development (specific targets will apply).

For Advocates:

• Annual Revenue: R 0 – R 3 million
  Advocates in this category are also exempt from the Legal Sector Codes and can use a Sworn Affidavit, with the following procurement recognition levels:some text
  • Level 1: Black Advocate
  • Level 4: White Advocate
• Annual Revenue: More than R 3 million
  Advocates with revenue exceeding R 3 million will need a SANAS Verification Certificate. They will be measured only on the Skills Development Scorecard, which differs from that of attorneys.

For Legal Firms and Advocates with Revenue Between R 5 million and R 25 million:

• Attorneys: Revenue between R 5 million and R 25 million.
• Advocates: Revenue between R 3 million and R 15 million.

These firms and advocates will be classified as Qualifying Small Enterprises (QSEs) and must comply with the relevant codes accordingly.

Notable Differences Between Legal Sector Codes and Generic Codes

While the new Legal Sector Codes are in line with the overall B-BBEE framework, there are some important distinctions to be aware of:

1. Black Ownership Targets
   There are increased targets for Black Ownership, Black Women Ownership, and Top Management over the next five years.
2. Specific Occupational Definitions
   The new codes introduce specific definitions for occupational levels within legal practices.
3. Skills Development Scorecard
   Attorneys and advocates will be subject to a significantly different Skills Development Scorecard. Key focus areas include:some text
   • Increased training targets for black legal practitioners.
   • Continuous Legal Education Programmes for black legal practitioners.
   • Mentorship and retention programs for black candidates.
   • Enhanced training for black support staff.
4. Preferential Procurement and Enterprise Development Scorecard
   This scorecard includes a focus on:some text
   • Legal services for Black Advocates.
   • Procuring goods and equipment from black suppliers.
   • Partnering and sub-contracting with Black Exempted Legal firms.
   • Contributions to the Legal Sector Transformation Fund.

Stay Informed and Plan for Compliance

These updates represent just a few of the changes included in the Legal Sector Codes. The new standards aim to advance transformation in the legal profession, making it crucial for firms to understand their obligations and take action.

For more details or to schedule a consultation, reach out to Elevate Advisory Partners at info@elevateadvisory.co.za.

Supplier and Enterprise Development might create confusion as they are mentioned together in the BEE Codes. They are however entirely different with only some similarities here and there.

One of the most important indicators is that they both have their own subminimum requirements. This clearly showcases the importance of each of these elements in their own capacity. Enterprise development and Supplier development are both priority elements in the B-BBEE codes and thus 40% of the total points of each element must be obtained.

Let’s look at each of the elements in its own form:

Supplier Development

• Beneficiary MUST be a Supplier of the measured entity
• Beneficiary must be a company, not an NPO, NGO
• 40% of the subminimum must be reached
• Can contribute 10 points to the scorecard

Enterprise Development

• Beneficiary may not be a Supplier of the measured entity at all
• Beneficiary must be a company, not an NPO, NGO
• 40% of the subminimum must be reached
• Can contribute 5 points to the scorecard‍

Contributions to Beneficiaries

There are various ways to contribute to these beneficiaries, which include the following:

• Grants/monetary donations
• Interest-free or standard loans
• Discounts on goods or professional services rendered
• Indirect costs
• Employee or professional time spent
• Favourable payment terms on invoices (capped at 15% of total points)

It’s important to ensure that specific documentation is compiled and signed by both parties, clearly stating that the contribution was for the purpose of Enterprise or Supplier Development. This documentation may include:

• An agreement
• A confirmation letter
• Proof of contribution
• The beneficiary’s BEE Affidavit

For more information on how to maximise these points for your BEE scorecard and what types of contributions will be recognised, contact Elevate Advisory Partners at info@elevateadvisory.co.za.

The Management and Control element of the B-BBEE scorecard is crucial in measuring the participation and representation of black South Africans in key decision-making roles within a company. This element assesses board members, executive directors, and other executive management positions. Points are awarded based on representation and voting rights, ensuring that black South Africans have a meaningful role in shaping business direction.

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Points Available on the B-BBEE Scorecard (Revised Generic Codes)

On the B-BBEE scorecard, a total of 9 points can be awarded for Management and Control, with an additional 3 points available if a company does not distinguish between "Other Executive" and "Senior Management" positions.

• Compliance Targets:some text
  • Black board representation: 50%, with at least 25% black female representation.
  • Black executive directors: 50%, with at least 25% black female representation.
  • Other Executive Management: 60% black representation, with 30% being black females.

These targets emphasize the importance of inclusive leadership structures.

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Verification Process for Management and Control

During a B-BBEE verification of the Management and Control element, certain documents and records are required to confirm compliance with transformation mandates. Here is an overview of the documentation needed:

Key Documents Required for Verification

1. Memorandum of Incorporation (MOI) – Signed:
   Details decision-making processes, including voting rights and director appointment methods.
2. Voting Rights of Directors:
   Confirms the processes by which directors participate in corporate decision-making.
3. Certified ID Documents and Payslips:
   Verifies the identities and employment statuses of executives.
4. Board Meeting Minutes:
   Confirms black directors' and managers' participation in board and executive meetings, illustrating meaningful involvement.
5. Employment Equity and Structure Reports:
   Ensures alignment with B-BBEE targets by analyzing employment equity reports.
6. Employment Documents (Payroll and COR39):
   Provides verification of black representation at the Board and executive levels.
7. Management Representation Confirmation Letter:
   Confirms the voting rights, race, gender, and nationality of board members, executive directors, and other executive managers.

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Role Players in Management Control

Management Control encompasses three distinct groups:

• Board of Directors
• Executive & Non-Executive Management
• Other Executive Management

Executive directors are involved directly in the company’s daily operations, while non-executive directors, typically not full-time salaried employees, represent the interests of specific shareholder groups. Non-executive directors ensure that these shareholders' interests are considered, contributing to a well-rounded management team.

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Building an Inclusive Corporate Environment

Meeting these verification standards not only improves a company's B-BBEE score but fosters an inclusive and equitable corporate culture. Companies that prioritize diversity in leadership are positioned for sustainable growth in South Africa.

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Closing the Gaps with Expert Guidance

Partnering with a B-BBEE Advisor can streamline the development of strategies and action plans to address compliance gaps and optimize your B-BBEE rating. For more guidance or assistance, contact Elevate Advisory Partners at info@elevateadvisory.co.za.

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