Company Compliance to BEE Legislation in South Africa

Legislation

The South African legislation of Broad-Based Black Economic Empowerment provides many guidelines and defines which companies are governed by BBBEE rules. It is supported by other forms of legislation and has taken approximately three years to implement.

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Bills

The National Land Transport Transition Amendment Bill: B38-2005 extends the maximum business contract period from five to seven years in order to bring the Act into line withBlack Economic Empowerment (BEE) and Small, Medium and Micro-Enterprise (SMME) development principles.

Acts

Of all the acts, the Broad-Based Black Economic Empowerment Act 53 of 2003 and the Employment Equity Act 55 of 1998 are the most well known.

The BBBEE Act aims to create a legislative framework to promote black economic empowerment, to allow the Minister to issue codes of good practice and to publish transformation charters. The forming of the BEE Advisory Council is as result of this act.

The EE Act is used to determine the Human Resource Management criteria of the BEE scorecard.

The various other acts are the following: Mineral and Petroleum Resources Development Act, the Petroleum Products Amendment Act, the Precious Metals Act, the Preferential Procurement Policy Framework Act, the Revenue Laws Amendment Act and the Skills Development Act.

Scorecard

The BEE scorecard, which rate companies on their level of compliance, lists seven specific elements. There are two scorecards: QSE scorecard and a Generic scorecard.

The QSE scorecard applies to qualifying small enterprises (QSE) and the Generic scorecard applies to all entities that are not QSE and that are not exempt.

The scorecard consists out of the seven following pillars:

Ownership Management Control Employment Equity Skills Development Preferential Procurement Enterprise Development Residual (Corporate Social Investment)

Companies receive points on each element, out of a possible 100 points.

An accredited verification agency such as Empowerdex should prepare and verify the scorecard. Companies may have themselves rated on a yearly basis.

Non-compliance

Companies with a turnover of less than R5 million are exempt from complying with the Codes of Good Practice. This means that approximately 87 % of all South African companies will fall into this bracket.

Companies not competing for government tenders are not affected by non-compliance, however, other business entities may choose not to trade with non-complaint companies.

Banks may regard such companies as a credit risk and your non-compliance may breach fiduciary duty. Directors should compensate the company for any losses occurred due to this breach.

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Company Compliance to BEE Legislation in South Africa

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