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.

ENTERPRISE PORTAL

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.

Moneybiz, a leading African Financial Information portal, brings you all the insider news and information on BEE procedures.

We will ensure you are always up to date with the newest developments in Black Economic Empowerment legislation.

Company Compliance to BEE Legislation in South Africa

ENTERPRISE PORTAL

The History of BEE in South Africa

What is BEE?

BEE refers to measures, actions or programmatic steps geared to enable meaningful participation of black people in the economic mainstream. It is a response to our particular reality born of racial capitalism, the fusion of apartheid with the capitalist system.

ENTERPRISE PORTAL

Rationale for BEE

The BEE commission, chaired by Cyril Ramaphosa, and assisted by Saki Macozoma, Derek Cooper, Patrice Motsepe, Gloria Serobe, Danisa Baloyi, Buhle Mthethwa, Vuyo Jack, Ronnie Ntuli, Loyiso Mbabane, Imogen Mkhize, Alan Hirsch, Philisiwe Buthelezi and Lionel October, broadly outlined BEE in a 2000 report, which led to the government's implementation of BEE.

Many companies see it not only as a moral obligation, but also as a business reality. Its aim is to incorporate a substantial amount of skilled black workers (African, Coloured and Indian) into the workforce.

Black Economic Empowerment led to the creation of Broad Based Black Economic Empowerment, as many groups felt BEE did not live up to its objectives. The government introduced the Broad Based Black Economic Empowerment Act 53 of 2003.

With BBBEE, ownership is only one of seven criteria upon which a company's empowerment score is calculated.The purpose of BBBEE is to create economic empowerment for the many groups who were not on an equal footing: all black people, women, youth, the disabled, and those in rural areas.

A company's Employment Equity policy is just one way in which to measure its transformation. Affirmative Action exclusively led to more positions being filled by black candidates; BBBEE, however, strives toward the implementation of the following seven pillars:

Equity Ownership Management Employment Equity Skills Development Preferential Procurement Enterprise Development Residual Element/Corporate Social Investment

Of these, Employment Equity account for only 10 percent.

The first set of Codes of Good Practice, released on 1 November 2005, dealt mostly with Ownership and Management. The second set was released on 20 December 2005 and these dealt with special codes for SMMEs (small, medium and micro enterprises).

The final Codes of Good Practice, which deals with Scorecards, Small Enterprises and Skills Development, amongst others, were released on 9 February 2007.

Definitions

A black company is one that is at least 50.1 percent owned by black people.

A black empowered company is at least 25.1 percent owned by black groups.

A black woman-owned enterprise is represented by at least 21.5 percent of black women at equity and management level.

Moneybiz, a leading African Financial Information portal, brings you all the insider news and information on BEE procedures.

The History of BEE in South Africa

ENTERPRISE PORTAL