Introduction

BBBEE is regulated by the BBBEE Act 53 of 2003 as amended and the codes of good practice (the “codes”) and determine the manner in which businesses’ scores are computed.

It is common cause that compliance is a ‘turnover’ based consideration. Businesses are categorised into 3 levels for this purpose namely; Exempt Micro Enterprises (“EME”), Qualifying Small Enterprises (“QSE”) and Generic enterprises. EME’s compliance is much more lenient as scoring and issuing a certificate is done by way of an auditor’s certificate or affidavit. QSE’s on the other hand, have relieved or streamlined compliance in terms of the scorecard, while generic businesses require full scorecard compliance (without any relief).

EME Turnover ≤ R10 million
QSE Turnover of R10-50 Million
GENERIC Turnover > 50 Million

Accordingly, it is crucial for businesses to not only understand these codes, as it specifically relates to them, but also to consider strategies that would facilitate compliance on an urgent basis.

That way, businesses would comply, remain competitive and not run the risk of losing clients or work (suffering losses) due being non-compliant.

Considerations for QSE’s

Under the previous codes QSE’s could elect 4 out of the then 7 elements to be scored on, they are now required to be compliant with all 5 scorecard elements. These elements are: Ownership, Skills development, Enterprise and Supplier Development, Socio Economic Development and Management Control.

The new codes list three priority elements, namely:

  • Ownership;
  • Skills development; and,
  • Enterprise and Supplier Development

Management Control

Management Control is now essentially a merger between the elements previously known as management control and employment equity.

Although Management Control is not a propriety element, a lot of businesses are losing points because of two main issues:

  1. Non-compliance with the Employment Equity Act 55 of 1998 as amended; and
  2. A lack of distinction in levels of management.

All businesses employing more than 49 employees or that meet the turnover requirements set in schedule 4 of the Act must comply with the requirements of the Employment Equity Act.

Furthermore, many businesses do not have clearly defined managerial levels, which means many employees are classified as either semi-skilled or less. This results in an adverse BBBEE score. Also, the points for black executive and non-executive board members have changed leaving unprepared businesses in a proverbial “pickle”.

Moreover, in addition to the effects on BBBEE compliance, the non-compliance with the Employment Equity Act has much more serious repercussions; as the maximum fines for contravention have been increased threefold and an employer’s turnover could be taken into account in determining the maximum fine. Non-compliance or substandard compliance with either Acts is therefore a great risk to a business.

 

Conclusion

Businesses can no longer rely on “quick fixes” or view BBBEE compliance as “cherry picking” by selecting a few items whilst discarding the rest.  As such, it is important to create those managerial levels and distinctions and to comply with the required aspects of the Employment Equity Act.

If employees lacking in experience or skill is holding you back; consider whether a skills development strategy, that suits your vision and specific business needs, should be implemented. Once identified, it should be implemented by a suitably qualified team of professionals so that levels of management are clearly defined and may add value to your employees and the business.

About The Author

Nicolene Schoeman-Louw

I founded the firm Schoemanlaw Inc in 2007 aged 24 and am the Managing Director of the firm. I am an admitted attorney of the High Court of South Africa, as well as a Conveyancer , Notary Public and Mediator. I obtained my LLB degree cum laude and successfully completed my LLM degree (dissertation) in commercial law and B-BBEE at the University of the Free State. In addition I obtained my postgraduate diploma in financial planning (CFP) at the University of Stellenbosch. An abstract of my LLM dissertation was published in the Journal for Estate Planning in 2006 and is regularly published in De Rebus (the SA attorneys’ journal) as well as Without Prejudice and Polity.org (legalbriefs). I also write regularly for various online publications such as Spice for Life and other mainstream publications such as The Entrepreneur Magazine, Personal Finance Magazine and have a regular slot on SAfm’s The Law Report with Karen Key. For more information visit http://www.schoemanlaw.co.za/about-us/

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