PLEASE SIR CAN I HAVE SOME MORE? … MORE!

Is charitable giving still as generous to your BBBEE score?

 

Introduction

As most are aware by now, on 11 October 2013 the revised Broad-Based Black Economic Empowerment (BBBEE) Codes were gazetted by the Minister of Trade and Industry (DTI). Although BBBEE, is regulated by the BBBEE Act 53 of 2003 as amended, the codes regulate the manner in which businesses’ scores are computed.

Importantly later in April 2015 (in a few weeks), these (new) Codes will come into operation thereby replacing the existing BBBEE Codes of Good Practice. Therefore, the manner in which your business is rated or scored will drastically change.

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. EMES’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 simpler 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 urgently that would facilitate compliance simultaneously with the new codes.

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

A QSE must achieve 40% of the points for two of the three priority elements, with Ownership being a compulsory one. Non-compliance with the thresholds for the above priority elements will result in a penalty by one level on the scorecard.

CSI – Corporate Social Investment

Businesses have under the old codes enjoyed a 10 pint scoring for their contribution to their philanthropic causes. In other words their charitable contributions to organisations benefitting “black” people (as defined in the BBBEE Act and codes).

 

For many businesses this was not only relatively easy to achieve but also incorporated a “feel good” element to achieve and in addition included tax deductible benefits, where the organisation supported was a registered Public Benefit Organisation (PBO) in terms of the Income Tax Act .

 

Under the new codes less points are allocated to this element (only 5). This will in all likelihood have a negative impact on the non-profit sector.

With an eye on the new elements introduced by the new codes, a view may be taken that a shift away from non-profit or social causes has been taken by the drafters. However, in my view this simply serves to prove the point that compliance particularly with the new codes cannot be element focussed, but must follow a holistic approach and strategy.

 

Conclusion

This, it is important to consider a holistic BBBEE compliance strategy that suits your vision and specific business vision and values best. Once identified it should be implemented by a suitably qualified team of professionals.

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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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