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The Impact of the Amended BEE Codes on your Business

Blog-image07Melanie van Wyk
Chief Operating Officer
BQSystems (Pty) Ltd

The long awaited amendment to the BEE Codes of Good Practice was finally unveiled on Friday 11 October 2013. It will only be applicable to businesses measured in terms of the general codes and the Sector Codes will remain applicable to businesses operating within those sectors.

The most important provisions with respect to EME’s being measured in terms of the Revised Codes is as follows (these are not applicable to entities being measured in terms of Sector Codes):

  1. The threshold for EME’s has been increased from R5 mil to R10 mil. Businesses with an annual turnover below R10 mil is now regarded as EME’s.
  2. An EME receives an automatic Level 4 BEE Status as was the case in the past, but
  3. 51% Black owned EME’s receive an automatic Level 2 BEE Status; and
  4. 100% Black owned EME’s receive an automatic Level 1 BEE Status.
  5. Start-up enterprises are measured as EME’s.
  6. A Sworn Affidavit is sufficient proof of a business turnover and black ownership status for purposes of qualification as an EME.

It only comes into effect on 11 October 2014 and although it contains a clause that attempts to introduce a transitional period for the next 12 months in terms of which businesses may opt into the Revised Codes, legal commentators are of the opinion that even the transitional clause can only become effective on 11 October 2014. Bad drafting has therefore once again lead to mass confusion and you can expect a lot of requests from clients to be issued with a certificate or affidavit in terms of the Revised Codes. Although this confusion will exist for the next 12 months we trust that the Dti will provide clarity before the commencement of the Codes on 11 October 2014.

In the interim we expect that there will be mixed acceptance, both in the private sector but more specifically at government tender boards, of certificates or affidavits issued in terms of the Revised Codes. The reason we expect government tender boards and those of parastatals to be reluctant to accept certificates or affidavits in the Revised Codes is because they are compelled to make use of the scoring mechanism provided for in terms of the Preferential Procurement Policy Framework Act and its 2011 Regulations.

The Act and the Regulations has not been aligned to the Revised Codes and won’t be for at least the next year. As far as the larger businesses in the private sector are concerned we also believe that very few if any will opt into the Revised Codes in the next 12 months because of the onerous requirements it introduces for these entities. As a consequence some of them will not be accepting certificates in terms of the Revised Codes for purposes of calculating their procurement status under the existing Codes.

That won’t deter some of your clients to insist on a certificate in terms of the Revised Codes though and we do not believe that it is Taxleaders’ place to be prescriptive to our clients about whether they can or cannot issue certificates in terms of the Revised Codes yet. Accounting Officers will therefore be met on the one hand with a demand for certificates in terms of the Revised Codes, but will on the other hand also need to be aware of the risks explained above for there clients when tendering for business with these certificates in terms of the Revised Codes.

 

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