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New QSE B-BBEE Codes Released

On the 10th of October 2014, the DTI issued the Amended BBBEE Codes of Good Practice for Qualifying Small Enterprises (QSE’s) and invited the public to submit comments on the amendments made within 30 days.   Companies are reminded that compliance to these Amended Codes must be applied urgently and immediately, to ensure good BEE levels are maintained from 1 May 2015 when all BEE certificates will be measured against these new requirements.

The gazette also provides clarity on the following, which was not addressed in the initial Amended Codes of Good Practice gazette on the 11 October 2013.

  • Scorecard for Specialised Enterprises
  • Recognition in the Sale of Assets
  • Recognition of Equity Equivalents for Multinationals

 

Some of the highlights in the QSE Amended Codes of Good Practice are:

1. The elements to BEE have now changed from 7 to 5, QSEs having to comply with all 5.

2007 Codes of Good Practice

Amended Codes of Good Practice October 2014

Elements

Points

Bonus Elements

Points

Bonus

Ownership

25

3

Ownership

25

0

Management Control

25

2

Management Control

15

0

Employment Equity

25

3

Skills Development

25

0

Skills Development

25

0

Preferential Procurement

25

0

Enterprise and Supplier Development

30

0

Enterprise Development

25

0

Socio-Economic Development

25

0

Socio-Economic Development

5

0

Total (after selecting any 4 of the above elements)

100

8

Total

100

0

2. QSE’s are now required to be compliant with all five elements as opposed to previously choosing the best four elements to be scored.

3. The total points that can be scorecard on the scorecard is now 100 points.  No bonus points available.

4. Priority Elements:

The codes have defined three priority elements:

  • Ownership
  • Skills development
  • 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 the discounting by one level on the QSE scorecard.  Discounting can only be applied once.

5. Changes to Elements

Ownership

  • An enterprise must achieve at least 40% of the net value targets in order to comply with the priority element requirements.  If they do not, they drop by 1 level.  This equates to a minimum 10% black shareholding status.

Management Control

  • Incorporates the measurement of Senior, Middle and Junior management as well.
  • Specific indicators introduced for the measurement of female participation in management positions.
  • The demographic targets as per the Large Enterprise scorecard do not apply to QSEs.
  • Adjustment for Gender calculation (ARG) is no longer applied. The black percentage is calculated as a percentage of total population.

Skills Development

  • Is an optional priority element.  40% of the points must be achieved or the company drops 1 BEE level.
  • Compliance with the SETA requirements (Workplace Skills Plan, Annual Training Report, Pivotal Report amd Priority Skills Programme) are pre-requisites for an entity to receive any points in this element.
  • Training is not limited to employees – it can apply to any black person.
  • The demographic targets as per the Large Enterprise scorecard do not apply to QSEs.
  • Adjustment for Gender calculation (ARG) is no longer applied. The black percentage is calculated as a percentage of total training spend.
  • Category F and G learning programmes (informal on-the-job training) is limited to a maximum of 15% of total training spend.

Enterprise and Supplier Development

  • Is an optional priority element.  40% of the points must be achieved or the company drops 1 BEE level.
  • Measures Procurement as well as Supplier and Enterprise Development together in 1 element.
  • In order for suppliers to qualify for BEE spend, they must be an “Empowering supplier”.
  • Targeting specific enterprise development to suppliers.
  • No cumulative contributions are allowed,  only annual contributions.

Socio Economic Development

  • Minimal change, however emphasis is placed on job creation and giving sustainable access to the economy.
  • No cumulative contributions allowed,  only annual contributions.
  • Carries 5 points in the scorecard, compared to 25 points in the 2007 Codes.

Adjusted Generic Scorecard
The adjusted scorecard is applicable to organisations where Ownership cannot be assessed eg. Public entities, higher education institutions, non-profit organisations, etc.  The Amended adjusted scorecard has changes as follows:

2007 Codes of Good Practice

Amended Codes of Good Practice October 2014

Elements

Points

Elements

Points

Management Control

15

Management Control

20

Employment Equity

15

Skills Development

20

Skills Development

25

Preferential Procurement

20

Enterprise and Supplier Development

50

Enterprise Development

15

Socio-Economic Development

15

Socio-Economic Development

5

Total

100

Total

100

To refresh, please take not of the amended thresholds and qualification criteria below, which will have a marked impact on future BEE levels:

Increased thresholds for EME, QSE, and Generic scorecards.

Category

2007 Codes of Good Practice

Amended Codes of Good Practice 2013

EME

Turnover ≤ R5 million

Turnover ≤ R10 million

QSE

Turnover of R5-35 Million

Turnover of R10-50 Million

GENERIC

Turnover > R 35 Million

Turnover > 50 Million

Changes to BEE Recognition levels

BBBEE Status

2007 Qualification

Amended Qualification 2013

BBBEE Recognition Level

Level 1

≥100 points

≥100 points

135%

Level 2

≥85 points <100

≥95 points <100

125%

Level 3

≥75 points <85

≥90 points <95

110%

Level 4

≥65 points <75

≥80 points <90

100%

Level 5

≥55 points <65

≥75 points <80

80%

Level 6

≥45 points <55

≥70 points <75

60%

Level 7

≥40 points <45

≥55 points <70

50%

Level 8

≥30 points <40

≥40 points <55

10%

Non-compliant

<30

<40

0%

 

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