Summary of Changes to the B-BBEE Codes

June 24, 2019

Just as you think that you’ve mastered the knack to correct B-BBEE implementation and compliance, legislation changes! Last month, the government and the Department of Trade and Industry released major changes to the B-BBEE Codes of Good Practice. While the changes are significant, they are yet to receive much media coverage. The lack of media coverage and explanation of the changes creates a considerable problem, given that the operational date for the recent changes is December 1st, 2019.

The changes will affect your BEE scorecard in terms of skills development and enterprise and supplier development. We’ve summarised the changes for you below; plus, we’re hosting two free training sessions focused on the changes – be sure to book your seat.

Changes to the B-BBEE Codes and the impact on business

As one of the biggest contributors to an organisations B-BBEE status level, the new guideline for procurement sends a strong message.

The changes affect the following B-BBEE elements:

Ownership

Ownership qualifying for enhanced B-BBEE recognition of either level 1 (100%) or level (51%), must be measured using the flow through principle. In other words, only direct ownership is permitted.

Enterprise and Supplier Development

The change in this element affects increases in procurement spend with suppliers that are directly black owned. Here, points have increased from 9 to 11 and all entities that are at least 51% black owned qualify for a spend multiple of 120%. This applies regardless of a three-year agreement with an entity.

In addition, large black-owned generic entities qualify as beneficiaries of ESD and for additional procurement spend recognition, if they were initially receiving assistance or first procured from as Exempt or Qualifying SME’s

Skills Development

The approach to skills development has been changed.Previously, skills development required 6% of an entity’s annual payroll to be used on skills development initiatives, that would account for eight points on the B-BBEE scorecard. With the new changes, the points and percentage for skills development has been reduced to six points, from only 3% of an entity’s payroll. Did you know that YES training spend is claimable here? Speak to one of our YES experts to see how you can claim your YES training spend here.

Further, skills development now includes the funding of higher education; here 2.5% of an entity’s payroll is required. The scorecard weighting points now accommodate black bursary expenditure; this includes accommodation, catering and travel without limits.

Another change to skills development includes an increased limit on unaccredited workplace training (Category F&G), to 25% of total skills development spend – for YES training, this limit is up to 50%. Lastly,there is no longer a separation between employed and unemployed learnership programmes and the bonus points for Absorption will only be awarded if the entity provides the candidate with a long-term employment contract on completion of the programme; this specifically excludes further training programmes.

In addition, the changes become fully operational from December 1st, 2019. You’re probably wondering what does the datehave to do with anything? Well, the operational date means that all certificates issued on or after this date, will include these provisions regardless of the financial year end, also the measurement period, of the organisation. So, if not properly planned, these changes will have a major impact on companies with financial years ends that have closed or are closing soon.

Do the changes affect sector charters?

The changes are not automatically applicable to the various sector codes; so, we can expect to see numerous amendments to specific sector codes in the next six months.

We can and want to help you get the most out of your B-BBEE compliance, beginning with being compliant. We offer a wide range of services that targets compliance and positive impact – speak to a qualified consultant today – for free!