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Delay in implementing new BEE Codes will bring certainty but including Sector Codes by the new deadline could be too ambitious

19 March 2014 Wade van Rooyen, Grant Thornton

In a new development this week, Sector Charter Councils will need to incorporate all relevant amendments which were made to the B-BBEE Codes of Good Practice in October last year, into all Sector Charters too.

The Department of Trade and Industry announced in a Government Gazette yesterday that the transitional period for the implementation of the amended B-BBEE Codes of Good Practice has been extended. The new implementation date will now be 30 April 2015 – a full six months and two weeks later than the original deadline date of 12 October 2014.
 
In addition to the extension, all sector charter councils have been advised that their respective sector codes must be aligned to the direction of the new codes by the end of April 2015.
 
Wade van Rooyen, managing director of Grant Thornton Verification Services explains that when the Amended Codes of Good Practice were announced on 11 October 2013, the specific sector B-BBEE codes had been excluded.
 
"The dti specifically stated that these amendments were only relevant to the ordinary, general B-BBEE Codes,” says van Rooyen. "We’re assuming that the revised delayed implementation date for the new codes allows time to correct this problem.”
 
The Broad-Based Codes of Good Practice were launched in 2007 and provided a framework for measurement of Broad-Based Black Economic Empowerment (BBBEE) in terms of the BEE Act 53 of 2003. On 11 October 2013 an amendment to the codes was published, ushering in a new phase of B-BBEE measurement, and significantly changing the face of transformation. The amended codes included a transitional period during which companies could prepare for measurement under the amended codes. The original transitional deadline stated that from 12 October 2014, all measured entities must use the amended codes as a basis for measurement. Following yesterday’s Government Gazette, this date has now been extended to 1 May 2015.
 
"Overall we welcome this extension because the new deadline gives everyone further opportunity to clarify requirements while ensuring that companies can absolutely be ready to comply from 1 May next year,” says van Rooyen. "And now that the sector codes have also been included in the amended codes, at least the legislation speaks to the same core, central objective in its entirety.”
 
But van Rooyen laments the short timeframe given to the sector charter councils in which to comply with the amendments.
 
"There has been much debate regarding whether the practice of different codes for each sector is necessary and sustainable, given the complexity of drafting legislation, but the general consensus is that specific B-BBEE requirements per industry is definitely important and the long term benefits can certainly be seen in the process thus far,” he says. "However, when the dti re-drafts the main codes by making sweeping adjustments such as we have seen in the amendments published in October last year, is it really reasonable to expect all of the sector codes to tag along? How much time is reasonable to allow them to comply? Will they all be able to do it in time?”
 
The following sector codes have been gazetted: General, Construction, Construction Built Environment Professional, Tourism, Forestry, Transport (with separate scorecards for each of 8 subsectors), Information & Communication Technology, Agriculture, Property, Financial Services and Chartered accountancy.
 
According to the amendments in the codes, one of the critical changes is that a business’ overall B-BBEE status will drop when measured on the new codes. This is firstly because the movement of overall contribution levels for a given level of points has been changed, and then secondly because businesses probably won’t continue to meet the revised sub-minimum criteria for all priority elements.
 
"The plus side is that all of your competitors will experience the same penalty so the playing fields between white-owned companies as an example will remain level,” says van Rooyen. "But long-term company targets will now have to be re-assessed and new goals set to meet the amended requirements.”
 
Van Rooyen says that there are still some significant items of clarity that must be issued by the dti for the new codes. This delay hopefully gives the dti time to reflect on these issues and make definitive regulations by the time they must be implemented.
 
One question that will need to be answered relates to how the extended transitionary period will be incorporated into the sector codes.
 
Van Rooyen asks: "If the sector codes must be aligned by 30 April 2015, will they also contain a transitionary period? If not, companies within a sector code scope will have to be measured immediately against an unknown target which seems very unreasonable.”
 
He adds that he hopes the Minister of the dti, Mr Rob Davies, can successfully provide an integrated and uniformed approach to B-BBEE across all of these sector codes as soon as possible.
 
"One thing is certain - a thorough understanding of your company’s scorecard on the new codes is a necessity, and in order to remain competitive companies will need to focus on regaining previous B-BBEE levels,” Mr van Rooyen concludes.

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