The Minister of Trade and Industry has amended the transitional period in respect of the new Broad-Based Black Economic Empowerment Codes of Good Practice, issued on 11 October 2013. This is according to Verushca Pillay, Director in the Corporate and Commercial Practice at Cliffe Dekker Hofmeyr.
Pillay notes, “The transitional period was initially indicated as a period of one year from the date of publication of such new BBBEE Codes of Good Practice and would have expired on 10 October 2014. It has now been extended until 30 April 2015. During the transitional period a measured entity may elect to have its B-BBEE compliance measured in terms of the new B-BBEE Codes of Good Practice, or the old B-BBEE Codes of Good Practice of 2007.
Pillay notes that on 11 October 2013, the final and long-awaited revised Codes of Good Practice (revised Codes) were published in the Government Gazette, under s9(1) of the Broad-Based Black Economic Empowerment Act, No 53 of 2003 (the Act). This was followed by the publication of amendments to the Act itself, on 27 January 2014. “The revised Codes make a number of changes to the Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice which were published in February 2007.
She explains that the revised Codes provide for five elements, as opposed to the seven that were provided for in the original Codes. The five pillars are Ownership, Management Control, Skills Development, Enterprise and Supplier Development and Socio-Economic Development. The revised Codes have introduced three so-called priority elements which have minimum thresholds. Failure to meet such minimum thresholds will result in a measured entity being penalised by reducing its BEE compliance status by one level.
“It will generally be more difficult for enterprises to achieve and possibly retain their current (and possibly, favourable) B-BBEE contributor status ratings under the revised Codes as a result the priority elements and the increase in weightings attached to the BEE compliance levels. For example, an entity that has obtained a level four contributor status rating under the original Codes will have scored between 65 and 75 points. If such score does not increase prior to its next verification under the revised Codes, that measured entity's contributor status will drop to either a level six or a level seven,” says Pillay.
“The extension of the transitional period gives companies additional time to implement solutions to improving their BEE ratings under the revised Codes. We also understand that the Department of Trade and Industry has requested that all sector codes be aligned with the revised Codes by the end of the transitional period so this extension may be aimed at that process as well.” Pillay adds.