The Minister of Trade and Industry (the Minister) today released
draft revised broad-based black economic empowerment (BBBEE) Codes
Companies that have, until now, focussed on the other elements of
the generic BBBEE scorecard to the exclusion of the black
shareholding requirements, will be particularly adversely affected
by the proposed changes.
The draft Codes will be open for public comment for a period of 60
According to the Minister, the main rationale, for the proposed
amendments is to deal with the formalistic tick-box approach to
BBBEE generally adopted by corporates in South Africa and to
ultimately achieve real empowerment.
The amendments are also intended to align with the economic
trajectory of the country so that productive black businesses are
created and supported. Passive black shareholding and ownership may
no longer be enough.
The first key proposed amendment is that the number of elements of
the generic scorecard will be reduced from seven to five. These
management control (including employment equity);
enterprise and supplier development;
The total score across all the elements will increase from 100
to 105 points. Ownership will count for 25 of those points and
enterprise and supplier development will be the highest
contributing element, counting 40 points.
The most controversial proposed amendment is likely to be the
introduction of sub-minimum targets for "priority
elements" including ownership, enterprise and supplier
development and skills development.
If the amendments are processed in their current form, companies
will be required to achieve a minimum compliance of 40% of the
targets for the priority elements. If they do not achieve the
minimum compliance for any of the priority elements, their overall
contributor status will be reduced by two levels if they are large
entities or by one level if they are qualifying small
This means that companies (particularly large companies) that have
until now overlooked any black shareholding requirements and have
focused on all the other elements of BBBEE will be seriously and
adversely impacted. For example, a large company that may have 7%
black ownership, but is a level three contributor, will be
automatically reduced to a level five contributor because it does
not meet the 10% minimum black ownership target.
Under the draft revised Codes, the thresholds for exempted
micro-enterprises and qualifying small enterprises have been
increased. Entities with a turnover of less than ZAR10 million
(currently ZAR 5 million) will now qualify as exempted
micro-enterprises and enterprises with a turnover of between ZAR 10
million to ZAR 50 million (currently ZAR 5 million to ZAR 35
million) will qualify as qualifying small enterprises. Exempted
micro-enterprises that are 100% black-owned will automatically
qualify as level one BBBEE contributors. If they are more than 50%
black-owned, they will automatically qualify as level two
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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