Frequently asked questions
Q. The use of the term BLACK in B-BBEE – It is not in line with the generic term Black because it includes Indian’s and Coloured’s
Q. HDI – is it now clear what the term means – does HDI mean the same and are they inclusive of black people and white women. HDI – are we double counting? Possibility in that request for HDI status, women status and disabled, unless timely detected. If question states “did not have franchise” this would refer only to black women.
Q. What is the economy going to look like after 10 years, i.e. the outcome?
Q. Alignment of the Codes with the different Charters?
Q. What are the timelines for the conclusion of the process with regard to fronting? And When are the Codes going to be reviewed?
Q. How flexible are the Codes? Can they be seen as minimum standards only?
Q. How are the Codes of Good Practice, PPPFA, and other related regulations going to be aligned?
Q. Section 9 (1) of the Codes, Schedule 1 Part 2, defines a “ Competent Person” The difficulty with this definition is that it is very broad, would one for example a. Need to have any previous qualifications, or be in a specific industry in order to qualify as a competent person? b. Are there specific accredited institutions which can award one with the necessary qualifications? c. What sort of experience and knowledge is required and would be acceptable to the dti to become a Competent Person?
Q. The Formulas in the Codes are very difficult to understand, for example members of the Institute of Chartered Accountants are having great difficulty in being able to apply them.
Q. the dti Codes and Sectoral Charters – Which one will take precedence?
Q. Can Sectoral Charters be more stringent than the Codes?
Q. Which Sector charters are section 9, and which are section 12? What is the significance of the two categories?
Q. How does one define BEE Compliant Entities?
Q. Are Black Women owned Enterprises treated as level 2 or level 3 contributors?
Q. What provision has been made for the ownership element of the scorecard in evaluating State Owned Entities?
Q. Beneficiary-base: is there not too much weighting given to ownership, management control, and preferential procurement?
Q. What happens if South African companies relocate to a neighboring or country to qualify to use equity equivalents on the ownership element?
Q. Black ownership without economic interest and exercisable control is meaningless.
Q. How does one apply for exemption to participate in the Equity Equivalent programmes
Q. The recognition of Ownership after the Sale of Loss of shares by black participants (Once-empowered always empowered)
Q. How will equity equivalents be valued?
Q. How long can the companies retain their status (continuing consequence) after they have lost their black investors?
Q. The Sale of Equity Instruments in non-South African operations
Q. The Equity Equivalent calculation, does not allow companies to score full points on day one, even if they have spend the allotted funds
Q. What is the turn-around time for the processing of applications by multinationals?
Q. Will SOE’s have to come to the dti for approval of a supplier’s equity equivalent application?
Q. How many points are multinationals that have sold 25% of their local operation entitled to claim on Ownership?
Q. If you elect to show Top Management as Senior Management, you cannot count these points under Code 300, What happens to the 5 points that are now short in Code 300?
Q. The formula for Gender Recognition is not clear, please provide clarity
Q. Why are the targets not aligned to the Employment Equity Act? The Department of Labour was part of the development process.
Q. Do the Codes replace the Employment Equity Act?
Q. What is the implication of the parity principle?
Q. The Codes state that no Measured entity shall receive any points for this section unless they have achieved a sub-minimum of 40% for each of the targets set in this section.
Q. Constant reference is made to the EE Act and that the same data that is filed with DOL must be used for purposes of the Code. However, the code refers to “Black Disabled people” and the EE Act refers to “Disabled people” irrespective of race or color. Again clarity is sought on this as we are of the opinion that “All races” should be included under disabled as is the case of the EE Act
Q. The EE Code states that where a Measured Entity does not distinguish between Middle management and Junior Management it can consolidate the Measured Categories as follows: Senior Mng : 8 points Junior Mng : 6 points 14 However, per the code these three categories total 13 points being: Senior Mng : 5 points Middle Mng : 4 points Junior Mng : 4 points 13 points The weighted points for this category would now not add up.
Q. The Learning Program Matrix does not really allude to counting training that is conducted abroad. The vehicle manufacturers send many staff abroad for technical training, skills that they bring back to SA. This is a critical part of their business and the development of their staff – sometimes they spend months in Germany / Japan / USA, etc. The Codes do not allow the benefit to be taken into account. There is no cost of the training charged back to the local car companies. The Codes do not allow for the inclusion of salary costs. This needs to be dealt with as this training is so vital to bringing skills back to South Africa.
Q. The total allocation of budget for procurement allocation. Was this included in case study?
Q. Best practice models. Is there a central point where other government departments can source such information?
Q. Does it mean that PPPFA does not extend to SOE?
Q. With the Codes now being gazetted what is the process going forward?
Q. Working within constraints of PPPFA what is the creative way to still achieve compliance?
Q. How do we set-aside to circumvent for e.g. ownership.
Q. Do we assume the B-BBEEE Act will take over but still required to use point system within the codes?
Q. Currently construction industry development board is using minimum requirements to tender, prior to taking into account 80/20-90/10.
Q. How much do you do as a department to approach companies to get onto the dti database? This can start immediately
Q. What should we do to for e.g. to fast track payments, etc.
Q. What is the role of CIDB in the pre-tendering/qualification?
Q. In the strategy, will it include processes for empowerment of the SMME’s etc. How will we overcome the barriers? Is the dti willing to deploy resources to assist SMME’s etc.
Q. Do the points that a company receives affect the pricing of the product?
Q. What is the policy regarding public companies?
Q. How will SOE’s be measured?
Q. General lack of compliance between SOE’s and private enterprises?
Q. How will the value added aspect be recognised?
Q. How is the balance struck between companies who are charging slightly different prices, but where one company scores more procurement points than others?
Q. We assume that if a company buys a product from a local value-adding enterprise, and the same supplier is a recipient of Enterprise Development, that they would apply the multiple of 1.2 for value adding supplier, and then 1.25 as the supplier is a recipient of Enterprise Development. For example, if they spend R1m on such a supplier, the calculation is R1m
Q. Paragraph 3.3 – Need to clarify that spend with both an enterprise development recipient and a value adding recipient cannot be multiplied by both 1.2 and 1.25 – it’s one or the other (or is it cumulative)
Q. Need to clarify the definition of a Value-adding Enterprise for the automotive industry (the definition on page 93 is not clear enough)
Q. Paragraph 4.2 – What does “…. Complying with all the elements of the Codes mean?” – e.g. does this require compliance with a minimum score for each of the 7 elements?
Q. Paragraph 6.1 Does “Taxation” include customs duty (we’re assuming it does).
Q. Should enterprise development funds not be incorporated into NEF and other existing bodies?
Q. Are funds sector specific?
Q. The compliance target in the Enterprise Development Scorecard states that where NPAT is not used Turnover is to be used and the formula is: “3 x indicative profit margin (NPAT/TURNOVER) x turnover”
Q. How have companies been incentivised to operate in poor, rural and economically marginalized areas?
Q. The codes refer to socio-economic development with the specific objective of “facilitation of sustainable access to the economy for beneficiaries”. There are currently hundreds of millions of CSI funds which focus on health, welfare, arts, sports development and other such causes which do not specifically meet this condition.
Q. Are contributions made by the Measured Entity directly to government institutions or other institutions (e.g. NBI, Business Trust), but who are not acting directly as implementing partners, as a means of indirectly reaching black people, included as SED.
Q. It is noted that new products that are donated or discounted can be included as a qualifying contribution. What needs to be clarified is the base price that should be considered in determining the value of the benefit offered, i.e. the ‘selling’ price of the goods or the ‘direct cost-to-company’.
Q. There is an essential difference between providing ‘new’ products and services, and passing on old or redundant products and services that may still have some value (albeit a reduced value). In the latter case, the company is trying to reduce the levels of redundant products, but when stuck with such products make an effort to ensure they are used for a good cause. Therefore a cause still benefits, but only as a consequence of business practice rather than any deliberate or proactive attempt to support Socio-Economic Development. Therefore one issue requires clarification: Does the sale of old, redundant product qualify as a contribution to Socio-Economic Development? If yes, how should such donations be valued?
Q. Can the cost of research undertaken by the company, to determine the most effective way of making an investment in a cause, or the impact of an investment already made, be included as part of the contribution? If this research is undertaken by a third party (e.g. experts in a particular developmental field), can the cost still be included? If research into a particular aspect of socio-economic development is funded, but not associated with a particular project the company is supporting (or intends supporting), can such cost be included? The compliance target in the Socio-Economic Development Scorecard states that where NPAT is not used Turnover is to be used and the formula is: “3 x indicative profit margin (NPAT/TURNOVER) x turnover”
Q. Wouldn’t one argue that if you exempt small businesses, does that not remove incentives to grow business?
Q. Will thresholds of R5m and R35m be indexed to inflation?
Q. Who verifies the verification agencies?
Q. How will verification agencies be regulated?
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In the context of the B-BBEE Act, the generic term for Black People includes African, Indian and Coloured’s, further qualified as including only natural persons who are citizens of the republic of South Africa by birth or descent; or are citizens of the Republic of South Africa by naturalization: a. Occurring before the commencement date of the constitution of the RSA Act of 1993; or b. Occurring after the commencement date of the Constitution of the RSA Act of 1993, but who, without the Apartheid policy would have qualified for naturalization before then; Other legislation, however, define HDI’s, as individuals who, due to the apartheid policy that had been in place had no franchise in national elections prior to the introduction of the Constitution of the RSA, 1983 (Act 110 of 1983) or the Constitution of the RSA, 1993 (Act 200 of 1993) (“the Interim Constitution) and/or a. who is a female; and/or. b. who has a disability which differs from the Codes of Good Practice for Broad-Based Black Economic Empowerment.
HDI – although it also includes black people, further includes white women and white disabled people. The Codes seek to address a certain group of individuals.
The targets are giving the picture that should prevail in the economy – a transformed and strong economy that’s reflective of SA demographics.
The B-BBEE Act is the primary piece of legislation in terms of which the Minister may issue the Codes of Good Practice to provide details on how to implement the Act. The Charters are intended to allow the different industries or sectors to interpret BEE in a way that accommodates their unique circumstances.
The guideline on Fronting has been posted on the dti website and will assist in identifying fronting practices as well as provides the process that companies will follow when reporting a fronting case. In terms of the review of the Codes, the BEE Unit will release a strategy that will provide guidance to that.
The targets set in the Codes are considered to be minimum targets, companies are allowed to do over and above the minimum targets set in the Codes.
The dti has assured the public that a mandate has been received from Cabinet to deal with the alignment of the PPPFA and the Codes of Good Practice, the project is already underway.
With reference to "Competent Person" - reliance will be placed on Normal Market Practices. i.e. For the valuation of a building we would expect a qualified valuer or assessor to conduct this valuation; for pension/ provident funds, the norm is to use an actuary so we would expect the same. In other words we would expect that in terms of the job specification a qualified individual should be assigned to that post.
Clarification and Examples are provided in the Interpretive Guide which is available on the dti website.
the Codes of Good Practice for B-BBEE takes precedence over sector charters gazetted by the dti under section 12 of the B-BBEE Act. However if any charter is gazetted under section 9 of the B-BBEE Act, then this charter has the same status as the Codes, as it will be gazetted as a Sector Code under Statement 003 of the Codes of Good Practice.
The key principles, weightings and targets must be aligned to the Codes. However if there are deviations in the sectoral charter, detailed justification, should be given for these deviations, and should substantiate the impact that it will have on transformation within that sector.
Currently only the Tourism Charter has been gazetted under section 9. And only 6 Charters have been gazetted under section 12 so far namely: Agri BEE, Property Charter, Financial Services Sector Charter, Construction Charter, Marketing, Advertising and Communication Charter and Forestry Charter. Updated information on the charters is also available on the dti website. Charters gazetted under section 12 of the B-BBEE Act are for information purposes only and only signatories to the charter are bound by it. However, if a Charter is gazetted under section 9 of the B-BBEE Act that charter will have the same status as the Codes of Good Practice for B-BBEE, and will be utilized by the sector and
Compliance is determined using the BEE Recognition levels as your BEE Status.
Only Black owned and Black women owned enterprises that are Exempted Micro Enterprises, but it depends on the amount of contribution or compliance to B-BBEE.
They will be measured out of 6 elements instead of 7. The ownership element has been removed and the weighting points adjusted.
The Beneficiary Base for B-BBEE includes • Black workers and job seekers, black unemployed and the rural poor under Employment Equity, Skills Development and Socio-Economic Development • Black Entrepreneurs are included under Preferential Procurement and Enterprise Development • Emerging Black Middle class and Investors are included under Ownership and Management Control. The split therefore allows for the participation of all black people at all levels in the South African Economy.
If a company domiciled in the Republic of South Africa has relocated offices to a neighboring country, for the purposes of the Codes they will still be recognised as a South African Entity, and will not be able to apply for exemption to participate in the Equity Equivalent programmes.
The Scorecard on Ownership cannot be measured without Voting rights and Economic Interest.
Applications should be forwarded to the dti’s BEE Unit: Equity Equivalent Secretariat.
Continuing consequence (once-empowered-always-empowered) principle is intended to avoid punishing white companies that lose their black ownership due to factors beyond their control and to stop the distortion of the value of shares owned by black investors (illiquid due to the lock-in periods), as long as the affected company has transformed in the other areas of the scorecard and has created net value in the hands of black shareholders (although this is limited to a maximum of 40% of any company’s black shareholding.
Two options have been provided in the Codes for valuing Equity Equivalents. The 4% of Turnover is totally unrelated to the 25% of the value of the South African operation. If a company chooses the 4% of turnover they would utilise this for the duration of measurement. If the company chooses the 25% they would proportion it as per the project or once again according to the period of measurement. The two options do not relate to each other.
Further clarity provided in the guide.
Further Clarity has been provided in Statement 103 under paragraph 6.3
Equity equivalent calculation has been rectified. And statement 103 has been updated.
This is dependent on a case to case base.
The dti issues certificates to Multinationals that have been approved as Equity Equivalent participants, this can be verified with the dti by the SOE’s.
If a Multinational company fulfills all the requirements on the Ownership scorecard they are able to claim up to the maximum points allocated to the Ownership scorecard. The point scoring on the Ownership scorecard is dependent on the requirements being met by the Multinational in each category.
If a company has moved their Senior Management to the Management Control scorecard, they will then collapse the points to effectively read as Middle Management: 7 points Junior Management: 6 points Noting that the targets for Middle management now become the base.
Examples provided in the Guide.
The Department of Labour’s targets are as per the EAP targets, the Codes have been aligned to the EAP targets as per the Department of Labour and the Employment Equity Commissions recommendations.
The Codes do not replace the Employment Equity Act targets; besides, the information used to calculate the employment equity score is commonly sourced from the EEA2 Form – part of the submission to the Department of Labour in accordance with the Employment Equity Act.
Parity principle implies that half of the black representation should be comprised of black women in skills development.
Further clarity provided in the guide.
The B-BBEE Act and the Codes are specific to the benefit of different categories of black people.
Clarity provided in the guide. Senior Management 7 points Junior Management 6 points Total 13 points
Any training that takes place needs to be accredited, and needs to meet the requirements of the Learning Programme Matrix as per Department of Labour. When we look at SD we are looking at the amount that companies spend on skilling their employees. Salary costs are only recognised in categories B, C and D.
Focus is on what was spent and trends in PP – what was spent and what had been spent on HDIs – looked at not only in nominal but also
The dti has established a centrally accessible B-BBEE IT database that will help with such information for monitoring and reporting on B-BBEE.
Clarity provided in the Guide on how PPPFA relates to SOE’s.
That every player in SA economy should apply the Codes in their daily business practice to ensure economic transformation.
Immediate implementation – by using PPPFA – uses minimum compliance level of point system.
Restrictions of PPPFA – debate on setting aside – in PPPFA environment – you set aside suppliers from certain tenders e.g. black suppliers. COGP different in that it takes into account not who you are but what you do.
Currently both Acts to be worked with because PPPFA has not been amended. Challenge is that the PPPFA is in progress of amendment.
Make all the other conditions of the tender the basic requirements of the tender.
Companies always encouraged joining dti database.
The Codes also seeks to reward entities for early payment of goods and services through Enterprise Development Element.
CIDB construction projects and engineers are able to undertake projects – these are requirements by the industry but still have to comply with PPPFA and B-BBEE.
Agencies of dti can provide channels for private sector to channel funding for dti agencies to promote enterprise development. Dti has agencies to develop SMME’s etc.
No it does not. It only allows the company purchasing the service to claim additional procurement points.
Public companies will be scored on all other matters except on the ownership aspects.
They will be measured as any other company with the exclusion of the ownership aspect.
All SOE’s must also report to the B-BBEE Advisory Council, chaired by President, on transformation. This provides a platform by which SOE’s will be held accountable for progress or lack thereof.
There is an enhancement formulae that is applied in addition to the ordinary scoring, resulting in any value added activities receiving additional points.
There is need for alignment for B-BBEE legislation with PPPFA. It is a subjective issue that will have to be dealt by the respective SOE.
Yes! This is correct the company will receive double enhanced recognition for this using this supplier.
Yes! This is correct the company will receive double enhanced recognition for using this supplier.
Examples provided in the guide.
It simply means that they have to produce or provide a scorecard.
All Government levies and Taxes form part of this taxation.
Lots of individual initiatives in the market, and true there are some institutions already providing these services which may have their capacity increased due to additional requests and additional funds provided.
The funds utilised for Enterprise Development do not have to be sector specific, the dti encourages all types of funds and initiatives that meet the objectives of the Enterprise Development Code.
Examples and clarity provided in the guide.
The statement on Socio Economic Development – 700, clearly lays out incentives for companies to participate and contribute to marginalized communities.
Examples provided in the Guide.
If the ultimate beneficiaries of any intervention meet the criteria as per Clauses 3.2.1 and 3.2.2, the expenditure should be included.
The Benefit Factor Matrix provides guidance on this.
It is suggested that contributions should be acknowledged, in order to encourage such practices. However, the price used should be significantly discounted to either procurement price (where old equipment is donated), or original sales price (where returned or devalued products are donated). The means of determining a value needs further consideration. Where costs are incurred to sort, refurbish, or distribute such products, they should be included as part of SED expenditure.
Examples provided in the Guide. Where costs are incurred to sort, refurbish, or distribute such products, they should be included as part of SED expenditure.
There is a circumvention of the Act where you split business activity simply to ensure designation as Micro or QSE. Companies want to grow and make profits; therefore the incentive for profit is greater than the disincentive.
The intention is to review the thresholds and for it to be indexed to inflation.
The dti will check the BEE credentials of verification agencies. With regard to the actual process of verification agency accreditation of BEE credentials, SANAS will be responsible.
Verification Agencies will be overseen and regulated by SANAS (a division of the dti). SANAS will determine the regulatory framework, together with the methodology that will be used in verifying the BEE credentials of companies. In addition the Association of BEE Verification Agencies (ABVA) will play a key role in regulating the activities of members within a prescribed Code of Conduct.
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