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Amended B-BBEE Codes – Changes to QSE and Generic BEE Requirements
The QSE and Generic BEE requirements have changed significantly with the Amended B-BBEE Codes for which the transitional period for compliance will end on the 30th of April 2015. The Department of Trade and Industry issued the requirements of which all firms wishing to compete favorably in the South African business environment should take note. A brief overview of some of the important new QSE and Generic BEE requirements is provided below.
The Current Codes made provision for 7 elements of which QSEs had to be compliant with only 4 elements. QSEs must now comply with all the elements, which now total 5. Under the Amended Codes, Ownership counts for 25 points, Management Control for 15 points, Skills Development for 25 points, Enterprise & Supplier Development for 30 points, and Socio-Economic Development for 5 points, thus adding up to a total of 100 points with no provision for bonus points.
The Amended Codes make provision for three priority elements, which include Ownership, Enterprise & Supplier Development and Skills Development, of which QSEs must attain 40% of the point score for at least 2 of the 3 elements, with Ownership being compulsory. QSEs not complying with the requirements for the priority elements will see their score drop with a level, although discounting is applied only once.
Ownership is perhaps the most challenging of the elements, requiring a 40% achievement of the net value targets. The minimum black shareholding for QSEs to meet this requirement is therefor set at 10%. Management Control is the second element that can be challenging with specific indicators now used for the measurement of female representation on management level, with the Adjustment of Gender calculation no longer used.
Skills Development is one of the two optional priority elements also requiring 40% achievement to avoid a BEE level drop. Compliance is required in terms of the Priority Skills Program, Pivotal Report, Workplace Skills Plan and the Annual Training Report (must meet the SETA requirements). QSEs must ensure compliance to be legible for points for Skills Development. Note that the black percentage is calculated based on the percentage of the total spending on training. The learning programs in the F&G categories, which entail informal on-the-job training, provide for a maximum of 15% of the total spending on training and the ARG is also not applied, but training doesn’t have to be limited to the company employees, as training for any black person will be taken into account.
Enterprise & Supplier Development is the other optional priority element also requiring a minimum of 40% achievement to avoid dropping a BEE level. The element entails measurement of procurement, in addition to Supplier & Enterprise Development as a single unit. Only suppliers that have the status of empowering supplier are taken into account for the spending on BEE. Entities should focus on the development of Black suppliers to maximise their score in this element.
There are only slight changes to the Socio-Economic Development element, with the focus now placed on job creation and only annual contributions taken into account. The element only carries 5 points on the Amended Scorecard, whereas with the 2007 Codes it carried 25 points.
Note that the Adjusted Generic Scorecard is used for measurement of compliance with BEE requirements for organisations where it is not possible to assess the Ownership element, such as public entities and non-profit organisations.
The elements are measured as Management Control at 20, Skills Development at 25, Enterprise & Supplier Development at 50 and Socio-Economic Development at 5 points, in order to get to 100 points with no provision for bonus points.
The EME threshold is set at a turnover below R10 million, QSE at a turnover of R10 to R50 million, and Generic at a turnover more than R50 million per annum.