October 11 is a key date, not only because it marks the commencement of the second Boer war, it is the date upon which the new Amended Codes of Good Practice will become effective.
There are many changes (to many to discuss in detail) that will take place, for example if you are a EME (Exempt Micro Enterprise) under the generic scorecard, the bracket has increased from R5 million to R10 million; for a QSE (Qualifying Small Enterprise) the bracket has changed from R35 to R50 million. If you are 100% black-owned you are automatically level one, if more than 51% automatically level 2; in addition a simple affidavit will be sufficient for a submission, rather than a full ‘audit’. Gone are seven elements – these have been consolidated into five. Other than EME’s, all companies will be measured against all five elements. In addition, the Amended BEE Codes have changed the points to levels table, significantly.
There is probably no better advice than get to understand the new scorecard far better than you ever knew the old one. Start adopting strategies now to ensure you are able to make the changes in your business.
“Failing to Plan, is Planning for Failure”
If you are considered to be part of the tourism sector, you MUST follow that sectorial codes, which at the moment have threshold level of R 2.5 million. Who is part of the tourism sector, all accommodation (hotels, resorts, B&B’s, etc); hospitality services (restaurants, conference venues, catering, attractions, “consulting and professional services companies”); and travel distribution (tour operators, travel agents, tour guides, car rental, coach operators).
One scenario can be easily illustrated by taking ourselves (COMPEX) as an example:
We are currently level 2 (with a score of 93%) – under the new codes because the points table has changed we would become level 3. Furthermore, because of the impact of the amended Points to Level table on Preferential Procurement, we will probably see our score fall under the 90%, resulting in us becoming a level 4.
A new component of the Codes is that there are now Priority Elements (40% on ownership’s net value, 40% of the skills development score, 40% of the Enterprise and supplier development score). As a QSE if we fail to achieve the minimum score in two of these areas then we will drop an additional level. Our projections are that we will drop another level – level 5
We will probably see ourselves drop form level 2 to level 5 ‘overnight’. Whether this is the intention of the Codes or not, whether or not such implications will be widely seen across our industry; time will only tell.
Our immediate strategy, in order to give ourselves more time to adjust, is to actually prematurely undertake an early assessment in order to be measured under the old Codes, and to ensure a valid certificate until October 2015.
If you are considering splitting your company into two or more legal entities in order to reduce turnover; or similar avoidance schemes it would be wise to understand that actions that may be perceived as Fronting will become an offence, with fines of at least 10% of a company’s turnover or jail terms of at least 10 years.
The dti has announced that the transitional period for the amended codes will be extended by a further 6 months. This means that the amended codes must only be followed as from April 2015.
If your year end is December 2014 or February 2015, you can be verified before April 2015 on the current gazetted codes. The current codes follow a less stringent scorecard, and do not have the new points to levels table, or the priority element targets.
If, like ourselves you were planning to delay your verification to just before October 2014, to allow you to use the current codes, you should consider an earlier verification, such as April or May of 2014. This will allow you to be verified again next year, prior to April 2015 to again benefit from the 2007 codes.
The transitional period allows you to either follow the Amended codes or the 2007 codes up until April 2015. The amended codes do have some benefits to EMEs and QSEs, – particularly for black-owned business and there are businesses that can benefit from following the new codes with immediate effect.
NOTE: The views expressed here are those of the authors and do not necessarily represent or reflect the views of SA Conference.