BEE CODES FOR SMALL BUSINESS FLEX MUS­CLE

CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­press.co.za

The long-awaited new BEE codes for small com­pa­nies are far tougher than their 2007 pre­de­ces­sor.

Ac­cord­ing to Keith Leven­stein of con­sul­tancy EconoBEE, they could knock a company cur­rently en­joy­ing level 2 sta­tus all the way down to level 8 with­out them do­ing any­thing dif­fer­ently, de­pend­ing on how their BEE score had been con­sti­tuted.

The new codes of good prac­tice for so-called qual­i­fy­ing small en­ter­prises (QSEs) were gazetted for com­ment on Fri­day.

QSEs are com­pa­nies with an an­nual turnover of be­tween R10 mil­lion and R50 mil­lion.

The codes only ap­ply to com­pa­nies that are majority white-owned.

Any company of that size, which is more than 51% black-owned, au­to­mat­i­cally be­comes a level-2 contributor. If black own­er­ship is 100%, the company gets a level-1 score.

Although the generic BEE codes ap­ply­ing to all larger com­pa­nies were re­placed last year, it has been seven years since the rules for smaller com­pa­nies were re­vised.

The hall­mark of the pro­posed re­vi­sion is tougher tar­gets and less con­ces­sions, ac­cord­ing to Leven­stein. The pe­riod for com­ments closes on Novem­ber 14. One pro­posed change is that QSEs are chas­ing points out of a to­tal of only 100. Large com­pa­nies ap­ply­ing the generic score­card can the­o­ret­i­cally achieve 118 points, mean­ing there is more room to fail in cer­tain cri­te­ria.

One area where the QSEs will have it eas­ier than larger com­pa­nies is in pro­cure­ment. The generic codes re­quire 40% of pro­cure­ment to be from 51% black-owned sup­pli­ers.

For QSEs, this will be 15%. Although the tar­get is eas­ier, it also comes with less points.

Big com­pa­nies can the­o­ret­i­cally earn 44 points out of 118 through pro­cure­ment. QSEs can­not earn more than 30.

Over­all, ac­cord­ing to Leven­stein, the pro­posed new codes are “dra­mat­i­cally” more dif­fi­cult for QSEs.

The big change in last year’s new generic score­card was the in­tro­duc­tion of “pri­or­ity” cri­te­ria. Th­ese are tar­gets that rate higher than oth­ers and com­pa­nies fail­ing in those are not only dis­qual­i­fied from earn­ing points, they are pe­nalised by los­ing points earned through other cri­te­ria.

There are five BEE cri­te­ria. The pri­or­ity cri­te­ria are own­er­ship, skills de­vel­op­ment and en­ter­prise de­vel­op­ment. Big com­pa­nies need to achieve a min­i­mum score in all three to not lose lev­els. QSEs will have to do the same in the own­er­ship cri­te­ria as well as in one of the other two.

As per last year’s codes for big­ger com­pa­nies, the points com­pa­nies can earn through so­cioe­co­nomic de­vel­op­ment have been cut dra­mat­i­cally from 25 to 5.

This is to stop com­pa­nies achiev­ing high scores on the back of their support for char­i­ties with­out re­ally chang­ing their own busi­nesses.

Ac­cord­ing to Leven­stein, it is en­tirely pos­si­ble that a QSE cur­rently with a score of 85, mak­ing it a level2 contributor, could fall to level 8 un­der the pro­posed new codes.

This would es­pe­cially be the case at a wholly white-owned company.

The depart­ment of trade and in­dus­try aims to im­ple­ment the new codes by May next year, mean­ing there will be very lit­tle time to ad­just, some­thing Leven­stein sug­gests would make com­pli­ance un­likely.

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