For those of you who wanted to know how long B-BBEE is going to be around, here is an interesting read.

Article by Business Live:

“B-BBEE Amendment Bill to be tabled in May: Davies

The Broad-Based Black Economic Empowerment (B-BBEE) Amendment Bill will be tabled in May and should become an Act by the end of this year, Minister of Trade and Industry Rob Davies told a media briefing on Tuesday after a meeting of the Presidential B-BBEE Advisory Council.
“We expect to table the Bill next month and after that it depends on the legislative process, but we hope that it will become law by the end of this year,” he said.
The amendments were published for public comment in December and the closing date was February 9.
“The overwhelming response in terms of public comment has been positive, and we have only made some small tweaks to the proposals,” Davies added.
The new bill will establish a B-BBEE Commission, which will monitor issues pertaining to B-BBEE. It will also make fronting a statutory offence.
“You can go to jail for fronting currently as that is a fraudulent transaction, but the amendments will provide a definition of fronting that will make it easier to prosecute. The amendment will also state that where there is conflict between various laws, then the B-BBEE Act is the superior law,” he noted.
The proposals stated that fronting related to a transaction, arrangement or conduct that directly, or indirectly, undermined or frustrated the achievements of the aims of the B-BBEE Act or the implementation of any of the provisions of the Act.
“The aim of making fronting a statutory offence is to make sure that black entrepreneurs are not just passive shareholders, but active decision makers. The purpose of black empowerment is not to foist it down the throats of businesses, but rather to broaden participation in the SA economy,” H. Preuss (03/04/2012). Business Live.

Please feel free to leave your thoughts on this matter.

As from 1 March 2012, all BBBEE EME Certificates issued by a Verification Agency will have to bear the “SANAS” logo. SANAS and the DTI have issued a joint statement announcing that BEE Verification Agencies would now be accredited to issue EME certificates.

The reason for this; is that the recently revised PPPFA regulations make it a requirement for Government Departments to award tenders to companies and a valid BEE certificate, issued by a Verification Agency and accredited by SANAS, need to be present during this process.

What this entails for Verification Agencies is that a thorough, minor verification will have to be conducted:

• Confirming that the Measured Entity being assessed actually exists
• Confirming Black Ownership (if applicable)
• Ensuring that the Measured Entity falls within the set out Turnover threshold (depending on the Industry)

Industry Thresholds:

Typically these are the requirements for a company looking at having their BEE status certified:

What this means for the ordinary Exempt Micro Enterprise or Small company:

• A rise in Verification Costs
• Keeping track of all financial records
• An interview to be conducted, by the Verification Agency, with the Owner/s or Bookkeeper/Accountant if Black Ownership is involved

Overall and by means of BEE Verification Agencies, Government ensures that better verifications are conducted, which will go a long way to preventing fronting, fraud and misuse where huge penalties and even jail-time could be incurred.

This Element of the BEE scorecard gives acknowledgment to companies for supporting initiatives that help 75% or more black beneficiaries gain sustainable access to the economy. These contributions can be monetary or non- monetary in nature.

The following table shows the kinds of contributions that can be counted and what percentage of each can be counted towards your target.

It is important to note that not all charity organizations qualify as beneficiaries. In order to qualify the beneficiaries need to be black people, there for, wildlife organizations and the SPCA would not count.

Above I mentioned that the beneficiaries need to be 75% black. That is in order to count the full 100% of the contribution. If the beneficiaries are less than 75% black then the percentage counted would be worked out on a pro-rata basis. For example, if R100 000 was donated to an organization with 50% black beneficiaries then only R50 000 would be counted towards your SED scorecard.

Just like Enterprise development, your SED target is worked out as a percentage of your Net Profit after Tax (NPAT). For a Generic company as well as a QSE company the target is 1% of your NPAT as indicated in the relevant scorecards below.

Generic scorecard:

QSE scorecard:

Typical evidence that would need to be presented to a Verification agency to score SED points:

• The latest audited financial statements 
• Proof of the percentage of black beneficiaries-usually done by an affidavit or a third party confirmation. 
• Proof of the payments or transfer of the contributions-usually bank statements showing proof of payment. 
• The beneficiaries need to supply a letter acknowledging receipt of the contribution. 
• Many agencies are also now requesting an agreement between the measured entity and the beneficiaries so it would be a good idea to get some form of agreement between the two parties, signed and dated before the contribution is made. 

Please give me a call if you are interested in getting your companies verification done, we can assist you with streamlining the process at a competitive price with extremely good turnaround time.

Today I am going to give the definition of Enterprise Development and give you the necessary document requirements for your onsite assessment.

In short, Enterprise development, in BEE terms, refers to giving support to another business that is more than 50% black owned and are a QSE or EME company or any size company that is more than 25% black owned and has a BEE level of 1-6.

The following table shows exactly what can be counted towards Enterprise development and what percentage recognition you will receive for the different types of contribution.

 Note that for the last qualifying contribution- shorter payment periods, we as analyst would take the difference between the invoiced date and the payment date, subtract that from 15 and base the percentage on that amount of 15. This might have been very confusing so here is an example.

Invoice date: 04 March 2011

Payment date: 07 March 2011

Amount R10 000

Calculation:

07 march-04 March=3 days

15 days- 3 days=12 days

12/15%=80%

Therefore we can count 80% of the invoiced amount which in this case would be 80% of R10 000 which is R8000.

It is extremely important to note, in order to score Enterprise development points, there must be a signed agreement between your company and the beneficiary company that you have chosen as your ED beneficiary company. State what contribution you will be making towards them and an agreement needs to be signed between the two parties before any contributions can take place.

Enterprise development cannot be recognized as an afterthought and should be a conscious decision to help an ED beneficiary in future transactions.

Let us look at the evidence requirements for an onsite assessment:  

• Most recent audited financial statements.
• Evidence to obtain BEE status of beneficiary (BEE certificate or affidavit stating percentage black ownership/beneficiaries.)
• An independent, competent persons report to support the above BEE status. (The affidavit would be sufficient or a report from an independent 3^rd party.)
• The companies turnover need also be given, either an affidavit or a letter from the company’s auditor.
• Relevant evidence to support the contributions made, eg. the shorter payment period example I gave earlier, however, we would need invoices and proof of these payments.
• In addition to the agreement signed by both parties, we will also need a letter from the beneficiary acknowledging receipt of the contribution.

You now have the basics of Enterprise development.

Please remember that I am a BBBEE verification analyst working for an accredited agency and would love to assist you with your companies next certificate. So give me a call for an assessment that is competitively priced, fairly carried out and leads to you attaining your certificate in the shortest time possible.

The Skills Development element looks at what a company is doing to develop the skills of their black employees.

The targets for this are 3% of your payroll for a Generic company and 2% of your payroll for a QSE company. In order to reach these targets you need to spent time and money on either internally training your black employees or training through external training institutions. Alternatively you could combine the two but formally implement them through learnership agreements.

A note must be made that there are specifications to the training that need to be met and are given by a tool called the Learning Program Matrix and looks as follows:

This table shows the different categories of training that can be counted and when cross referenced with the scorecard which follows, you can see exactly how to score points.

GENERIC scorecard:

QSE Scorecard:

Two things that have not yet been mentioned which are stated on the scorecards is, once again, the adjusted recognition of gender and the leviable amount.

The adjusted recognition has previously been explained but for those people joining us for the first time, the ARG is a calculation which enhances your points for training black females and penalizes you if you have only trained black males or very few black females.

The leviable amount refers to your payroll. The term is used from the skills development levy that companies need to pay over and is 1% of your payroll. So the BBBEE skills development targets are also based on this amount.

Key points for the measurement of Skills Development:

• Your company must be compliant and up to date with the conditions of the Skills Development Act and Skills Development Levies Act before any points can be awarded. This includes, for Generics, having submitted a Workplace Skills Plan and Annual Training Report and for QSE`s being up to date with levy payments.
• Spend on uncertified training can be counted but only up to 15% of the total amount.
• The salaries of learners placed on learnership programs can also be counted as part of the training expenditure but the learnerships must be registered with your relevant SETA.
• Training costs can also include course fees, travel and accommodation, materials, venue costs and the costs of internal trainers.
• Only money spent on training employees that appear on your payroll can be recognized under Skills Development, otherwise the contributions spent will fall either under Enterprise Development or Socio- Economic Development.

Evidence Requirements for the verification of Skills Development:

• GENERIC companies only – Workplace skills plan and annual training report submission as well as confirmation from the relevant SETA of submission. 
• GENERIC & QSE- EMP201 returns for the period being audited.  
• Applicable payroll and annual financial statements.  
• Associated expenses relating to in house and external training(invoices, proof of payment etc.) 
• Signed attendance registers for in house trainees. 
• Learnership agreements, signed by employee and trainees. 
• Certified ID copies of Learners who participated in training. 

As always these are only guidelines and may vary between different rating agencies. Also note that the information mentioned above has been simplified as much as possible for easy understanding and may not cover some of the finer details.

Note that I am a BEE analyst and I do offer the verification service. We have extremely competitive rates and our turn around time is great. So, get my details on the contact page and get in touch with me.

I look forward to hearing from you so that we can get your rating process started.

This week I will explain to you firstly, what is meant by employment equity and secondly the evidence required to rate your company on this element.

This element measures Black participation within the middle and lower tiers of the organization. In all cases the measurement will be based on a head count and the adjusted recognition of gender, discussed in the previous article, will apply.

This is the employment equity scorecard for a Generic company:

What is important to note from the scorecard is that the scoring is broken up into different management levels. If the company has a flat structure and does not distinguish between middle and junior management then the two levels can be consolidated and measured against the junior management target. The weighting points for senior management would then be 7 and the weighting points for the consolidated level will be 6.

Note should also be given to the bonus points for meeting or exceeding the EAP target which is the Economically Active Population, a statistic that can be found on the statsSA website.

Another important factor which needs to be discussed is that for every item on the scorecard rated there is a sub minimum score needed to qualify for any points to be awarded. This sub minimum score is 40% of the compliance target and can be seen on the scorecard underneath the compliance targets in brackets. This applies to both the Generic and QSE scorecard.

Bellow is the employment equity scorecard for a QSE:

Note that the items are only split up into management employees and then all the employees as a whole in the organization. Again bonus points are awarded for exceeded the EAP targets

Evidence requirements for Employment equity:

• The most recent EEA2 and EEA4 forms submitted to department of labour (but not if company is exempted from submitting them
• Confirmation From Department of Labour in respect of submission of EEA2
• Appropriate and sufficient evidence to determine gender, race, management level (the most recent organogram of all senior, middle, junior managers as well as other employees)
• Employee list
• Payroll of the company
• Certified copy of ID of employees interviewed, as well as 2 months pays slips and employee contracts.

Note that a sample of employees will need to be interviewed on the onsite date and the last point under the evidence requirements will apply to them.

Next week we will take a closer look at Skills development and the evidence requirements for verification.

Note that I am a BEE analyst and I do offer the verification service. We have extremely competitive rates and our turn around time is great. So, get my details on the contact page and get in touch with me.

I look forward to hearing from you so that we can get your rating process started.

This week, I will explain ownership and management control. Once you have an understanding of exactly what these elements mean in BBBEE terms, I shall then explain the typical evidence that an analyst would need from your company to prove compliance in each.

OWNERSHIP – quite simply looks at black shareholding in an enterprise. Although, ownership structures and shareholders rights can get very complex which is why it is very important to provide the correct evidence to prove these type of ownership structures. The following list outlines the documents an analyst would typically require to verify the ownership element:

• List of shareholders
• Share certificates
• Shareholders agreement
• Certified ID copies of shareholders
• Most recent loan agreements (If money has been borrowed to a shareholder to purchase the shares)
• All company registration documents

MANAGEMENT CONTROL- This element of the scorecard measures black participation in the      top levels of management within the organization. This includes the board and the most senior executive managers in each area of the business.

Something important needs to be taken into account with this element and that is the adjusted recognition of gender (ARG). This is a calculation which takes into account the participation of black women and can be explained simply with the following formula:

ARG=     (%black representation/2) + % black women representation.

The following list outlines the documents an analyst would typically require to verify the management control element:

• Company organogram
• Company registration documents
• Memorandum and articles of association
• Employee contracts of black top managers
• Pay slips of top managers
• Certified ID copies of top managers.

It is extremely important to note that the above definitions and explanations have been simplified for easy understanding. The above information also does not distinguish between GENERIC and QSE companies, where their scorecards do differ and score different aspects of each element.

Next week we will have a look at Employment Equity and Skills development and provide you with the general evidence requirements for verification.

Note that I am a BEE analyst and I do offer the verification service. We have extremely competitive rates and our turn around time is great. So, get my details on the contact page and get in touch with me.

I look forward to hearing from you so that we can get your rating process started.

Remember to keep in mind from last week that a QSE company can choose which of the 4 elements they would like to be rated on but a Generic company must be rated on all 7. This gives a QSE the advantage of choosing which of the elements they have a greater BEE compliance in to score more points. Note that in the case of a QSE each of the 4 elements will have a weighting of 25 points on the scorecard.

At this point, the words, weighting, scorecard and points may be confusing you. The following 2 tables will put these in perspective and show which scores qualify for which levels of BBBEE compliance.

Element weighting:

Points vs. Level:

You may notice that to be a level 1 you need to have a score greater than or equal to 100. How this works is that in certain elements you have the opportunity to score bonus points for exceeding certain targets, however, we will discuss this at a later stage when we really go into detail with each element.

You now have an understanding of the points you need to score to achieve a certain level of compliance but knowing how to score those points is the important part. This is where I am going to assist you from here on.

From here on I will focus on giving you a better understanding of each element and what efforts you have made as a business towards becoming compliant can be counted towards your BBBEE score.

Note that I am a BEE analyst and I do offer the verification service. We have extremely competitive rates and our turn around time is great. So, get my details on the contact page and get in touch with me.

I look forward to hearing from you so that we can get your rating process started.

When classifying your company we take the annual turnover of your company into account. Therefore if your company has a turnover of less than R5 million per annum then you are termed to be an EME (Exempted Micro Enterprise). If your company has a turnover between R5 million and R35 million per annum then you are termed as a QSE (Qualifying small enterprise). If your company has a turnover greater than R35 million per annum then you are termed as a Generic company.

What does all this mean?

An EME company does not have to go through the process of an onsite assessment and through the right verification agency and with the right documentation can have a certificate issued in less than a day. Typically the documentation needed is a letter stating turnover of the company being less than R5 million; the business registration documents and a certified ID copy of the person who s name appears on the registration document, easy as that.

A QSE company will need to undergo the onsite verification assessment and will be rated on a maximum of 4 out of the 7 elements as per the codes of good practice.

A Generic company will also need to undergo an onsite assessment but will be rated on all 7 of the elements as per the codes of good practice.

But what are the elements as per the codes of good practice?

These are the different categories or aspects that form the bulk of the running of your business that have been identified as areas that could benefit the position of previously disadvantaged people in business, when applied in accordance with the Broad based black economic empowerment codes of good practice. These include:

• Ownership
• Management control
• Employment equity
• Skills development
• Preferential procurement
• Enterprise development
• Socio economic development

You now have the basic understanding of how we classify your company. Next week we will take a closer look at each of the elements and the weighting they carry on the scorecard, contributing to your overall BBBEE compliance level.

Note that I am a BEE analyst and I do offer the verification service. We have extremely competitive rates and our turn around time is great. So, get my details on the contact page and get in touch with me.

I look forward to hearing from you so that we can get your rating process started.