Newtons

B-BBEE: TWO THINGS WORTH KNOWING

B-BBEE (Broad Based Black Economic Empowerment) has been with us for quite some time. The process of including the previously disadvantaged into the economy has not been without controversy but the reality is that it will not be going away any time soon.

  1. Exempted Micro Enterprises: B-BBEE Certificates can be issued for you by your Independent Reviewer, Auditor or Accounting Officer
    EMEs (Exempted Micro Enterprises) are enterprises with annual turnover of R5 million or less (possibly increasing to R10 million shortly – see below). Some sectors’ codes have prescribed different turnover thresholds to qualify as an EME – for example, the Tourism Sector Code is R2.5 million or less while the Construction Sector is set at R1.5 million or less.EMEs automatically qualify as B-BBEE level 4 contributors and thus have B-BBEE procurement recognition level of 100%. Those EMEs that are more than 50% black owned can get promoted to a level 3 contributor status.A recent joint notice issued by SAICA (South African Institute of Chartered Accountants) and the Department of Trade and Industry, confirmed that chartered accountants, auditors or any person that qualifies to act as an accounting officer may issue a certificate confirming your business qualifies as an EME.Thus, if you are a business that qualifies as an EME, it will be both time efficient and cost-effective to use your independent reviewer, auditor or accounting officer for your certificate.

  2. What we can expect in the future

    Minister of Trade and Industry, Rob Davies, has asked for comment on proposed changes to the B-BBEE Codes of Good Practice.The number of elements in the scorecard will be reduced from seven to five – employment equity would be joined with management control whilst preferential procurement and enterprise development would also merge and be called enterprise and supplier development.  Ownership, skills development and socio-economic development would remain as the other three elements. The stated aim of these intended amendments is to broaden the base of black participation in the economy. It is worth looking at the consequences that some of these proposed codes may have on your business.

    • The qualifying turnover
      This is scheduled to change. For EMEs, the proposed threshold would increase from R5 million to R10 million. This will take pressure off businesses with turnover from R5 million to R10 million as they are spared doing the B-BBEE scorecard and they can obtain exemption certificates as in 1 above. QSEs’ (Qualifying Small Enterprises)   turnover threshold increases from R10 million to R50 million versus R5 million to R35 million in terms of the current code.
    • Procurement
      One avenue open to businesses to bolster their B-BBEE points is to buy from B-BBEE accredited suppliers. In fact many of these businesses have pressurised their suppliers to get B-BBEE certification which has considerably increased the number of B-BBEE compliant businesses. The new codes propose that B-BBEE procurement points can only be claimed from value adding suppliers – defined as “entities whose profit before tax added to their salary costs is to exceed 25% of their turnover”. In essence, the codes are favouring businesses with high labour content. A survey estimates that around 30% of businesses will be value adding.  Many of the 70% who will not be value adding will have no incentive to remain B-BBEE compliant as their customers cannot get B-BBEE points from buying from them. Not only will entities lose B-BBEE points if they cannot buy from value adding suppliers but non-compliance with this element could result in the measured entities’ B-BBEE status level being discounted by two levels.
    • Ownership
      This element is given priority in the suggested codes. Under the current codes, businesses can make up points in other elements if they do not meet the ownership criteria. In terms of the proposed codes, businesses’ B-BBEE contributor status will drop two levels if they fail to get 40% compliance in this element. Groups, such as multi-nationals will face some very difficult decisions and it could potentially affect investment in South Africa.
    • QSEs
      In terms of the current codes, QSEs can choose the best four of the seven elements when having their B-BBEE compliance measured. The proposed codes require QSEs to comply with all fiveelements. This will make the process more difficult for QSEs. As opposed to larger entities which stand to drop two contributor levels when they do not meet compliance targets in priority elements, QSEs will only drop one level.

If you want to contact us in respect of any matter mentioned herein, please send an email to Anze Pienaar at anze@newtons-sa.co.za.

© DotNews, 2005-2012. This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.

ic@newtons-sa.co.za

SCHALK GOUWS

Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.

schalk@newtons-sa.co.za

CEDRIC PETERSON

Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.

cedric@newtons-sa.co.za

LUCHA GREYLING

Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.

lucha@newtons-sa.co.za