Government releases first BEE Codes

Valid for transitional period of 12 months ED RICHARDSON THE DEPARTMENT of Trade and Industry has provided more clarity on the first five Broad Based Black Economic Empowerment codes. The codes address BEE in ownership, management, employment equity, skills development and preferential procurement. The next four codes, still to be released, cover enterprise development, broad-based black empowerment contributors and the residual element. In code OOO, the adoption of a new code of good practice and a generic scorecard are addressed. All enterprises, public entities and the state must comply with these, with the exemption of defined Qualifying Small Enterprises. These have yet to be finally defined. Measuring ownership Points are weighted heavily on measuring ownership, preferential procurement and skills – an indication of areas where businesses need to focus BEE the most as BEE status is determined according to the weighted points on the scorecard. It also shows the status of businesses with a certain level of points. For instance, a company having less than 30 points on the scorecard is classified as a non-compliant contributor and has a 0% of BEE procurement recognition. According to the code, it is essential that businesses surpass their current BEE status and aim for the next BEE status level, particularly when it is at the stage where black people hold more than 50% of the exercising voting rights and more than 50% of economic interest in the enterprise. Financial reports The Transitional period of these codes will be 12 months while BEE compliance measurements of the Code in accordance with the generic scorecard will take effect in December 2005. The code will be in practice for ten years, after which it may put under review by the Minister. Code 100 measures the ownership element of the BBBEE and also looks at new regulations in the broad-based ownership scheme. The Code says that all black people identified as deemed participants in the broad- scheme are entitled to participate at a level equivalent to the level of participation offered by shareholders of a private company with shares and to receive financial reports of the scheme on an annual basis. Code 200 measures the management and control element of the BBBEE. This contains the management control scorecard, weighting points and compliance target that businesses should set out to achieve. The weight of the points rests on the percentage of exercisable Voting Rights held by Members of the Board that are black, to the total of all Voting Rights exercised by members of the board. Companies should also begin targeting the percentage of senior top management who are black people and constitute the total number of senior top management. More black women at this level is also an advantage.