Transport industry remains in limbo

As the business world gets to grips with the amendments to the BBBEE Act, the transport industry – which has its own set of sector codes – remains in limbo. There’s still no confirmation of when the sector codes will be aligned with the amendments, but the advice from specialist consultant Keith Levenstein of Econobee is to familiarise yourself now. The Transport Sector Code is broken down into various sub-sector codes, such as domestic aviation, road-freight, clearing, bus and taxi, and some others. Companies in the transport industry follow the particular sub-sector code that applies to them. “Although the new Act may look the same, there are a lot of differences,” says Levenstein. “They’ve changed the names and weightings of some of elements,” he explained, “with the previous seven now reduced to five.” The first element is ownership which has not changed much in his view. Management control however includes employment equity – and while the value of this was previously 29 points, it has now dropped to 19. The next element is skills development which used to account for 15 points and now accounts for 25. “This is one of the most crucial elements,” said Levenstein. Procurement has been combined with enterprise development to be known as enterprise and supplier development, accounting for 44 rather than 35 points, while socioeconomic development remains unchanged at 5 points. There are also significant changes in the points required for each level. “Previously a level 4 company required 65 -75 points. Now level 4 is someone who earns 80-90 points. This used to be an easy level to achieve but now it’s very difficult, says Levenstein. “You’re talking about the old level 4 being the equivalent of the new level 6 or 7. Level 8 used to be 30-40 points and is now now 40-55 – which means that a company that used to be a level 8 will now be non-compliant. A company that was level 5, on the other hand, will be lucky to get to level 8.” What is also causing the levels to drop is what the Minister has labelled priority elements for each level. “If you don’t reach a particular target on each of the priority elements you drop a level. What this means in terms of ownership, for example, is that previously if you didn’t have the credentials for ownership you got a zero. Now you drop a level – and the same applies if you don’t do skills development. That means if you’ve already dropped a level from ownership and you don’t do skills development, you won’t be compliant.” In short, you have to do pretty much everything to reach a level of compliance, he added. And the new legislation is a lot more demanding in terms of administration. In the past one person could do the work, but now this is not possible in his view. There’s good news, however, for smaller companies or exempt micro enterprises (EMEs). “In the past if a company’s turnover was below R5m all that was required was that you produced a letter from your accountant. Now that minimum threshold has been increased to R10m which covers a vast majority of companies,” said Levenstein “A small business will therefore be exempt from BEE requirements and will automatically be rated as level 4. If they are 51% blackowned they jump to level 2 and if they’re 100% blackowned, they jump to level 1.” The target of BEE is not smaller businesses, says Levenstein, and that exempts a fair number of companies in the freight and transport sector. But the fact that the transport sector codes have not yet been aligned with the amended legislation puts smaller transport businesses at a disadvantage. “Until the codes are aligned, the transport industry has to follow the roadfreight sector code – which means that a small business with a R7ma- year turnover, for example, doesn’t quality as an EME.” Large freight companies will continue to follow the roadfreight sector code until it is aligned – which could take up to a year – and that means they are not immediately affected by amendments. But it’s probably a good idea to start budgeting for the changes as soon as possible. “In the old codes, for example, companies were required to spend 3% of their payroll on staff training. In the new codes the requirement is 6%.” Another positive area of change is the push for enterprise development. “The idea is to encourage companies to spend more time and effort on coaching and mentoring – particularly small black companies.” For companies not affected by sector codes, the deadline for the new codes is October this year. A separate act, which is due to be signed by the president shortly, applies to all companies and is unrelated to the sector codes. In terms of this act, anyone found guilty of fronting could go to jail for up to 10 years. INSERT & CAPTION You’re talking about the old level 4 being the equivalent of the new level 6 or 7. – Keith Levenstein