The New B-BBEE Thresholds, Codes and Penalties – What You Should Know

beethresholdsEvery South African business will be affected by the pending new amendments to the B-BBEE (Broad Based Black Economic Empowerment) Act, and by the new Codes of Good Practice.  The benefits of complying are as great as the risks of not complying, so take advice in any doubt.

Turnover thresholds up

  • Exempt micro-enterprises (EMEs): the annual turnover threshold for EMEs has doubled to R10m from R5m.  If you qualify (to be confirmed annually by an affidavit as to both annual total revenue and level of black ownership), you are deemed to be a Level 4 contributor (100% recognition level).  You will go up to Level 1 (the highest level) if you are 100% black owned, and to Level 2 if you are 51% black owned.
  • Qualifying Small Enterprises (QSEs): the threshold for QSEs has been increased to R50m from R35m.
  • Large Enterprises: Over R50m you are a “Large Enterprise”.

The Codes

There is a lot of detail in the new Codes, to which a 12 month transitional period applies from 11 October 2013 – during that time you can if you wish elect to be measured on the previous (2007) Generic Scorecard, so take advice on specifics.  These are the highlights –

  • Sector Charters (currently operative in the agricultural, chartered accountancy, construction, financial, forestry, Information and Communication Technology, tourism and transport sectors) will continue to apply but must be aligned with the new Codes within the transitional period.
  • You will be scored now on 5 targeted elements (down from 7) totalling 105 points –
  1. Ownership (25 points)
  2. Skills development (20 points)
  3. Enterprise and supplier development (40 points)
  4. Management control (15 points)
  5. Socio-economic development (5 points)
  • Elements 1, 2 and 3 are now “priority elements”.  QSEs must comply with element 1 (ownership) and also with either element 2 or element 3.  Large enterprises must comply with all 3.
  • “Subminimum” targets are set for parts of the priority elements, and you drop one level if you fail to meet them.

New penalties pending

Amendments to the B-BBEE Act which are at date of writing working their way through the legislative process provide for fronting in any form to carry significant new penalties –

  • A fine of up to 10% of annual turnover for offending businesses, and
  • Anyone implicated in misrepresentation of B-BBEE status (or of information in order to secure such a status) will risk criminal prosecution and up to 10 years’ imprisonment.

Also proposed is a new Commission to monitor and evaluate B-BBEE, and to investigate complaints of fronting or other breaches of the Act.

Ashersons Attorneys

Ashersons Attorneys

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