As previously mentioned, I believe any sustainable BEE framework should be underpinned and incentivized through appropriate industrial policy action IPAP2 for example and a more coordinated and inclusive role throughout the private industry associations and functional chambers of commerce.
The idea being that if an IQuad staff member was in a lift and someone asked them what IQuad does, they would be in a position to provide a concise definition of our service offering. IQuad is a JSE Alt-X listed company that provides high impact strategic outsource and compliance services to business.
These services can be categorised into four areas:. Did I mention that it needs to be a slow lift or very tall building? I think BEE has become a business imperative, not only because more emphasis is being placed on BEE compliance levels in the procurement process but also because it is the right thing to do to ensure the broad-based development of South African society.
It is encouraging seeing how businesses are embracing B-BBEE and making meaningful contributions in terms of skills development for staff and broader community upliftment. Do you have a personal motto that you live by, in work and play?
Yes, I think that hard work and a positive attitude will always prevail, in both a business and social context. Where do you see the future of SA heading — and how can IQuad use this in their favour? There is currently a huge amount of hype around job creation and not without good reason. Government by their own admission have not been successful in creating a business climate that is conducive to establishing and operating small businesses and a huge amount of work is needed in this area.
IQuad is well positioned to assist with this challenge. We are doing a very good job of promoting the various investment incentives available to both small and large businesses throughout South Africa and thus assisting in the very important task of stimulating job creation.
A good example is in East London where we work closely with the investment promotion staff at the East London Industrial Development Zone to assist them in attracting new investors to the IDZ. IQuad needs to keep a focus on assisting in stimulating economic development and job creation. One would be foolish not to take heed of the warning signs. It is alarming how the discontent in countries like Tunisia, Egypt and Libya rapidly gained momentum. It is only through meaningful economic growth and job creation that we will be able to improve the lives of all South Africans and avoid a growing level of discontent.
Moeletsi Mbeki calls for a renewed focus on entrepreneurship to create job opportunities. This is something that can be achieved through existing B-BBEE legislation if big business turns their attention to improving the plight of the broader community rather than promoting wealth creation for a select few. I believe that Clem Sunter sums it up best in his publication, Never mind the Millennium. What about the next 24 hours? These centres should be run by private enterprise, with financing coming from government and business….
The pillars of skills development and enterprise development within the B-BBEE codes provide the platform for the above to become a reality. Sourced from Paul Janisch click here. The Ditikeni group was formed in by a number of non-profit organisations seeking financial sustainability. They aimed to participate in Black Economic Empowerment in order to create a capital base to fund their community development and welfare work.
Consumption just breeds greed and little else. This approach to business through politics breeds a kind of entitlement that will rip the foundations of our society apart. And in many respects it is. Naidoo says he still believes BEE can work in South Africa but only if it is linked to the goals of a people-centred democracy. The actual checklist seems to focus on good governance of broad-based ownership schemes — to quote the checklist.
The checklist does not deal however with the extent to which the subject organisation complies with the BEE Codes of Good Practice — that remains a separate exercise. The Checklist covers what the BEE Codes do not, that is, the bona fides of those organisations which claim to be broad-based.
Broad-based ownership schemes are those ownership initiatives that allow business owners to invest with B-BBEE candidates including black designated groups as defined in the B-BBEE act on a collective basis.
This is achieved through structures, arrangements and mechanisms to allow such candidates to participate in B-BBEE ownership initiatives without compromising on the quality and standard of the relevant enterprises value proposition. It is inevitable that enterprises who wish to embark on Broad-Based ownership initiatives will be confronted with a number of complex legal issues including but not limited to the following:.
Tax Implications in respect of any value shift; 2. Financial sureties in respect of the measured entity in relation to a third party Financial Institutions ; 4. Affordability and sustainability; 7. Board representation of shareholders in the case of Private and Public Companies. Some industries, for example the construction and mining industries find it more difficult to achieve these internal targets i.
Black Female Participants than other industries where such designated groups enjoy higher percentage presentation. According to Johnny, this rather complex approach to the measurement of B-BBEE ownership renders it almost impossible for ordinary business owners to understand the issue of ownership.
As this complicated issue comes with a series of challenges, including the lack of understanding from business owners on legal consequences in business structures, Johnny explains that it is almost impossible to suggest that any structure be used as a general principle or point of departure.
Each business enterprise must be considered on its own merits. The multi-disciplinary approach as referred to above plays a very important role in the process of designing and structuring of business enterprises to accommodate B-BBEE in a meaningful and sustainable manner.
B-BBEE and in particular the issue of ownership can never be dealt with in isolation. Any responsible business owner will consider all the relevant factors including but not limited to financial risks, management issues, exit strategies, continuity plans, tax implications, logistical challenges, financial and operational sustainability and possible growth potential. The participation in any BEE initiative must be considered in relation to the impact thereof on the other elements of the business.
The initiative was designed to have a severe impact on the business as we know it, in order for it to be meaningful and sustainable in terms of the inclusion of black participants in the main stream of the economy.
When calculating BEE ownership for shares that are held in a trust, many companies fail to meet the requirements set out for trusts.
We have spoken about these requirements at length in previous editions see Issue 4 and Issue 9 but essentially the codes require that shareholding held through a trust must actually vest with the beneficiary. Where the intended beneficiaries of the trust are not fixed, because they belong to a class of people e. A Broad-Based ownership scheme exists where employees or community participants receive beneficial ownership of a portion of the company.
It is not possible for beneficiaries to exercise direct control over their allocated portion of the company. Their interests do however need protection, and the codes stipulate a number of requirements in terms of which the rights of these beneficiaries would be protected.
Additional restrictions apply to the maximum number of points that can be claimed for ownership through these schemes, as well as proving the competency of the persons administering the schemes. While Broad-Based Ownership Schemes and Employee Ownership Schemes are viable alternatives to meeting the vesting requirements of ownership held through a trust, careful consideration should be given to ensure that the measured entity has met the additional criteria applicable to these schemes.
For companies listed in this BEE sector, verification agencies will be required to provide specific information relating to BEE ownership, in a condensed ownership certificate.
The certificate would not replace the more comprehensive Broad-Based Certificate but would provide a short-cut to establishing the true BEE ownership for trading purposes. The BEE Segment enables broad based share ownership and creates an opportunity for skills development within the financial markets through providing holders of listed BEE scheme shares with market education and access to the exchange not only for the trading of their BEE shares but to all products listed on the JSE.
If one aspect of BEE is unmistakable, it is that the level of understanding of the basic concepts is very poor. This is something indicated by managers within companies, owners of companies and the average fellow South African. The amount of information offered will only be a summary in order to give a basic understanding of how the elements apply to your business. The goal of this guide is to explain B-BBEE, in straightforward terms, thus making sure you achieve the best possible scores for your business as quickly as possible, and incessantly.
A simple case study is provided with each element to assist with clarification in how they work in businesses. A glossary is also available at the end of the guide with clear definitions of various BEE terms. This guide has been written for all those not interested in the history or finer details behind BEE — it is simply a guide to show businesses how to boost their scorecard.
Please click here to download the Guide in a PDF format. It is not surprising that many supporters wanted President Jacob Zuma to pay particular attention to unemployment in his state of the nation address — and he did not disappoint them. We are humbled by the overwhelming support and consensus from all parties. We are all agreed that this is the correct course of action given the levels of unemployment in our country.
We hope the president will give direction in terms of the economy. However, since the address by the president, there has been a flood of criticism. According to Free Market Foundation executive director Leon Louw, the direction that President Zuma wishes to take will actually cut employment. The problem is how do you get the people who want the job to the people who want the job done? The answer is you remove the barriers between them, which means he should not tinker around with laws that result in less jobs, but undertake a comprehensive review of labour policies and other measures.
He told MPs that government would find it difficult to achieve its set job target if the issue of transformation was not urgently addressed. No economy can grow as fast as it should, create jobs and be sustainable, if the majority of citizens are excluded. In essence, this is what is called black economic empowerment BEE.
If we want to develop SA instead of shuffling pre-existing wealth, we have to create new entrepreneurs, and we need to support existing entrepreneurs to diversify into new economic sectors. The arguments above, for and against, do however, all endorse the issue of unemployment in this country and the various ways of eliminating this problem. While IQuad BEE has been involved in providing training on an ad hoc and informal basis for a number of years, it has become clear that there is a need for a formal, accredited course, based on the numerous requests received from clients and contacts alike.
The feedback from the courses in PE and Bloemfontein was extremely positive. The participants felt that the course contained new and useful information and were enthusiastic to partake in further training. Our attendees have included HR professionals, BEE consultants and procurement and financial officers. The course encourages group participation and has a very practical element to it. This is to ensure that delegates will leave with an understanding of the BEE requirements as well as how to implement them back at their workplace.
Check our website for new dates to be added at a location near you. If you are interested in attending this course or would like to find out more information, please contact Jenni at IQuad — jenni iquad.
B-BBEE Contributions made to Enterprise and Socio-Economic Development could soon be recognized annually instead of cumulatively, according to the latest amendment of the codes published in the government gazette on 18 Feb The un-amended codes of good practice make it possible for excess contributions made in a given year to carry over into the next year. The proposed amendment is that instead of adding up all contributions made over a period and measuring them against the profits made during the same period, contributions can now only be made each year and measured against profits for the year.
The amendment will have a negative impact on companies that made large contributions a few years ago, and who were planning for those contributions to see them through for a few years of profitability.
Conversely, the move is positive for new entrants to the B-BBEE measurement, because under the current legislation a company is forced to measure its contributions cumulatively from the date of inception of the codes. This means that a company preparing its scorecard 4 years after inception of the codes will in theory be required to contribute for each of the 4 years even though it did not measure its B-BBEE contributions until year 4. A sudden withdrawal of the interpretative guide by the dti lead to some confusion over which calculation was correct.
The amendment to the codes will eliminate all confusion, but potentially at the expense of those who made large contributions in the past. Email us if you will be negatively affected by this amendment, and we will include it in our commentary to the dti. Do not miss the boat and lose valuable points! Time is running out for your company to donate to qualifying beneficiaries under the enterprise development or socio economic development elements on your scorecard.
Contributions have to be made by the end of the financial period that you are measuring. That means that if your financial year-end is 28 February , you have only a couple of weeks to make the required contributions to meet your target. For more information, contact your consultant or verification agency or read the ED and SED article in Issue 2 on http: It would be more beneficial to have a long-term relationship, which would be of mutual benefit to both the measured entity and beneficiary and more cost effective.
For enterprise development, you could consider developing a supplier with black ownership. Spending time in training and mentoring owners, managers and employees of a beneficiary entity, could earn points for your scorecard, while potentially improving the service and product delivery of your supplier. These two examples may take a bit more planning and monitoring throughout the year but can have an excellent return on investment, if properly executed.
Founded in by my brother, Neil and I, our sole purpose was in attempting to facilitate and ensure broad-based BEE funding. Thankfully, it found its way to the right people in the correct manner. The past four years have been a roller-coaster ride to say the least. To date, the company has managed and implemented relatively modest amounts of funding just over R4m , but in the process, has also assisted over 20 businesses in successfully complying with the enterprise and socio-economic aspect of the BEE codes.
I hold the concept of restoration close to my heart. South Africa is in need of a great deal of restoration — not purely financial either. Unfortunately, I believe that a great deal of policy in SA today has become overly politicized and very heavy handed. I think one of the worst areas where this has manifested is through the incorrect application, implementation and verification of BEE.
Elaborate as to why and how this can change. No, it has not, but some of these reasons are quite justified. There has been and continues to be very poor Government communication surrounding the interpretation and verification of the Codes.
ABVA Association of BEE Verification Agencies is currently attempting to provide more certainty in this regard, however, without DTI endorsement or further collaboration, ABVA will continue to fight an uphill battle concerning bringing appropriate uniformity and regulation to the industry.
I believe there are steps currently underway by Government to resolve the process but much damage has already been done. As previously mentioned, I believe any sustainable BEE framework should be underpinned and incentivized through appropriate industrial policy action IPAP2 for example and a more coordinated and inclusive role throughout the private industry associations and functional chambers of commerce. Do you have a personal motto or proverb for work and play?
For more information, please go to www. Skills development points are awarded when a company demonstrates that it has spent money on the training of black employees, with a separate target in the generic scorecard, for training black disabled employees. Certain types of training qualify for enhanced recognition.
Another example is the cost of practical training that will result in a formal qualification being issued. This cost can include the salary expenditure of the employee for the duration of the training. Record keeping is the most essential foundation to this element. These are some of the most common ways to lose points on your scorecard, under the skills development element:.
Here are three of the most common BEE myths in the industry:. Ownership is only one of the seven elements on a BEE scorecard. There is no compulsory requirement to sell all or any share of your business to anyone.
In certain industries however, black ownership is a prerequisite when applying to government entities for a license, for e. The answer is no. This is because, under B-BBEE, the aim is to measure the involvement of black people in your business, under the employment equity element.
This is something we often hear in our industry. In fact, the government is becoming more earnest about BEE, which is evident by their commitment to increasing the number of verification agencies this year.
The Codes of Good Practice were released on 9th February , with a review to be carried out after 10 years. This substantiates another seven more years of BEE reporting and a highly unlikely chance of it being withdrawn or cancelled. ABVA have released Best Practice Notes with the goal of eliminating the imperfections in the inconsistent application and interpretation of the Codes.
At the top of the list, is the legislative framework within which it operates. This resulted in an uncertain environment within which to apply verification and calculation in accordance with the Codes. Thus, the imperfections contained in the B-BBEE legal framework leads to an inconsistent application of the Codes and an inconsistent interpretation. The pre-condition for this commitment is that the process of developing these Best Practice Notes should be consultative. The Best Practice Notes will have no formal legal standing as they are not legislation nor do they purport to be.
It must be seen for what it is — an attempt by a concerned industry to achieve the consistent application of transformation legislation and where appropriate suggesting common application where the legislation is silent on the treatment of a particular matter.
ABVA believe that to be the prerogative of Government and its structures. Click here to read article. Zuma goes on to add that affirmative action and the broad-based black economic empowerment BBEE programme had increased the black middle class substantially.
He believes it is currently being misapplied to serve narrow business interests. Both articles, over the span of a year, have proven that BEE is still a progress in the making. Agreeably so, there are flaws and some truth behind narrow based ownership.
But realistically, it is still vital that changes in empowerment should only happen across all seven elements set out in the Codes and not just one or two. Each element has an equally important aspect that can benefit companies or communities as a whole, and not just benefit a few.
If BEE does start moving towards these attainable goals, then hopefully we will be reading an article next year where the President declares his faith in the system, and not further concerns. Please email us at beeintheknow iquad. It is once again time to step back and reflect on the past year. A time to look at past events, accept the true successes, and acknowledge the failures, and subsequently planning how to tackle issues differently going forward.
With this in mind, we have compiled a few BEE resolutions to help you focus on making the best of your BEE scoring opportunities in the next 12 months. The earlier you are organised, the easier and more cost effective it will be to earn your points. Ask your SETA if they can advise on and subsidise appropriate training for your staff.
Find out what scorecard you are measured on, which elements of that scorecard are the best to focus on and how to effectively earn and measure your points. Appoint a BEE consultant, speak to your industry bodies and go on courses to keep yourself informed and updated. Once you know which elements to focus on, put strategies into place to ensure you are earning points in those areas.
Ask your verification agency for a list of evidence they will require for verification purposes and make sure you store them safely. This resolution is repeated twice due to its importance. BEE is a journey, not an event. Phinda Ndabula started her career as a researcher at the University of the Western Cape, then worked as a Manager at the Sekhukhune District Municipality before being recruited as a BEE Manager on the Bombela Consortium responsible for the construction of the Gautrain project.
I also ensure that clients are provided with a satisfactory technical service. On a day to day basis, this means planning assessments, managing financial issues, ensuring technical integrity by carrying out benchmarking of the program.
SANAS certificates and their accompanying schedules are a formal recognition that an organisation is competent to perform specific tasks. However, some agencies continue with their business usual operation parallel to the QMS. It is only once harmony has been established between the two that the organisation will then meet SANAS requirements and also develop into a sustainable business.
The B-BBEE environment is constantly evolving and this requires preparation and organisation in order to deal with issues that emerge on a daily basis. Verification Agencies are faced with the most difficult challenge, as they have to produce accurate results in an environment that is constantly changing.
This can carry huge financial implications for their clients, for example, in many cases tenders are linked to these BEE certificates. This is to ensure that together with the dti, SANAS can implement mechanisms that are necessary to ensure that Verification Certificates are reliable.
For more information, visit www. This code will apply to businesses operating in the financial sector, such as banking, long and short term insurance, financial intermediation and brokerage, and investment management providers.
The gazette of the first phase of the FSC means that members of the public are specifically invited to provide comments and inputs on the gazetted document. This first phase specifically excludes access to financial services, empowerment financing, enterprise development and some aspects of the measurement of black ownership. Phase II will aim to achieve consensus on these aspects, after which a final version will be released in draft for consideration by the public.
The Draft Financial Sector Code commits all participants to actively promoting a transformed, vibrant and globally competitive financial sector that reflects the demographics of South Africa, which contributes to the establishment of an equitable society by providing accessible financial services to black people and by directing investment into targeted sectors of the economy.
Members of the public have until Wednesday 10 February to make comments which will serve as inputs for the finalisation of the Financial Sector Code.
All inputs and comments must be addressed to the Department of Trade and Industry: In Black Economic Empowerment terms, four of the last sixteen years stand out. A year in which business behaviors finally gave effect to previous legislation aimed at redressing the economic imbalances of the past.
A year in which leading government departments started acting in congruence with the Broad Based Black Economic Empowerment Act. A year in which the formalized regime for the measurement and comparison of BEE contributions by verification agencies was given the teeth it required to fulfill its mandate.
Amidst intense debate over the effectiveness and direction of Black Economic Empowerment, there has been stabilization in the BEE space, which can only result in positive outcomes.
One cannot measure the effectiveness of a policy or intervention unless it is consistently implemented over a period. During disruption to policy has given way to consistent application of a set of principles, allowing perhaps for the first time an analysis of the impact of the codes on business. There are however, a few key issues that threaten to upset the balance, and the challenge of BEE practitioners and policy makers in is to ensure that these can be resolved without derailing the entire system.
Technical inconsistencies still threaten to dilute the impact of policy on the individual beneficiaries it aims to empower. A loss of common industry regulation could result in the implementation of multiple measurement standards and cause a loss of integrity of BEE certificates. BEE in the Know has chronicled over the last year topical issues in BEE, technical commentary to assist companies in implementing BEE policies, and feel-good articles to help us see the impact of positive policies in Make it your BEE companion in as we watch government balance the challenges of the future and successes of the past.
There are two elements on the scorecard that have phased in targets. They are employment equity and procurement. The targets are phased in over 2 periods, years and years. Since the codes were released in February , the first period will run to and the following period from If you are not currently reaching or exceeding the targets for employment equity or procurement, or actively planning to achieve those targets, you are likely to suffer a drop in score after This can include supervisors, team leaders, etc.
This subminimum calculation can be applied to each target for employment equity. Black employees in Senior Management as a percentage of all such employees using the adjusted recognition for gender. Black employees in Junior Management as a percentage of all such employees using the adjusted recognition for gender.
This means you need to be focusing on changing to suppliers who are BEE compliant, encouraging existing suppliers to improve their BEE scores and assisting existing or possible new black owned suppliers and service providers to achieve BEE compliance.
After a successful first year with BEE in the Know , we provide an aide memoire to the BEE topics discussed this year in our informative e-newsletter. An article followed this on How to claim points through disability. Issue 2 and Issue 3 gave us an insightful look at ED and SED contributions , how charities can benefit through clients and part 1 of a detailed article on Ownership. Ben Nyaumwe, a successful black entrepreneur in Port Elizabeth tells us in Issue 4 why the current BEE model could be improved and this is followed by part 2 of Ownership.
Our newsletter strives to give variety and informative articles on BEE. Please find the remaining issues, with articles, below by clicking on the links to download the issues. All the issues below can be found by clicking here. Issue 5 Sector code accreditation in midst of clarification What our clients have to say on BBBEE and the construction sector codes Differences in the construction charter. Issue 7 Learnerships Part 2 Challenges and rewards for a verification analyst What to do when things go wrong?
Issue 18 Coffee with Barry: After the fact Coffee With Paul: They were also excluded from public facilities, banned from entering certain areas, and subjected to job and educational restrictions. In terms of B-BBEE, a Chinese person will still need to be a South African citizen or need to have become a citizen before the implementation date of the constitution of the Republic of South Africa Act of or prove that they should have been granted citizenship before such a date.
How does this affect your scorecard? Previously, Chinese people would not have accrued any BEE points but now, it is likely that your scores will increase due to one of the following reasons:. These are just a few reasons why your scores may increase, so be sure to update your scorecard as soon as possible or contact your verification agent for any further information.
Client feedback is crucial and we need our clients to keep us informed of suggestions, criticisms and praises in order to improve constantly in all aspects of our business.
We launched BEE in the Know in the beginning of to provide value-adding information to companies preparing for and affected by BEE verification. By the end of , we will have completed 22 issues dealing with the technical, topical and feel good elements of BEE. However, as previously mentioned, the success of the e-newsletter is dependent on your feedback.
Do you have any further suggestions for articles or for the e-newsletter in general? It is of great consequence to us to assure our clients that our motto is sincere and that we continue to strive each day to maintain effective systems with exceptional people who deliver expert knowledge.
What for, one may ask? This is something indicated by managers within companies, owners of companies and also the average fellow South African. The body of this guide will list all the elements and provide a simple breakdown of how each element functions in our current B-BBEE system.
The guide describes each of the elements in as much detail deemed necessary. Case studies are given with each element to assist with clarification in how they work in businesses.
For a preview of the new guide, please email us at beeintheknow iquad. One of the main contributions from the survey emphasized that the top priorities from across all organisations in the survey were the elements of Employment Equity, Skills Development and Preferential Procurement. The emphasis placed on these elements, in particular Ownership appears to have been temporary as organizations are moving back to addressing the higher weighted internal elements.
Scores for Preferential Procurement, for example, across industry types and sectors have increased substantially. The shift towards these elements, including Skills Development, is positive as it shows a maturity in understanding Broad-Based BEE as a whole. A sustained focus on improving Skills Development scores will have a positive spin off on both the Management Control and Employment Equity elements over the medium to long term.
Another conclusion drawn from the survey is that companies are not really applying pressure on their suppliers to change. Although the majority of respondents set minimum B-BBEE contribution levels for their suppliers and did put suppliers on notice to achieve the stipulated procurement recognition level within an agreed period, it remains to be seen whether respondents actually change suppliers after the notice period.
The key findings and future recommendations from this survey stand as follows:. The link between these two elements requires more focus. The link with Employment Equity and Skills Development should be emphasised. There are still quite a few challenges facing organisations regarding BEE implementation and achieving their desired targets. Best pair to trade. How to activate Accounts.
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