Dr. Rob Davies, Minister of DTI published the Amended Codes of Good Practice for implementation within 6 months from the date of the Gazette. This means that B-BBEE verifications taking place from the 1 December 2019 will need to comply with these changes.
Changes to the B-BBEE scorecard can impact your business and if you aren’t staying up to date your B-BBEE rating could drop significantly.
Four codes were amended; we’re going to take a closer look at these changes and how they will impact businesses in terms of:
- Skills development
- Enterprise and supplier development
Amended: The B-BBEE Codes of Good Practice
Here are the code changes you need to know about:
Schedule 1 Interpretation and Definitions – Amendments:
- Designated Group Supplier: Added definition
- Absorption definition: Amendment
Related: How Do I Become B-BBEE Compliant?
General Principles and the Generic Scorecard – Amendments:
- Sub-minimums: Explanation
- Unincorporated Joint Venture: Added measurement
General Principles for Measuring Enterprise and Supplier Development – Amendments:
- Suppliers within a business’ supply chain cannot be considered an Enterprise development beneficiary
- Guarantees: ESD matrix has been updated
General Principles for Measuring Skills Development – Amendments:
- Double counting on various interventions have been ruled out
- Capping of Category F and Category G training interventions have changed to 25% (this is an amendment from the 15% that it was previously capped at).
What do these changes mean for your business?
Updated Skills Development
Although skills development remains unchanged, there is a shift in focus on how you’ll need to approach skills development. Skills development, previously, accounted for 8 points on your B-BBEE scorecard.
It also requires you to use 6% of your business’ annual payroll for skills development initiatives.
Now, skills development only counts for 6 points on the scorecard, and you only need to use 3% of your annual payroll. There is also the addition of some new elements, such as funding for higher education.
Rajan Naidoo, director of Edupower Skills Academy believes this change came about because of former president Jacob Zuma’s free higher education announcement to appease the protestors of the #FeesMustFall campaign.
“Zuma’s announcement was made without any budgetary provisions, but the changes to the scorecard offers the means to potentially access the funds from the private sector and to creating new funding mechanisms,” explains Naidoo.
The increase in higher education funding
The new amendments now require you to spend 2.5% of annual payroll on funding higher education through bursaries for black students at higher education institutions.
This will earn your business up to 4 points on the B-BBEE scorecard. Adult basic education training and school funding programmes are also included in this new amendment.
Businesses can now fund the children of their employees through bursaries or even school fees, says Naidoo, as the new amendment enables businesses to choose both basic and higher education.
Revised Code 300: General Principles for Measuring Skills Development
Find the amendments to The Skills Development Generic Scorecard:
|Skills Development Expenditure on Black People||6||3.5%||Points and target reduced|
|Expenditure on Bursaries for Black Students at Higher Education Institutions||4||2.5%||New indicator relating to bursaries for tertiary education|
|Skills Development Expenditure on Black People with Disabilities||4||0.3%||Unchanged|
|Skills Development Expenditure on Black People participating in Learnerships, Apprenticeships and Internships||6||5%||Points reduced and a clear restriction to Categories B, C & D with no distinction between employed and unemployed black people|
|Bonus: number of Black People absorbed||5||100%||Clearly limited to Categories B, C & D learners only|
- The points available under skills development and bursary expenditure are now 10 vs 8 previously although the combined target remains at 6%
- The cap on informal and workplace skills development expenditure under Categories F&G Learning programmes is increased from 15% to 25%.
Source: Mantis Networks
What you need to know about the changes to enterprise and supplier development
The changes also combine the categories for training through learnerships, apprenticeships and internships of the unemployed in relation to the size of your company’s workforce.
In this previous iteration, the B-BBEE scorecard required 2.5% of your workforce to be unemployed and undergoing training.
Related: Making BEE Work for You
You should focus your skills development spending on the unemployed, but you can now also focus on skills development alternatives, such as training. 3.5% is currently mandated for your business’ training budget, of this you can now spend 25% on non-accredited in-house programmes that are not necessarily NQF certified.
These programmes can focus on soft skills and adult literacy, which can benefit your business as you’re spending your budget on upskilling your employees.
“The implications of training versus productivity will also come into play as training unemployed people doesn’t have the same impact on productivity as staff training,” says Naidoo.
How absorption has changed and what this means for you
This code of good practice used to say that your business needed to provide the unemployed with additional training and a short-term job, this would qualify as absorption and earn your business 5 bonus points.
Related: BEE and Small Businesses
In the updated codes, your business only needs to provide one learner with permanent employment to qualify for absorption, which can offer your business a one level increase on your B-BBEE scorecard says Naidoo.
Changes to your procurement requirements
“Procurement remains one of the most commanding mediums for transformation and maintains the most powerful weighting on the overall B-BBEE scorecard,” says Naidoo.
“The two-points increase definitely emphasises the need to bring more Exempt Micro Enterprises (EME) and Qualifying Small Enterprises (QSE) into the supply chain. The points increase is undoubtedly aimed at incentivising generic entities (businesses with an annual turn-over exceeding R50 million) to empower and grow majority black-owned businesses.”
Take note of these changes as you’ll need to implement them within six months from the announcement date of 31 May.
This could have financial implications for you as you’ve probably already put a plan in place for the 2019/20 financial year and will now need to revisit it and make the necessary adjustments.