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INTERPRETATION AND KEY CHANGES TO THE B-BBEE CODES OF GOOD PRACTICE

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I have taken the time and opportunity to start analysing the key changes of the Amended B-BBEE Codes of 11 October 2013. Herewith some of the changes and my interpretations on these changes. More to follow soon…

Modified Flow-Through Principle

 According to the Amended B-BBEE Codes:

 “3.4.3.1 Where in a chain of Ownership, Black people have a flow-through level of participation of at least 51%, and then only once in the entire ownership structure of the Measured Entity, such Black Participation may be treated as if it were 100% Black”

According to the Old B-BBEE Codes:

“3.3.2 In calculating Exercisable Voting Rights under paragraph 2.1.1 and economic interest under paragraph 2.2.1, the following applies: Where in a chain of ownership, black people have a flow-through level of participation in excess of 50%, then only once in thatchain may such black participation be treated as if it were 100% black.”

Implication:

In a multi-tiered ownership structure with multiple instances of black ownership flowing through to the measured entity, you may only calculate the level of black participation as 100% in one chain of the structure (where black participation is at least 51%) of the measured entity, and not multiple times (as were allowed with the Old B-BBEE Codes).

Employment Equity Reports

“3.4 The requirement to submit data to the Department of Labour under the Employment Equity Act 55 of 1998 is only applicable to ‘designated employers’ who employ 50 or more employees. However, for the purposes of measurement for both Generic and Qualifying Small Enterprises that employ less than 50 employees are required to submit sufficient evidence for verification purposes.”

Interpretation

Should a measured entity be classified as a ‘designated employer’ in terms of the Employment Equity Act 55 of 1998, a measured entity must still submit their EEA Reports as well as proof of submission of these reports to the verification agency. Should an entity not be classified as a ‘designated employer’ in terms of the EE Act, sufficient information must be submitted for verification to be conducted.

Issuing of EME Certificates under the Amended B-BBEE Codes

According to Gazette 38765 of 6 May 2015, statement 4.5 of the Amended B-BBEE Codes has been amended as follows:

“An EME is only required to obtain a sworn affidavit or Certificate issued by the Companies and Intellectual Property Commission (CIPC) on an annual basis, confirming the following:

  • Annual Total Revenue of R10 million or less; and
  • Level of Black ownership
  • Any misrepresentation in terms of para 1 above constitutes a criminal offence as set out in the B-BBEE Act as amended.”

The IRBA issued a communique on the 6th of July, stating the following:

“In terms of Gazette 38765 issued on 6 May 2015, paragraph (b) ‘An EME is only required to obtain a sworn affidavit or Certificate issued by the Companies and Intellectual Property Commission (CIPC)’. Therefore, in compliance with this requirement B-BBEE Approved Registered Auditors are not allowed to issue certificates to EME’s. An EME may only obtain a certificate from the CIPC.”

Interpretation

We are not allowed to issue EME certificates based on the Amended B-BBEE Codes, but will continue to issue EME certificates based on the sector codes. All EME entities will be provided with a template of the Sworn Affidavit provided by the Dti for completion by themselves in front of a commissioner of oaths.

I will welcome any comments on these interpretations.


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