Paul Janisch

B-BBEE Target Compliancy Increases - not as soon as Ms Kerr surmises

From 9th February 2012 compliance targets for Employment Equity and Preferential Procurement significantly increase.

Employment Equity and Preferential Procurement elements of both the qualifying small enterprises (i.e. enterprises with a turnover of between R5 and R35 million per annum as per the generic scorecard) and generic enterprises (i.e. enterprises with a turnover of over R35 million per annum) will be affected.

“This means that if your business is not already meeting and exceeding the increased targets, your organisation will lose points in these elements. This will result in a decreased BEE Rating for next year, which could have a significant impact on your bottom line,” explains Siyakha Consulting’s executive director Dionne Kerr.

“When looking at the increased targets, you need to know if you are putting the necessary interventions in place to ensure that you remain at your existing rating level, or to improve your score on these elements,” she adds.

via www.themarketingsite.com

NOW HERE IS AN EXPERT.  What she doesn't know about arithmetic she certainly knows about BEE.  I, however disagree with her.

 

When do the new targets kick in?

I was pleasantly surprised when I was asked to post something of an informative nature, something that doesn't allow me to opine in my typically cynical fashion. And so with no prejudice in my brain I write.

There are two elements that have increased targets for the years 6-10 viz

Employment Equity. Total points – 18 (including 3 bonus points)
Description	Weighting points	Interim Target (Years 0-5)	Compliance Target (Years 6-10)
Black disabled employees as a percentage of ALL employees using the ARFG	2	2%	3%
Black employees in senior management as a percentage of all such employees using the ARFG	5	43%	60%
Black employees in middle management as a percentage of all such employees using the ARFG	4	63%	75%
Black employees in junior management as a percentage of all such employees using the ARFG	4	68%	80%
Bonus Point for meeting or exceeding the Economically Active Population (EAP) targets in each category above	3

 

Preferential Procurement. Total points – 20
Description	Weighting points	Interim Target (Years 0-5)	Compliance Target (Years 6-10)
B-BBEE procurement spend from all suppliers based on the B-BBEE procurement recognition levels as a percentage of total measured procurement spend	12	50%	70%
B-BBEE procurement spend from all Qualifying Small Enterprises (QSEs) or from Exempted Micro-Enterprises (EMEs) based on the applicable B-BBEE procurement recognition levels as a percentage of total measured procurement spend	3	10%	15%
B-BBEE procurement spend from any of the following suppliers as a percentage of total measured procurement spend: suppliers that are 50% black owned (3 out of 5 points); or suppliers that are 30 % black women owned (2 out of 5 points)	5	15%	20%

 

There is no clear indication from the codes as to when the sixth year occurs. The only hint as to time in the codes comes from paragraph 13 of Code 000, Statement 000

13 2 The Minister will review the Codes following the end of the tenth year following the commencement date of this statement, despite the aforementioned, annual reviews will take place to monitor the implementation of B-BBEE throughout the economy.

It follows then that this review will be conducted on the 10^th of February, 2017.

The targets therefore measure the performance within the period that the codes contemplate. This table should explain it

Period	Year number
Feb 9, 2007 – Feb 8, 2008	0-1
Feb 9, 2008 – Feb 8, 2009	2
Feb 9, 2009 – Feb 8, 2010	3
Feb 9, 2010 – Feb 8, 2011	4
Feb 9, 2011 – Feb 8, 2012	5
Feb 9, 2012 – Feb 8, 2013	6
Feb 9, 2013 – Feb 8, 2014	7
Feb 9, 2014 – Feb 8, 2015	8
Feb 9, 2015 – Feb 8, 2016	9
Feb 9, 2016 – Feb 8, 2017	10

You'll see that the targets are very clearly split into two with the words "years 0-5" and "years 6-10".  The specific mention of 0, in the years "0 - 5" means that you are measuring from February 9, 2007.  Logic would then dictate that the period "6 - 10" must start from February 9, 2012.   I think that Vuyo "Aristotle" Jack (and Kyle Harris) would agree with me. Their agreement is actually by accident because their proof reader didn't pick up that the sentence below is actually in the wrong element

Measured entities must realise that unless they increase the measured spend from the beginning of the sixth year of measurement, their score will decrease significantly.

Page 263 (under the Employment Equity element) – Broad-based BEE, the Complete Guide

I'm willing to stake my reputation for tolerance here that the sixth year that Jack and Harris refer to is the sixth year of the codes.

What about the verification period?

I doubt that there is anyone that will disagree that this interpretation is incorrect. However the world of BEE is never that clear. The big issue here is the verification period. Everyone knows that all you have to do is measure a 12 month period. Does this mean that if you measure from 1 July, 2011 to 30 June, you should measure your EE and procurement targets in two phases; 1 July to Feb, 8 and then from Feb, 9 to 30 June? It might be measurable but I wouldn't know how to allocate a score on this, you'd have to use some sort of average system.

That can't be it. I put it to you that if your measurement period ends beyond half way through year six then you must use the enhanced targets. In other words if you are rated on the period from September, 2011 to the end of August 2012 then you must be measured using the new targets. Everything before that must be measured using the 0-5 year targets.

Thanks for asking for this post – now distribute it freely and invite me to present at your next conference for a nominal fee.