03 Dec 2012

Corporate & Commercial Law News letter, Proposed Changes to the BEE Codes of Good Practice

Practice Area(s): Corporate & Commercial |


It has been over 5 years since the Codes of Good Practice in terms of the Broad-Based Black Economic Empowerment Act, 53 of 2003, were published and during those 5 years, the Codes have come under severe attack from various parties.

Therefore it is not surprising that changes to the Codes of Good Practice are about to be published by the Department of Trade and Industry ("DTI").  What is surprising is the nature of those changes.

The notice issued by the DTI summarising those changes states that, among other things:

the generic scorecard has been reduced to 5 elements, with Employment Equity and Management Control being consolidated, and Preferential Procurement and Enterprise Development merged to form a Supplier Development Element;

the thresholds for Exempted Micro Enterprises (EMEs) and Qualifying Small Enterprises (QSEs) have been adjusted;

elements have been given "priority status": ownership, skills development and supplier development.  Entities will need to comply with sub-minimum requirements in each priority category;

entities that are 100% black-owned will qualify as Level 1;

entities that are more than 50% black-owned will qualify as Level 2.

The last-mentioned 2 changes seem to indicate that level 1 status or level 2, as applicable, will be awarded regardless of that entity's scores on the remaining elements of the scorecard.  This emphasis on ownership is contrary to the calls for BEE to become more broad-based and to provide meaningful skills transfer rather than equity transfer.

Once gazetted, the proposed changes will be open for public comment for 60 days.