broad based black economic empowerment (b-bbee) … · the government’s broad based black...
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Broad Based Black Economic Empowerment (B-BBEE) in South AfricaApril 2016
The government’s Broad Based Black Economic Empowerment (B-BBEE) policy is a transformation imperative but is also viewed as an economic growth strategy. Embracing B-BBEE has not only proved to be the right thing to do, but is a cornerstone in the economic growth of our country.
Although this was the intention, the legislation has been criticised for not achieving true transformation.
2015 has marked more than a decade of B-BBEE policy in South Africa and given the many criticisms over the last few years, the Department of Trade & Industry (DTI) revised the legislative framework.
The final B-BBEE Codes were gazetted in October 2013. Even though the draft codes gave one a sense of how “hard-hitting” the amendements were going to be, it has still come as a shock to business.
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Benefits/Importance of B-BBEE compliance
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The benefits/importance of complying with B-BBEE are as follows:
Address key business risks,
Retaining market share,
Competitive advantage/preferred supplier,
New growth opportunities,
B-BBEE serves as a “Licence” to do business in South Africa.
Introduction
2007 Codes
Pillars Score
Ownership 20 (3)
Management control 10 (1)
Employment equity 15 (3)
Skills development 15
Preferential procurement 20
Enterprise development 15
SED 5
Total points 100 (7)
2013 Revised Codes
Pillars Score
Ownership 25
Management control 19
Skills development 20 (5)
Enterprise & supplier development 40 (4)
SED 5
Total points 109 (9)
We have summarised the key changes below to provide a “high-level” analysis:
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B-BBEE status levels - Revised impact
B-BBEE Status Previous Qualification Amended Qualification Recognition Levels
Level 1 Contributor > 100 points > 100 points 135%
Level 2 Contributor > 85 but < 100 points > 95 but < 100 points 125%
Level 3 Contributor > 75 but <85 points > 90 but < 95 points 110%
Level 4 Contributor > 65 but < 75 points > 80 but < 90 points 100%
Level 5 Contributor > 55 but < 65 points > 75 but < 80 points 80%
Level 6 Contributor > 45 but < 55 points > 70 but < 75 points 60%
Level 7 Contributor > 40 but < 45 points > 55 but < 70 points 50%
Level 8 Contributor > 30 but < 40 points > 40 but < 55 points 10%
Non-compliant contributor < 30 points < 40 points
( ) bonus points
( ) bonus points
Introduction Structural changes
So what’s the big deal?
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Economically active population targets
Who is an Empowering supplier?
It is referred to as a good citizen South African entity that complies with all regulatory requirements of the country and should meet 3 of the following criteria if it is a large enterprise or 1 if it is a QSE:
At least 25% of cost of sales excluding labour cost and depreciation must be procured from local producers or local suppliers in SA, for the service industry labour costs are included but capped to 15%.
Job creation — 50% of jobs created are for Black people provided that the number of Black employees since the immediate prior verified B-BBEE Measurement is maintained.
At least 25% transformation of raw material/beneficiation which include local manufacturing, production and/or assembly, and/or packaging.
Skills transfer - at least spend 12 days per annum of productivity deployed in assisting Black EME and QSE beneficiaries to increase their operation or financial capacity.
At least 85% of labour costs should be paid to South African employees by service industry entities.
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Our Services
Current State Assessment
Future State Co-Development
Policy Co-Development
Implementation Strategy (deliverable)
This involves performing an independent assessment of the client’s current status of their B-BBEE compliance and transformation efforts. The assessment will revolve around the business meeting the relevant scorecard targets and compliance with the B-BBEE Act.
Using the results of the current state assessment and in conjunction with client sen-ior management, develop guidelines and goals for the appropriate level of compliance with the relevant industry charters in line with the overall strategy of the business. The future state co-development is a joint effort between the EY team and client senior/ top management. This ensures that the business benefits from the in depth knowledge of the business possessed by senior/top management and the wealth of knowledge and experience possessed by EY around B-BBEE transactions.
With the changing landscape of South African business, the inclusion of transforma-tion and B-BBEE in the development of policies within business should not be under-estimated. The EY team will assist client management and staff to develop/re-develop policies around enterprise and supplier development, employment equity, skills development and socio-economic development. The policy co-development service may extend to other areas of the business should the client request.
Regardless of how brilliant and appropriate a strategy may be, without implementa-tion the strategy is futile. For successful implementation of any strategy it is impor-tant to ensure that the correct resources are allocated to this critical stage of the project. EY will assist the client to identify the relevant projects, timescales and milestones for successful role out of its B-BBEE Strategy. We are able to assist with appropriate resources to ensure a successful roll out is achieved.
Reporting and Monitoring FrameworkFor successful strategy development, implementation and roll out of an appropriately designed reporting and monitoring framework is essential. EY will assist the client with the development of such a framework. Our services can be extended to include the supply of independent auditing of this framework thereby ensuring that objectivity exists within the process. Reporting formats, lines and timescales are discussed with client management to ensure that communication channels and deliverables are agreed on.
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Our Services
Facilitator role for stakeholders
Merger & Acquisitions
Supplier Development Models
Verification Services
B-BBEE Forensic Investigations
Internal Audit Reviews
In complex negotiations, it is important to include in the discussions an objective party that ensures the discussions remain focussed and for the best interests of the business. Our experienced facilitators act as the critical pivotal role in B-BBEE transaction negotiations and strategy development/implementation. Facilitators are able to operate at different levels within organisations thereby allowing clients the required flexibility in these negotiations and discussions.
Our services include advising shareholders on the disposal of non-core businesses, acquisitions of strategic investments, management buyouts, capital raising exercises, cross-border transactions, identifying B-BBEE partners for corporates, identifying investment opportunities for B-BBEE groups & capital raising and structuring of B-BBEE transactions.
For transformation efforts to be effective, it is imperative that B-BBEE extends to the supply chain. Through a collaborative approach, EY assists clients with developing models for its suppliers in their efforts to embrace B-BBEE within the supply of products and services.
The significance for most of our clients is that we are now in a position to issue a verified B-BBEE certificate together with the audited Annual Financial Statements which would be independently verified by our Assurance Division. We offer them a value added service, as we already possess an in-depth knowledge of their structure and operations.
We conduct director probity reviews and fronting investigations.
We assist with the review of certain internal controls related to B-BBEE processes.
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• Future clients can be assured of a realistic view of their B-BBEE status, backed by a certificate signed off by a leading assurance provider. This instils confidence in both the customer and seller of services.
• We are also committed to furthering the intention and spirit of the legislation, by ensuring that all certificates issued are in accordance with the letter of the law and by providing an entity with an accurate view of their present B-BBEE status.
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Contact us
Rubeshne GobardanTel: +27 31 576 8138Email: [email protected]
Daryn AndrewTel: +27 31 576 8054Email: [email protected]
Krish LutchmananTel: +27 31 576 8196Email: [email protected]
Sambulo ZunguTel: +27 11 772 3607Email: [email protected]
Siyabonga ZondiTel: +27 31 576 8125Email: [email protected]
Sugan PalaneeMarkets Leader - AfricaTel: +27 31 576 8077Email: [email protected]
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ED no. none This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
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