According to the B-BBEE Commission’s Zodwa Ntuli an analysis of compliance reports submitted by JSE-listed companies indicates that the financial sector is regressing in ownership and management control. These companies could face possible penalties for non-compliance.
Please take note of this response from the Construction Council re the application of EAP targets.
There has been no significant change in the levels of transformation in the South African economy with black ownership declining to 25.2% in 2018, says the Broad Based Black Economic Empowerment (BBBEE) Commission, reports the SA Government News Agency.
Click here to read the full article.
The Department of Trade and Industry, has gazetted the revised Chartered Accountancy Profession B-BBEE Sector Code (CA Charter) for public comment. The aim of the revised code is to empower and grow the number of Black people in the chartered accountancy profession.
Revisions to the Code include drastic changes to the skills development element.
Individuals who want to comment on the new CA Charter, should e-mail the DTI (for the attention of Sipho Solfafa) at firstname.lastname@example.org by no later than 26 June 2019.
See full CA Charter here.
Services SETA has released a draft discussion paper on improving the quality of Business Advisory Services in South Africa, with the aim to stimulate debate, policy consideration and strategies. See PDF document here.
The Broad Based Black Economic Empowerment (BBBEE) Advisory Council has called for the declaration of a Transformation Week in the country to showcase best B-BBEE practice.
“There was consensus at the meeting that there is a need to declare a Transformation Week in the country to showcase best B-BBEE practice, create awareness, and educate, with platform to share progress and introspect regarding economic transformation,” said the Council.
Council held its meeting, chaired by Trade and Industry Minister Rob Davies on behalf of President Cyril Ramaphosa on Friday.
The B-BBEE Advisory Council is a body appointed by the President in terms of the B-BBEE legislation to advise him and government on B-BBEE and transformation of the South African economy in order to achieve an inclusive economy.
The collective also acknowledged that the country’s procurement laws need to be strengthened to embed B-BBEE compliance in their content.
Friday’s meeting recognised that progress has been made in the implantation of B-BBEE policy over the last five years.
The Black Industrialist Programme, noted the meeting is among one of the achievements of that can be counted. The programme intends to create majority black-owned entities in the productive sectors. To date the Department of Trade and Industry (dti) has supported 138 beneficiaries.
The meeting held at the dti campus in the capital, also counted the establishment of the B-BBEE Commission to effectively monitor implementation and progress as one of the other successes.
“Understanding the primacy of B-BBEE in the government’s drive to effect fundamental change and economic redistribution, the Council discussed and number of issues that have an effect on the implementation of B-BBEEE,” it said.
Issues discussed at the meeting include the role of development financing institutions (DFIs) in financing and supporting empowerment. The gathering stresses that the role of DFIs, should be complemented by the financial sector to intensify funding for B-BBEE as per the commitment of the Financial Services Charter.
The Preliminary report of the B-BBEE Commission showed that vendor-financing is higher, followed by funding financial institutions in respect of major B-BBEE deals already registered, with government funding being the lowest.
It added that focus should be placed on financing SMMEs and Black Industrialists, particularly those in the productive sectors.
The Council emphasised the need to intensify efforts of ensuring that SMMEs get markets to sell their wares, and also appreciated the significance of public and private sector partnerships in this regard.
The Council also mulled on the appropriate way to utilise the 30% as contained in the procurement policies to empower SMMEs in local communities.
The collective acknowledged the veracity of the economic transformation work that still need to be advocated in society to educate and ensure increased B-BBEE compliance.
On black ownership target, the Council said the 25% target should be inclusive of active participation of the beneficiaries and not passive involvement.
In the same breath, the Council raised concern on the usage of broad-based ownership schemes, the abuse of the third party for enterprise development, supplier development and skills development.
It also expressed concern about the non-participation of black shareholders and directors in 51% black owned structures.
Acknowledging that fronting is becoming more sophisticated aided by consultants and verification agencies in the market, the Council urged government to finalise the development of regulation for verification agencies and B-BBEE practitioners to complement the work of the B-BBEE Commission and South African National Accreditation System. – SAnews.gov.za
The South African Qualifications Authority (SAQA) has commended the role players who have worked to get the National Qualifications Framework (NQF) Amendment Bill through Parliamentary processes.
SAQA on Monday thanked Higher Education and Training Minister Naledi Pandor and the Portfolio Committee on Higher Education and Training for being at the forefront of the amendment bill, which is now awaiting the President’s signature.
The NQF Amendment Bill aims to protect the integrity of the South African education and training system by giving SAQA the legal responsibility to verify qualifications and part-qualifications (an assessed unit of learning that is registered as part of a qualification).
The bill makes provision for the registration by the Higher Education and Training Department of all private education institutions and skills development providers, as well as for the accreditation of these providers by the Quality Councils.
It further makes provision for organs of State, employers, education institutions, skills development providers and Quality Councils to refer qualifications and part-qualifications to SAQA for verification and evaluation.
The bill also provides for the formulation of criteria for evaluating foreign qualifications.
“This means that in the case of national qualifications and part-qualifications, SAQA must verify that they are authentic. In the case of foreign qualifications, SAQA must first verify that they are authentic and then compare them with South African qualifications for placement within the South African NQF. By so doing, the quality of both national and foreign qualifications would be protected.
“The bill clearly defines authentic qualifications and part-qualifications. It also defines misrepresented as well as fraudulent qualifications. In the event that a qualification or part-qualification is found to be misrepresented or fraudulent, it will appear in the register of misrepresented qualifications and part-qualifications or fraudulent qualifications and part-qualifications. This will deter would-be qualification fraudsters from misrepresenting qualifications,” SAQA CEO Joe Samuels explained.
Another form of deterrent is the imposition of penalties to not only the qualification fraudsters but also to education institutions and skills development providers that falsely claim that they are registered and accredited to offer qualifications and part-qualifications, Samuels said.
“Hence, it is a criminal offence for an education institution or education skills provider to falsely claim to be registered and accredited, let alone offer qualifications that are not registered on the NQF. The penalties range from five to 10 years imprisonment or a fine or both. This means that learners will not be taken for a ride by unscrupulous providers,” Samuels said.
The penalties are not limited to qualification holders and providers but, also extend to anyone who makes or causes a false entry into the National Learners’ Records Database or the misrepresented or fraudulent database.
Samuels welcomed the changes brought about by the bill as they seek to protect the public against unscrupulous education and training providers, and also protect government and businesses from hiring people who do not have authentic qualifications.
“SAQA will continue to work together with all stakeholders to ensure that the quality of our education system is maintained and enhanced. SAQA will also ensure that once the bill is signed into law, it will be implemented for the benefit of all living in South Africa,” Samuels said. – SAnews.gov.za
Empowerdex, arguably the largest BEE verification agency, was suspended by SANAS on 5 April 2019 due to alleged fraudulent activity in the BOSASA scandal. More information is available on the Empowerdex website; http://www.empowerdex.com/news/item/86-re-judicial-commission-of-inquiry-into-allegations-of-state-capture and the SANAS website; https://www.sanas.co.za/?page_id=727.
Contact BEE Analyst, for more information on how to minimise your risk and exposure.
A pre-requisite to earning any points within the stipulations of the CSC300 code is the annual submission to CETA by 30th of April every year. Forget about this date and wave your B-BBEEE rating goodbye.
The following criteria must be fulfilled for the Measured Entity to receive points on the Skills Development Scorecard:
- Workplace Skills Plan
- An Annual Training Report
- Pivotal Report which has been submitted to CETA (Construction Education & Training Authority)
- Implementation of Priority Skills programme generally, and more specifically for Black People
SUB-MINIMUMS, DISCOUNTING & CHALLENGES
According to the scorecard measurement principles of the Skills Development element, any measured entity has to achieve at least 40% of the total weighting points as directed by each sub-element of the Skills Development Scorecard.
These include mentorship participation, facilitating learnerships, internships, apprenticeships and professional registrations, as well as skills development expenditure for black people and adjusted gender recognition parameters according to the categories of the Learning Programme Matrix.
Let’s have a look at the revised codes relevant to the classification of measured entities, discounting principles and foreseen challenges in more detail:
- Large Enterprises
For large industry players (Large Enterprises) compliance with all five priority elements will be compulsory, and Skills Development is viewed as a priority element for larger organisations in the construction sector. (page 41 of the Gazette)
The biggest risk here is that non-compliance to the threshold targets on any one of the five elements will result in the B-BBEE status being discounted by one or more levels depending on the compliance gap between actual and sub-minimum target points.
A prominent challenge for big business would be the potential disruption of services, production and manufacturing processes due to employee time spent in training and development activities and also for key staff involved in prescribed mentorship programmes.
- Qualifying Small Enterprises (QSE’s)
A measurable Qualifying Small Enterprise has more manoeuvrability in terms of the QSE Scorecard with a compulsory element of Ownership and then the choice of another element which may or may not include Skills Development. (heads up for growing concerns, skills development is a much more nimble element where maximum points can be earned far easier than for instance preferential procurement and supplier development elements)
If a QSE qualifies for an automatic B-BBEE level 1 or 2 status, compliance to the Skills Development element is compulsory as to avoid discounting. The challenging issue this scenario is that the modified flow-through principle cannot be used; only the standard flow-through principle is allowed in this case. For an explanatory infographic regarding the differences between these principles click here.
Another spanner in the works for automatic qualifiers on level 2 due to 51% black ownership is that they will be discounted by one level if a 40% subminimum in terms of the Skills Development element is not met. This change forces QSE’s to still spend funds on Skills Development despite qualifying for Automatic B-BBEE levels.
- Emerging Micro Enterprises (EME’s)
An EME with an annual turnover under 1.8 million for BEP’s and under 3 million for Contractors is not subjected to the discounting principles because they do not need to present B-BBEE verification certificates although proof of EME status is required.
Therefore, they are automatically released from being compliant to the QSE Skills Development Element as long as ownership percentages and annual turnover remains in the boundaries of EME classification. Kudos to Government for being considerate to ‘’small guys”.
However, as an Emerging Micro Enterprise (EME) with automatic B-BBEE status levels from 1 -4 the minimum expenditure target for Skills Development is 40% to avoid discounting action. (These are relevant to EME’s who choose to enhance their B-BBEE status levels)
A particular challenge for smaller construction companies who often find it difficult to achieve 30% black ownership is that they will be discounted from a level 5 to a level 6, by not obtaining a 40% subminimum in the skills development element. This means that their competitiveness in the market when bidding for tenders may be compromised significantly.
- Start-Up Enterprises
Start-up enterprises are by no means exempted from strict scoring regulations. During the first twelve months of operations, a startup will be measured as an EME regardless of expected revenue if below ten million.
However, tendering on any contract with a value of higher than 10 million (below 50 million) would immediately push the company into a QSE qualification. Similarly, a startup will be measured against the Large Enterprise Scorecard if any tender is made with a deal value higher than 50 million.
Therefore, the Amended Code expects increased compliance standards from a legitimate start-up the moment it secures a high value contract. Obtaining the required Skills Development subminimum will then become increasingly difficult for construction industry start-ups. (Note to all start-ups: Ramp up your internship and learnership recruitment processes with our eRecruitment Solution)
NITTY GRITTY, BUT IMPORTANT AMENDMENTS
Noteworthy changes to the Construction Sector Codes are concisely summarised in a recent SANAS publication. We have listed those that may have substantial impacts on future skills development strategies below:
- Stepped targets have been put in place for Skills Development expenditure with immediate effect, at the end of year 3 and then again from year 5 onwards, which provides for a much-needed scope in medium and long-term planning, to ensure Skills Development compliance.
- A welcome addition is the extra points being made available based on how and to whom the spend was allocated to, for example, African People, Black Management, Bursaries or Scholarships.
- The Learning Programme Matrix specially adapted for the Construction Sector now includes Category A Learners as well.
- Professional Registration Learnerships are capped at 5 years from now on, in terms of the maximum recognition period.
- Three additional points may be earned for Approved and Verified Membership Programmes going forward.
- A percentage change increase from 15% to 35% allows for additional informal training to be recognised in the construction sector. (specified in Categories F&G)
- Mandatory construction industry training cannot be included in the skills spend of companies, and these are clearly defined as Site, Project and Safety Inductions, Toolbox Talks and Operator Re-Certification. Effectively all other training not forming part of these specific mandatory training mechanisms may now be claimed for under the Skills Development Element.
BEE strategies created for the construction industry should be more than just ticking the boxes and adhering to bare minimums. At BEE Analyst and Associates we are ready to assist your company in adapting and achieving compliancy under the Amended B-BBEE Construction Codes and further optimise your scorecard levels in the most cost-effective manner.