Unpacking The New BBBEE Act: The Broad-Based Black Economic Empowerment Amendment Act, No 46 of 2013 (a.k.a BEE Amendment Act)

The Broad-Based Black Economic Empowerment Amendment Act, No 46 of 2013 (BEE Amendment Act) which amended the Broad-Based Black Economic Empowerment Act, No 53 of 2003 (BEE Act) to, amongst others, make the BEE Act the overarching legislation in South Africa with regard to BBBEE, to make it mandatory for all governmental bodies to apply the generic BBBEE Codes of Good Practice or other relevant code of good practice gazetted in terms of the BEE Act when procuring goods or services or issuing licences or other authorisations under any other laws, and to penalise fronting or misrepresentation of BBBEE information, came into force and effect on 24 October 2014.

The “trumping” clause contained in s3 (2), will become effective on 24 October 2015 one year after the rest of the BEE Amendment Act comes into force.

The below are several highpoints of the amendments announced by the BEE Amendment Act:

 Status of Sector Codes and generic BEE Codes

Section 10(1) now provides that every organ of state and public entity MUST apply any relevant code of good practice issued in terms of the BEE Act when, amongst other things, determining qualification criteria for the issuing of licences, concessions, or other authorisations in respect of economic activity in terms of any law; or/and developing and implementing a preferential procurement policy. This provision makes it clear that organs of state and public entities are obliged to apply a code of good practice gazetted in terms of the BEE Act and not to simply, "take into account and, as far as is reasonably possible apply" such code of good practice, as was previously the case.

 The new s10 (2)(a) provides that the Minister of Trade and Industry may, after consultation with the relevant organ of state or public entity, exempt the organ of state or public entity from the requirement to apply a code of good practice in terms of s10(1) or allow a deviation therefrom if particular objectively verifiable facts or circumstances applicable to the organ of state or public entity necessitate a deviation.

 
The BEE Act also requires that such an exemption or deviation is published in the government gazette. Therefore an organ of state or public entity would not be entitled to deviate from the requirement to apply a code of good practice unless it has first obtained the consent of the Minister of Trade and Industry to do so and it is gazetted in the government gazette.

 Section 9(5) makes it clear that where a Sector Code has been issued for a particular sector, the compliance of entities within that sector must be measured in terms of the Sector Code. This is subject to the provisions of s9 (6) which provides that if an organ of state or public entity wishes to specify qualification criteria for procurement and other economic activities which exceed those set out in a code of good practice, such organ of state or public entity must make a request in that regard to the Minister of Trade and Industry and any such consent must be published in the government gazette.

 

The BEE Act also makes it clear that a code of good practice remains in effect until amended, replaced or repealed. This is relevant in the case of Sector Codes which are currently undergoing an alignment process with the revised generic BEE Codes.

 The “trumping” provision means that any legislation which contains its own BEE provisions will have to instead defer to the BEE Act and codes of good practice, and the organs of state or public entities issuing licenses or authorisation or procuring goods or services in terms of such legislation will be compelled to apply the BEE Act and applicable code of good practice instead of the BEE provisions set out in such legislation. This will have great impact on the Preferential Procurement Policy Framework Act 05 of 2000 (PPPFA) and Municipal Finance Management Act 56 of 2003 (MFMA) when it comes into effect.

 Fronting

The concept of fronting is now widely defined in the BEE Amendment Act.

• A person commits an offence if he knowingly engages in fronting, or knowingly misrepresents his BEE status, or provides false information to secure a particular BEE status or outcome.
• An offender may be subjected to a fine or imprisonment not exceeding 10 years, or to both a fine and imprisonment.
• If the offender is an enterprise and not a natural person, it could be subject to a fine of up to 10% of its turnover.

 BEE Commission

The BEE Amendment Act empowers the creation of a BEE Commission, to amongst other things, oversee, supervise and promote adherence with the Act in the interest of the public; receive complaints relating to BEE; investigate, either of its own initiative or in response to complaints received, any matter concerning BEE and to promote good governance and accountability by creating an effective and efficient environment for the promotion and implementation of BEE.

 The Commission may issue non-binding opinions on the interpretation of any provision of the BEE Act.

The Commission may make a finding as to whether any BEE initiative involves a fronting practice.

The Commission may institute proceedings in a court to restrain any breach of the BEE Act, including any fronting practice, or to obtain appropriate remedial relief.

If the Commission is of the view that any matter it has investigated may involve the commission of a criminal offence in terms of the BEE Act or any other law, it will refer the matter to the National Prosecuting Authority or an appropriate division of the South African Police Service.

The Commission is also entitled to refer a matter to the South African Revenue Services (SARS) or to any other regulatory authority if it is of the view that the provisions of relevant legislation have been breached.

 In simple terms it now means that BBBEE is far reaching and almost impossible to ignore because if you need a license, accreditation or recognition such as a Liquor license, Import license, FSP license, CIBD accreditation, Banking license, etc. then BBBEE applies to you whether or not you are buying or selling directly or indirectly to government. Not doing business with government is no longer an exemption.

But companies are not forced to comply and if they so wish they do not have to do anything because change like business survival is not mandatory.

For expert assistance contact me Nelson Sebati.

Invite for SMMEs in the City of Tshwane to a working visit to Moscow, Russia, on 08-14 December 2014.

The Executive Mayor of the City of Tshwane, Cllr Kgosientso Ramokgopa, is planning a working visit to Moscow, Russia, on 08-14 December 2014. 

The main purpose of the visit is to formally establish technical relations and build business linkages between the cities of Tshwane and Moscow. Our engagement with the City of Moscow is undertaken within the broader context of South Africa’s cooperation with our BRICS (Brazil, Russia, China and South Africa) partners, aimed at addressing poverty and underdevelopment in the South-South sphere cooperation.

It is our wish that the two cities discuss possible collaboration on the following thematic areas of mutual interest such as:

• Construction
• Agriculture products and mechanisation
• Arts and culture
• Automotive industry
• Green economy
• Local Economic Development

It is against the backdrop of the above details of the visit, that the Executive Mayor would like to kindly invite SMMEs in the City of Tshwane to form part of this strategic delegation and participate in the discussions.

Please note that your organisation will be responsible for transport to Moscow, accommodation and meals and all related costs. The City of Tshwane will only cover ground transport costs in Moscow.

Should you have inquiries about the visit, kindly contact Dr Sefora Masia on the telephone number +27 12 358 8018 or cell +27 81 270 1830, or at this email address seforam@tshwane.gov.za. 

You can also contact:

Tshaba Tjemolane
Deputy Director: International Relations Enhancement Operations 

Tel: +27 12358 7369
Mobile: +27717017987
Email:tshabat@tshwane.gov.za 
International Relations Unit
Office of the Executive Mayor
Room 18 017, Isivuno House
143 Lilian Ngoyi Str, Pretoria
P.O. Box 440, Pretoria, 0001

Shared with you by www.enterprisesupplierdevelopment.co.za 

 

BBBEE Fronting Definition.....

The President signed the B-BBEE Amendment Act (the Act) 46 of 2013 into law on the 27 January 2014. The Proclamation Notice was signed on the 2nd October 2014 and it was gazetted and came into effect on Friday 24 October 2014.
 
The target date for setting up the new BEE Commission and B-BBEE Verification Regulator is 31 March 2015.

The Trumping Clause (Section 3) has been deferred for 12 months, and will come into force in October 2015.

The B-BBEE Amendment Act is now real and in force. I have started consulting and training companies on the increased risks that its provisions introduce with regards to Fronting.

FRONTING

Fronting is defined as a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act or the implementation of any of the provisions of this Act.

A person commits an offence if they knowingly:

i. Misrepresent or attempt to misrepresent the B-BBEE status of an enterprise.

ii. Provides false information or misrepresents information:-
·    To a B-BBEE Verification Professional to secure a BEE status or any benefit from compliance with the Act.
·    To a public entity or organ of state regarding a B-BBEE status.
iii. Engages in a fronting practice.

Penalties associated with Fronting are heavy:-

·         A person:  A fine &/or imprisonment of up to 10 years.
·         Legal Entity: A fine of up to 10% of annual turnover.
·         Directors and Shareholders may be imprisoned or fined

Government agencies may cancel contracts awarded on false B-BBEE information and offenders will be unable to do business with the Government for 10 years.

For Expert advice on the outgoing and incoming B-BBEE codes and Act, contact Nelson Sebati.

The Legend Of The “One Man Army” Entrepreneur.

 

Entrepreneurship is not an exact science. It probably is the furthest thing from it. However most people mistake Entrepreneurship with the famed legend of the “One Man Army”, but in life as in the picture above if you tilt your head or your screen a tab bit you will see the supporting troops in the background.

Though fabled and celebrated the “One Man Army” approach is completely wide off the mark. According to this approach the Entrepreneur controls everything and gives limited responsibility to others. I think if Entrepreneurs are to run successful businesses then they must learn to trust others and share responsibility with them. Team effort plays a major role in the development and growth of a business. So by delegating out tasks to others Entrepreneurs not only reduce their workload, but also give opportunities to others to show their talents.

By encouraging teamwork and cooperation the Entrepreneur transforms from a “One Man Army" to a "5-Star-General" and this is usually accompanied by better service delivery, increased customer satisfaction and higher staff morale. Most importantly it allows the Entrepreneur to do his/her job of creating much better.

At Murason Business Services we employ a rich balance of young talent and seasoned professionals that align for the company’s collective objective of excellently serving our clients. Our personnel consists of highly qualified, knowledgeable and enthusiastic expert teams devoted to the provision of service excellence i.e.:

• Executive Team  – Providing strategic oversight for the company’s activities;
• Management Team  – Managing the execution of the company’s operational mandate;
• Staffing Practitioners  – Certified consultants providing a comprehensive range of integrated recruitment services;
• Public Sector Professionals – Highly skilled specialists dedicated to serving government and public sector organizations and institutions;
• Support Team – Experts in back office systems, administration and quality reporting;
• Legal Team – Providing internal legal expertise.

We are dedicated to employing, empowering and developing people with the competencies required to enhance their careers. We constantly seek employees who wish to become instrumental participants in sustaining the company’s competitive advantage.

We value and reward the efforts of our staff because coming together is a Beginning, keeping together is Progress, working together is Success and staying together is significance.

We are a young company with many adventures and victories ahead of us. For the latest news on our journey follow us on Twitter, connect with us on LinkedIn and like our page on Facebook.

BBBEE Enterprise Supplier Development (ESD) Challenges.....

Enterprise Supplier Development’s foremost goal is to build sustainable business enterprises that achieve growth in order to create jobs and to grow the economy, the two VERY essential conditions for political stability and low crime rate. But intents alone are not enough to ensure success of Enterprise Supplier Development (ESD). The most prevalent problem is the lack of knowledge and expertise and these have led to the sluggish progress in implementing Enterprise Development projects. The problem is exacerbated by the following issues:

o Lack of time and resources to identify sustainable Beneficiaries;
o Lack of a business model to maximize recognition of contribution;
o Lack of a process to monitor progress on projects and to introduce corrective measures, where necessary;
o Delaying implementation until the right partner comes along; 
o And reservation of spending lump sum due to fear that money will be wasted or misused. 

I can help your organisations successfully overcome all the above stated challenges through a sustainable Enterprise Supplier Development (ESD) Strategy.


Contact me, Nelson Sebati today for EXPERT help.

BBBEE Enterprise Supplier Development (ESD) Mistakes......

In order to save my clients time and money I ensure that their Enterprise Supplier Development (ESD) interpretation is in line with the letter and spirit of the BBBEE Codes, Act and Sector codes. Here is a list of the most common mistakes that businesses make when interpreting the Enterprise Development element on the BBBEE scorecard:

The targets for Enterprise Development spend are 3% of Net Profit After Tax (NPAT) for Generic companies and 2% of Net Profit After Tax (NPAT) for Qualifying Small Enterprises (QSE). On occasion companies misconstrue the targets as a percentage of annual turnover. VERY expensive blunder.

Enterprise Development beneficiaries are categorized by the BBBEE codes of good practice into two categories – “Category A” for Exempt Micro Enterprises (EME) and “Category B” for Qualifying Small Enterprises (QSE). Spend incurred with “Category A” beneficiaries is multiplied by a benefit factor of 1.25, while spend with “Category B” beneficiaries is recognized at 1 for 1. A common error is that companies overlook to multiply the “Category A” spend by the benefit factor for enhanced recognition or multiply spend incurred with “Category B” beneficiaries by the benefit factor (Category B spend doesn’t qualify for enhanced recognition). Avoid confusing the 2 as this has significant impact on your ED score.

In claiming early payments as Enterprise Development spend, companies must only consider amounts paid for invoices within 10 days and going forward this recognition will be capped at a maximum of 15% of the invoice amount and available points.


In recognizing shorter payment periods as Enterprise Development spend, companies should consider amounts paid for invoices within 10 days. The amount recognized under shorter payment periods is a percentage of the invoice based on the number of days taken to pay. The actual formula used is (15 minus number of days from date of invoice) divided by 15.


For example if payment was received on the same day as invoice, i.e. zero days after invoice received, then the calculation would be (15-0)/15 = 100%. If payment was received one day later, the formula would be (15-1)/15 = 14/15 = 93.3% and so on.


Supporting Invoices and Proof of payments with dates will be required to validate any claims for shorter payment periods.


Some companies “mistakenly” qualify 30 days invoice payments or the full invoice amount paid within 15 days as Enterprise Development spend. This is bad business and you will be painfully penalized at verification.

Currently Enterprise Development means helping small black businesses that are have a 50% or more black-owned or any other enterprises with more than 25% and a BBBEE status of between Level 1 and 6 (This has been removed in the new codes and will no longer apply after After 01 May 2015). Another common mistake here is considering Exempt Micro Enterprises (EMEs) or Qualifying Small Enterprises (QSEs) with no black ownership as Enterprise Development beneficiaries.

It is clear from the above mentioned that it is easy to make these misinterpretations on Enterprise Supplier Development (ESD)  and that is why I recommend that you speak to an EXPERT to ensure that your Enterprise Supplier Development (ESD)  spend achieves the desired results.

Contact me, Nelson Sebati for dependable help and valuable advice on Enterprise Supplier Development (ESD).
 

Meet The BBBEE Enterprise Supplier Development (ESD) GURU.

My name is Nelson Sebati and I am a BBBEE Enterprise Supplier Development (ESD) GURU. I work for a market leading provider of BBBEE/ESD solutions across South Africa. Our company offers a seamless solution to Enterprise Development (ED) and Supplier Development (SD) that will not only feed into our clients’ business strategy and provide the requisite BBBEE points, but will meaningfully contribute towards sustainable and impactful socio-economic change in the communities and the country at large. By partnering with us your company will achieve the following ROE (Return On Empowerment): 
1. Receive the requisite BBBEE points for ESD (Guaranteed); 
2. Contribute towards strategically growing its Supplier base, Customer base and Potential skills base through targeted ED sponsorships in the relevant sectors or locations; 
3. Confirm its position as a socially-economically responsible corporate citizen thus improving employee loyalty and customer goodwill; 
4. Save money and time by maintaining focus on its core areas of business; 
5. Identify and develop companies for future M & A activity or Investment opportunities; 
6. Receive branding and marketing opportunities in the form of media exposure via our media partners ; signage at our premises; advertising on our website, at our sponsored or hosted events, our Social Media platforms and advertising on the beneficiaries’ websites and social media platforms; 
7. Assist South African SMMEs in becoming sustainable; I define Sustainable as a business employing at least 4 people on a full time basis, generating sufficient cash to pay the business owners and employees a reasonable salary, generating sufficient turnover and revenue to cover the market related expenses incurred in operating the business and generating an annual profit equal to the owner's salary, showing net positive growth in sales over the last year and having a positive net asset value. 
8. Additionally, by partnering with us, you create a buffer that mitigates the risks of straight line ED contracts as we assume responsibilities for beneficiary expectations and performance. 

I have assisted many companies in varying sectors to implement sustainable BBBEE/ESD programs that and we can help you too. Contact me, Nelson Sebati today.

What Is Enterprise Supplier Development (ESD)..

Enterprise Supplier Development (ESD) is a combination of Preferential Procurement, Supplier Diversity, Supplier Development and Enterprise Development programs to service business needs. It is part of the Broad-Based Black Economic Empowerment (BBBEE) policy to advance economic transformation in South Africa. The aforesaid can be defined as follows:

1.    Preferential Procurement is a national policy that encourages government departments and agencies to buy goods and services from previously disadvantaged individuals or businesses.

2.    Supplier Diversity is the proactive business process of sourcing products and services from previously under-used suppliers. This process helps to sustain and progressively transform a company’s supply chain thus quantitatively reflecting the demographics of the community in which it operates by recording transactions with diverse suppliers.

3.    Supplier Development is the process of working with certain suppliers on a one-to-one basis to improve their performance for the benefit of the buying organisation, leading to improvements in the total added value from the supplier in question in terms of B-BBEE rating, product or service offering, business processes and performance, improvements in lead times and delivery.

4.    Enterprise Development is a strategy for promoting economic growth and reducing poverty by building SMMEs, membership organisations to represent them and competitive markets that are stronger and more inclusive. It consists of monetary and non-monetary, recoverable and non-recoverable contributions actually initiated in favour of a beneficiary entity by a measured entity with the specific objective of assisting or accelerating the development, sustainability and ultimate financial independence of the beneficiary.

The broad practice statements which underpin ESD are;

1.    There is no single approach to ESD. Companies must select the most appropriate approach to suit their needs and their relationship with the beneficiaries that they select for development;

2.    Before any decision is made to implement ESD the organisation’s needs and objectives must be established;

3.    ESD is a two-way activity that should be thought of as a joint-venture;

4.    Whatever approach to ESD employed, companies should ensure quantifiable and measurable results that lead to business benefits;

5.    ESD projects should be capable of being assessed, monitored and evaluated in terms of quantifiable operational and financial impact;

6.    A Project plan must be developed and implemented to ensure that supporting evidence needed to guarantee that ESD projects will benefit under the B-BBEE codes is collected;

7.    It is not necessarily only the best suppliers which should be eligible for ESD programmes – each supplier should be assessed on the basis of individual merit and potential;

8.    ESD professionals should possess relevant expertise; in particular they need to have the necessary interpersonal and communication skills to be able to persuade stakeholders and beneficiaries who may otherwise be reluctant to embark on a development programme;

Companies must identify sound reasons for embarking on ESD such as:

1.    Improving B-BBEE rating;

2.    Improving beneficiary performance;

3.    Reducing costs;

4.    Resolving serious quality issues;

5.    Developing new routes to supply;

6.    Improving business alignment between the beneficiary and the sponsoring organisation;

7.    Developing a product or service not currently available in the marketplace;

8.    Generating competition for a high price product or service dominating the marketplace.

Contact me, Nelson Sebati, for expert assistance with your BBBEE and Enterprise Supplier Development requirements.