Background

The Amended Broad-Based Black Economic Empowerment (B-BBEE) Sector Codes for theconstruction industry were gazetted by the Department of Trade and Industry (DTI) on 1 December 2017.

The construction industry is one of the primary drivers of economy in South Africa therefore it is imperative that the industry understands it role/position and complies with the Amended B-BBEE Construction Codes to accelerate transformation.

Priority elements, subminimum and discounting principles

The priority elements are as follows:

Ownership:

The sub-minimum requirement for Ownership is 40% of Net Value (40% of the 6 points for Contractors i.e. 2.4 points, or 40% of the 4 points for BEP’s (Built Environment Professionals) based on the Time Based Graduation Factor.

Skills Development:

The sub-minimum requirement for Skills Development is 40% of the total weighting points (excluding bonus points) for Skills Development.

Preferential Procurement and Supplier Development:

The sub-minimum for Preferential Procurement and Supplier Development is 40% of the total weighting points (excluding bonus points) of each of the three broad categories, within the Preferential Procurement and Supplier Development element, namely ‘Preferential Procurement’, ‘Supplier Development Programmes’ and ‘Supplier Development Contributions’. For the avoidance of doubt, this means that a Measured Entity measurable in terms of the Large Enterprise Scorecard must achieve at least:

• 6 points for Contractors and 7.2 point for BEPs under Preferential Procurement category.
• 2 points for Contractors and 1.6 points for BEPs under the Supplier Development Programmes category.
• 4 points for Contractors and 2 points for BEPs under the Supplier Development Contributions category.

Compliance to priority elements

• A Large Enterprise is required to comply with all the Priority Elements.
• A Qualifying Small Enterprise, that is measurable in terms of the QSE Scorecard, is required to comply with 2 Priority Elements i.e. Ownership as a compulsory element, and either Skills Development or Preferential Procurement and Supplier Development.
• A Qualifying Small Enterprise, which qualifies for an automatic B-BBEE Status Level (one or two) is required to comply with the QSE Skills Development element as a compulsory priority element to avoid discounting.
• An Exempted Micro Enterprise, that qualifies for an automatic B-BBEE Status Level (one, two, four or five) is required to comply with at least 40% of the QSE Skills Development Expenditure Target as a compulsory priority element to avoid discounting.
• An Exempted Micro Enterprise (EME) with a total annual revenue of less than 8 million in the case of BEPs and less than R3 million in the case of Contractors not subject to the discounting principle and therefore do not have to comply with the QSE Skills Development element and not required to have B-BBEE Verification Certificate.

Sworn Affidavits

The entities below must complete an affidavit in the presence of a Commissioner of oaths to evidence their B-BBEE compliance status. The affidavit is valid for a period of 12 months.

BEPs – any entity with an annual turnover below R1.8million

Contractors – any entity with an annual turnover below R3 million.

Exempted Micro Enterprises (EME)

For the purposes of measurement in terms of the Revised Construction Sector Codes, an enterprise

will qualify as an Exempted Micro Enterprise (EME) under the following circumstances:

Contractors - any entity with a total annual revenue of R10 million or less.

BEPs - any entity with a total annual revenue of R 6 million or less.

• 30% Black Ownership                                     - Level 5 Contributor, Recognition Level 80%
• 30% and 51% Black Ownership                    - Level 4 Contributor, Recognition Level 100%
• 51% Black Ownership                                     - Level 2 Contributor, Recognition Level 125%
• 100% Black Ownership                                   - Level 1 Contributor, Recognition Level 135%

An EME that is less than 100% black owned, is allowed should they so wish, to maximise their points and move to a higher B-BBEE recognition level through one of the following three means:

• Obtain measurement in terms of the QSE Scorecard as a whole and apply the B-BBEE status and recognition levels.
• Obtain measurement in terms of the Skills Development Expenditure category.
• Obtain measurement in terms of Supplier Development Expenditure category.

Qualifying Small Enterprises (QSE)

For the purposes of measurement in terms of the Amended Construction Sector Codes, an enterprise will qualify as a QSE under the following circumstances:

Contractors – an entity with a total annual revenue of R10 million but less than R50 million.

BEPs – an entity with a total annual revenue of more than R6 million but less than R25 million.

A QSE must comply with all the elements of the Construction Sector Qualifying Small Enterprise Scorecard (Code CSC 600) for the purposes of measurement.

• A QSE, which is 100% Black Owned qualifies for Level One B-BBEE recognition.
• A QSE, which is at least 51% Black Owned qualifies for a Level Two B-BBEE recognition level.
• A QSE that is at least 51% Black Owned or 100% Black Owned that does not comply with Skills Development Element will be discounted by one level from that level which they initially qualify for.
• Despite the above an at least 51% Black Owned QSE’s BBBEE Status Level and corresponding B-BBEE Recognition Level will be enhanced by one level if it achieves full points (excluding the bonus points) for the Skills Development element of the QSE Scorecard.

Large enterprises

Any entity with a total annual revenue of R50 million or more.

• Ownership Element measures effective ownership of entities by Black People.
• Management Control element measures the effective control of entities by Black People.
• Skills Development element measures the extent to which employers carry out initiatives designed to develop the competencies of Black People (Employees or non-Employees).
• Preferential Procurement and Supplier Development element measures the extent to which entities buy goods and services from Empowering Suppliers with minimum B-BBEE recognition levels. This element also measures the extent to which enterprises carry out enterprise and supplier development initiatives intended to assist and accelerate the growth and sustainability of enterprises that are at least 51% Black Owned.
• Socio-Economic Development and Sector Specific Contributions element measures the extent to which entities carry out initiatives that contribute towards Socio-Economic Development or sector specific initiatives that promote access to the economy for black people.

Conclusion  

Master Builders KwaZulu-Natal urges members and readers to take the time to understand and comply with the Amended B-BBEE Construction Codes.

The following steps may be taken for B-BBEE success:

• Appoint a person who will assess the B-BBEE status of the organisation and put an implementation plan in place.
• Allocate a budget.
• Appoint a B-BBEE Verification Agency which is accredited by South African National Accreditation System (SANAS), the only institution mandated to carry out accreditations for compliance purposes. The agency will advise on the B-BBEE elements to focus on to maximise points and contribute to economic transformation.

Prudence Khumalo | Special Projects Manager