Understand revised codes

2017-05-31 06:05
Danie Krige

Danie Krige

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Question:

Black Economic Empowerment (BEE) is becoming increasingly important for my business. I understand that the Revised Construction Sector BEE Codes provide an opportunity for a small construction business to be exempted from BEE. Is this correct? If so, what must I do to qualify for the exemption?

Answer:

You are correct. The Revised Construction Sector BEE Codes (Revised Codes) do make provision for small construction companies to qualify for exempt BEE status, but subject to certain rules to qualify for the exemption. It should be noted that the Revised Codes are still in draft form, but it is expected that it will soon be finally published.

  • Here are some of the more important rules that should be taken note of: The Revised Codes provides for three types of small companies, namely start-ups, small exempt micro enterprise (small EME) and exempt micro enterprises (EME). ) The Revised Codes distinguish between contractors and built environment professionals (BEP). It is important to understand under which classification of small construction company you fall.) A start-up company receives recognition as such for the first 12 months from its registration date regardless of its turnover during those first 12 months. A small EME refers to a BEP company equal to or below R1,8 million turnover, or a contractor company equal to or below R6 million turnover.

An EME refers to a BEP above R1,8 million turnover, but below R6 million turnover, or a contractor company above R3 million turnover but below R10 million.

  • The following “special rules” apply to these different categories of small companies: A small company will automatically qualify for a Level 5 BEE status and not the usual Level 4 as would happen under the generic BEE codes. For a small company to qualify for a Level 4 BEE status, they must have at least 30% black ownership. ) Above 50% black ownership will, however, still qualify for Level 2 status or 100% black ownership for Level 1 status, but the Revised Codes clearly state that the modified flow through principle cannot be used if a company wants to obtain an exempt level 2 or 1 BEE status.) A BEP small company must be owned and managed by a majority of black professio-nals that are qualified within the applicable profession if it wants to obtain an exempt Level 2 or 1.

No provision is made for affidavits to prove BEE status. This means that all small companies will have to be verified by a South African National Accreditation System (Sanas) agent and this will hold a cost implication as it will likely entail a small audit by a Sanas verification agency.

Most small companies will be subject to the principle of discounting and enhancement. The discounting principle is focused on the skills development element and states that a company needs to score at least 40% of its target for skills deve-lopment to avoid discounting (losing a level). The enhancement principle makes provision for companies to enhance its levels by as many as two BEE levels by achieving their full targets for skills development and supplier development.

  • Danie Krige, associate, Phatshoane Henney Attorneys

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