New BBBEE codes will transform SA

2013-10-21 10:00

On Friday last week, the new codes for broad-based black economic empowerment (BBBEE) were published. They come into effect over the next 12 months and are game-changers for economic transformation.

Very few youth idling on the periphery of the formal economy know of the new opportunities that these codes bring. They are still largely unaware that the companies they dream of joining are now required to double their training budgets.

The target for skills-development expenditure has been increased from 3% to 6% of payroll and now includes training unemployed black people. Very few know bonus points will be awarded for absorbing trainees into companies.

Combined with whatever comes of the youth wage subsidy debate, the new requirements will change the lives of thousands of youth.

With the new employment equity targets of 88% blacks in junior management, 75% in middle management and 60% in senior management, there is a pretty good chance that some of the black youth will progress into the upper echelons of business.

The biggest winners in the new codes are entities that are 51% or more black owned. In the previous BEE codes, the majority of procurement points (12 out of 20) could be achieved by trading with companies that have no black ownership, but scored well on other elements such as employment equity, skills and enterprise development.

In the new codes, these points have been reduced to 5 out of 27, while points achievable for trading with companies that are 51% black owned and 30% black women have increased to 15 out of 27 (from 5 out of 20). The balance of the procurement points (7) are achievable for spend on small and micro enterprises.

These changes require either a significant shift in the current spending patterns of large businesses towards black-owned suppliers, or established suppliers will have to transfer 51% of ownership to blacks.

Whichever way businesses choose to react, the new codes will radically change or improve the role of black-owned businesses in the economic value chain.

The introduction of penalties for failure to meet minimum requirements on key BBBEE elements will compel entities to deal with transformation in its totality instead of the current temptation to select areas that are convenient.

Failure to achieve 40% of certain targets on ownership, skills, suppliers and enterprise development will lead to companies being dropped a level.

In a single 100-page gazette, government has demonstrated its strongest intention ever to transform the South African economy.

»?Mngadi is a corporate and public affairs professional based in Cape Town. He writes in his personal capacity

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