BBBEE Codes of Good Practice

Importance of meeting B-BBEE targets and priority elements

If a business fails to meet the targets outlined in the Codes of Good Practice, the primary consequence is that it will not earn the maximum available B-BBEE points. However, some points can still be earned on a pro-rata basis, even if the target is not fully achieved.

In the Codes, certain elements are identified as “priority elements”, specifically:

• Ownership
• Skills Development
• Enterprise and Supplier Development

These priority elements are crucial for improving and maintaining an organisation’s B-BBEE status.

How are multinational companies treated by the Codes?

Foreign businesses and their local subsidiaries are assessed under the B-BBEE Codes in the same manner as local companies. They are also subject to an automatic downgrade in B-BBEE status if they do not meet the sub-minimum requirements.

However, foreign multinationals have the option to use the “equity equivalent programme” to earn B-BBEE ownership points without having a B-BBEE shareholder or partner. This programme, which must be approved by the Department of Trade and Industry, typically involves the multinational funding an approved initiative, such as training for Black people.

Amended Codes of Good Practice 2013

In 2013,  amendments were made to the generic scorecard that is governed by B-BBEE legislation and the Codes. The most notable change was the consolidation of the generic scorecard into five elements, aligning them with the government’s priority programmes. These five elements are ownership, management control, skills development, enterprise and supplier development, and socio-economic development. This restructuring aimed to streamline the B-BBEE assessment process and enhance the focus on key areas of transformation: ownership, skills development and enterprise/supplier development. 

The biggest change was adjusting the turnover thresholds for Qualifying Small Enterprises (QSEs), Exempted Micro Enterprises (EMEs) and Generic Enterprises (GEs): 

• EME threshold: annual turnover of under R10 million
• QSE threshold:  annual turnover of between R10 million and R50 million
• GE threshold: annual turnover above R50 million

EMEs can transact with an affidavit and 51% or more black ownership. QSEs may also use an affidavit.

Revised Codes of Good Practice 2019

The Department of Trade and Industry published the revised Codes of Good Practice on 31 May 2019 for implementation within 6 months from the date of the Gazette. Among the changes was the requirement for bursaries under skills development, which meant that the spend for skills development was now split between bursaries (2.5%) and learnerships (3.5%). Absorption was also defined as being ‘long-term’ employment. 

Industry Sector Codes

Alongside the generic Codes of Good Practice, there are specific B-BEEE sector codes that cater to major industries in South Africa:

• Agriculture
• Construction
• Defence
• Finance
• Forestry
• Computers and Information Technology (ICT)
• Marketing, Advertising and Communications (MAC)
• Property
• Tourism
• Transport
  

Private businesses are not legally required by the B-BBEE Act or Codes to comply with B-BBEE policies. However, state and public entities are required to comply and choose to do business with private organisations that have high levels of BEE compliance. A major factor in measuring BEE compliance is the procurement of goods and services from other compliant entities. 

Organisations that are not directly dependent on the state for business are still likely to face commercial pressure to conform to BEE Codes. High levels of compliance expand procurement and licensing opportunities, meaning businesses across all sectors can stay competitive in the South African market.