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PETER ROSS ActivPro Business Solutions

B3 Bloubergsands,22 Arum Road,

Bloubergrant. 7441.

Tel: 021 556 2271Cell: 083 302 3791

Email: peter@activpro.co.za

INTRODUCTION TO THE NEW BBBEE CODES

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New BBBEE Codes

EFFECTIVE DATES

New codes came into effect on 1st May 2015

This implementation date relates to the financial year end of the

entity and not the date of verification

Old codes apply to all financial years on or before 30 April 2015

and the new codes apply to financial years after 1st May 2015

Sector charters will continue to apply until they are brought into

alignment with the new codes and finally gazetted.

New BBBEE Codes

DEFINITION OF A BLACK PERSON Black people – Generic term which includes Africans, Coloureds, Indians:

Who are citizens of RSA by birth or descent Who became RSA citizens by naturalisation:

a) Before 27 April, 1994b) On or after 27 1994 and who would have been entitled to

acquire citizenship by naturalisation prior to that date were it not for apartheid

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New BBBEE Codes

Principle ChangesEmpowering Supplier StatusAmended ScorecardsAdjusted Recognition TablePriority Elements & DiscountingEconomically Active Population (EAP) targetsSkills Development Increased targetIncentive for disability

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New BBBEE Codes

Principle Changes - ContinuedTraining of non employees is recognisedLearnership Absorption incentivesGrowth in EME/QSE ExpenditureGrowth in 51%+ BO Supplier ExpenditureSupplier DevelopmentSED – Income generating activities

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New BBBEE Codes

Changes in Turnover ThresholdsExempt Micro Enterprise (EME) Increase from R5

million pa to R10 million paQualifying Small Enterprise (QSE)

Old codes: R5m - R35 pa New codes: R10m – R50m pa

Large Enterprise:Old codes: > R35 million paNew codes: >R50 million pa

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New BBBEE Codes

Deemed Recognition LevelsExempt Micro Enterprises (EMEs):

< 51% Black-owned: Level 4>= 51% Black-owned: Level 2100% Black-owned: Level 1

Qualifying Small Enterprise (QSEs): < 51% Black-owned: Per verification>= 51% Black-owned: Level 2100% Black-owned: Level 1

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New BBBEE Codes

Deemed Recognition LevelsSpecialised Enterprises (EMEs and QSEs):

>=75% Black beneficiaries: Level 1>=51% Black beneficiaries: Level 2

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New BBBEE Codes

Proof of Deemed StatusFor EME or QSE with at least 51% Black

Ownership: Affidavit confirming turnover and percentage Black Ownership

EME with less than 51% Black Ownership: Affidavit confirming turnover

QSE with less than 51% Black Ownership: has to be verified.

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New BBBEE Codes

Proof of Deemed StatusFor Specialised Enterprises EMEs or QSEs

with 51% or more Black beneficiaries: Affidavit confirming:

Annual revenue of R10m / R50m or less Percentage of Black beneficiaries

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New BBBEE Codes

Empowering Supplier•Entity must be a good SA citizen •Complies with all regulatory requirementsFive Criteria:1. At least 25% of costs of sales must be procured from local SA suppliers2. 50% of jobs created are for Black people 3. At least 25% transformation of raw material including manufacturing, production, assembly or packaging4. Spend 12 days pa minimum assisting Black EMEs and QSEs beneficiaries5. At least 85% of labour costs should be paid to South African employees by service industry entities

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New BBBEE Codes

Empowering Supplier:Large Enterprises have to comply with 3

out of 5 criteria QSEs have to comply with 1 out of 5

criteria EMEs and Start-ups automatically qualify

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The BBBEE Generic Scorecard

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Old Codes   New Codes

Element  Weighting (excluding bonus points)  Element 

Actual points as per each code (excluding bonus points) 

Ownership  20 +3 Ownership (priority element) 25

Management  10 +1 Management control  19

Employment Equity  15+3 Skills development (priority element) 20+5

Skills development  15 Enterprise and Supplier Development (priority element)

40+4

Preferential procurement  20  Socio-economic

development  5

Enterprise Development  15 

 Socio-economic development  5 

TOTAL  100 +7   109+9

The BBBEE Generic Scorecard

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REVISED BBBEE CODES GENERIC SCORECARDHIGH LEVEL TARGETS

Indicatorweighting

Indicatortarget

Ownership (Priority Element) 25,0 25% of EquityManagement Control 19,0 50% - 88%

Skills development (Priority Element) 20,0 6% of PayrollEnterprise and Supplier Development (Priority element) 40,0

Preferential procurement: 25,0 80% of TMPSSupplier development: 10,0 2% of NPATEnterprise development: 5,0 1% of NPAT

Socio-economic development 5,0 1% of NPATTOTAL 109,00

GENERIC SCORECARD

New BBBEE Codes

Priority ElementsPriority elements with sub-minimum targets:

OwnershipSkills DevelopmentEnterprise and Supplier Development

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New BBBEE Codes Priority Elements - Continued

Large Enterprises:All three priority elements are

compulsoryQSEs:

Ownership compulsoryChoose between Skills Development and

Enterprise & Supplier Development

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New BBBEE Codes

Priority Elements - ContinuedOwnership:

At least 40% of the Net Value points (3.2 out of 8)Skills Development:

At least 40% of the total points (8 out of 20)Enterprise and Supplier Development:

At least 40% of the points in each of Preferential Procurement, Supplier Development and Enterprise Development

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Procurement Recognition Levels

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Contribution Level  Old Codes New Codes Recognition level 

Level One   ≥ 100 points  ≥ 100 points  135%

Level Two ≥ 85 points but < 100 points  ≥ 95 points but < 100 points 125%

Level Three   ≥ 75 points but < 85 points  ≥ 90 points but < 95 points 110%

Level Four   ≥ 65 points but < 75 points  ≥ 80 points but < 90 points 100%

Level Five   ≥ 55 points but < 65 points ≥ 75 points but < 80 points 80%

Level Six   ≥ 45 points but < 55 points  ≥ 70 points but < 75 points 60%

Level Seven   ≥ 40 points but < 45 points  ≥ 55 points but < 70 points 50%

Level Eight   ≥ 30 points but < 40 points  ≥ 40 points but < 55 points 10%

Non-Compliant Contributor  < 30 points  < 40 points 0%

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PETER ROSS ActivPro Business Solutions

B3 Bloubergsands,22 Arum Road,

Bloubergrant. 7441.

Cell: 083 302 3791Email: peter@activpro.co.za

FROM CHARITY TO BBBEE BENEFICIARY

Scorecard elements which could benefit NPOs

SOCIO ECONOMIC DEVELOPMENT

SKILLS DEVELOPMENT

ENTERPRISE AND SUPPLIER DEVELOPMENT

PREFERENTIAL PROCUREMENT

Socio-Economic Development Scorecard

Criteria Weighting Points

Compliance Target

Annual value of all Socio-Economic Development Contributions by the Measured Entity as a percentage of the target

5 1% of NPAT

Socio Economic Development Monetary or Non-monetary Contributions

Specific objective of facilitating income generating activities for

targeted beneficiaries

SED contributions are measured annually

Full value of SED contributions is recognisable if at least 75% of

the value benefits black people

If beneficiaries are less than 75% black the actual percentage is

recognisable ie Pro rata achievement is recognised

Socio Economic DevelopmentSED Contributions include:

Development programmes for women, youth, people with

disabilities, people living in rural areas

Healthcare and HIV/ Aids programmes

Support for education programmes, resources and materials at

primary and secondary education level

Arts, culture and sporting development programmes

SED Benefit Factor MatrixGrant and Related Contributions:

Grant Contributions (100%)

Direct cost incurred in supporting SED initiatives (100%)

Discounts in addition to normal business practices supporting SED

initiatives (100%)

Overhead Costs incurred in supporting SED initiatives - Monetary or Non-

monetary (80%)

Contributions made in the form of human resource capacity:

Professional services rendered at no cost supporting SED initiatives (80%)

Professional services rendered at a discount (80%)

What NPOs Need to do to Align themselves with BBBEE

As a Recipient of Grants and Related Contributions:

Thank You letter in the prescribed format on your letterhead stating:

Date and amount of donation

The name of the donor

The nature of the NPOs activities

Description of the beneficiaries

The percentage of thebeneficiaries who are black persons

Beneficiary Recognition Certificate issued by a verification agency or by an

independent competent person

What NPOs Need to do to Align themselves with BBBEE - CTD

As a Recipient of Grants and Related Contributions - CTD:

Apply for registration as a Public Benefit Organisation (PBO) with

SARS

This will enable the donor to treat the donation as tax deductible

Other Scorecard elements which could benefit NPOs

SKILLS DEVELOPMENT

ENTERPRISE AND SUPPLIER DEVELOPMENT

PREFERTIAL PROCUREMENT

New BBBEE Codes

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Skills development (Priority Element) 20,0

Skills development spend for black people 8,0 6,00%

Skills development spend for black employees with disabilities 4,0 0,30%

Black employees participating in Learnerships, Apprenticeships and Internships as a % of all employees 4,0 2,50%

Black unemployed people participating in training specified in learning programme matrix as a % of all employees 4,0 2,50%

Bonus points: Black people absorbed by the measured and industry entity at the end of the learnerships programme 5,0 100,00%

SKILLS DEVELOPMENT The new Skills Development scorecard refers to training of black people as

opposed to black employees

The Skills Development target for large corporates has been increased from 3%

of annual payroll to 6% of annual payroll. For medium sized corporates the

increase is from 2% to 3% of annual payroll

New element for larger corporates – Black unemployed people participating in

training specified in learning programme matrix. Target is 2.5% of number of

employees (4 points).

Must be an alignment to demographic representation of black people and

different race and gender sub-groups

Skills development a priority element (40% of target needs to be achieved)

SKILLS DEVELOPMENT - CTDAn NPO can examine their activities and the skills of their Management and

Staff with a view to providing training programmes to Corporates as another

revenue stream

Programmes can be aimed at the corporates employees and / or unemployed

black people (latter applicable to large corporates only)

Reference must me be made to the Skills Development matrix – defines

Categories A to G training programmes.

Informal training (Category F and G) is capped at 15% of total expenditure

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BBBEE - SKILLS DEVELOPMENT MATRIX

Cat. Narrative description Delivery mode Learning site Learning achievement A Instruction-based theoretical

instruction alone – formally assessed by the institution

Institutional instruction Institutions such as universities and colleges, schools, ABET providers

Recognized theoretical knowledge resulting in the achievement of a degree, diploma or certificate issued by an accredited or registered formal institution of learning

B Instruction-based theoretical instruction as well as some practical learning with an employer or in a simulated work environment – formally assessed through the institution

Mixed mode delivery with institutional instruction as well as supervised learning in an appropriate workplace or simulated work environment

Institutions such as universities and colleges, schools, ABET providers and workplace

Theoretical knowledge and workplace experience resulting in the achievement of a degree, diploma or certificate issued by an accredited or registered formal institution of learning

C Recognized or registered structured experiential learning in the workplace that is required after the achievement of a qualification – formally assessed by a statutory occupational or professional body

Structured learning in the workplace with mentoring or coaching

Workplace Occupational or professional knowledge and experience formally recognized through registration or licensing

D Occupationally directed instructional and work-based Learning Programme that requires a formal contract – formally assessed by an accredited body

Institutional instruction together with structured, supervised experiential learning in the workplace

Institutions and workplace

Theoretical knowledge and workplace learning, resulting in the achievement of a South African Qualifications Authority registered qualification, a certificate or other similar occupational or professional qualification issued by an accredited or registered formal institution of learning

E Occupationally directed instructional and work-based Learning Programme that does not require a formal contract – formally assessed by an accredited body

Structured, supervised experiential learning in the workplace which may include some institutional instruction

Workplace and some institutional as well as ABET providers

Credits awarded for registered unit standards

F Occupationally directed informal instructional programmes

Structured information sharing or direct instruction involving workshops, seminars and conferences and short courses

Institutions, conferences and meetings

Continuing professional development, attendance certificates and credits against registered unit standards (in some instances)

G Work-based informal programmes Informal training Workplace Increased understanding of job or work context or improved performance or skills

New BBBEE Codes

Enterprise & Supplier Development – ED & SD Component

 

   Annual value of all Supplier Development Contributions made by the measured entity as a percentage of the target  Annual Value of Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target

 10   5

 2% of NPAT

  

1% of NPAT

 Total - Enterprise & Supplier Development

 15

 

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ENTERPRISE AND SUPPLIER DEVELOPMENT What was previously just enterprise development (ED) has been split into

enterprise development (5 points) and supplier development (SD) (10 points)

Targets and points allocated for each are:

ED – 5 points if target of 1% of NPAT achieved

Supplier Development – 10 points if target of 2% of NPAT achieved

The aim is to encourage the development and sustainability of black-owned

small businesses and their access to market.

NPOs can’t benefit directly since they are not businesses, but they can act as a

conduit by facilitating ED and SD initiatives for a company for a fee.

NPOs can also possibly set up small black-owned business units within their

operations for companies to fund.

ENTERPRISE AND SUPPLIER DEVELOPMENT - CTDThere are various types of ED and SD initiatives (Refer ED and SD Benefit Factor

Matrix)

For example:

Grant contributions (100% recognisable)

Direct cost incurred (100%)

Discounts in addition to normal business practices (100%)

Overhead Costs incurred in supporting SED initiatives - Monetary or

Non-monetary (70%)

Soft loans (70%) or standard loans (50%)

Professional services rendered at no cost (60%)

Professional services rendered at a discount (60%)

New BBBEE Codes

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FROM BENEFICIARY TO SUPPLIERPreferential Procurement Component      BEE Procurement Spend from all Suppliers 5

80%

  BEE Procurement Spend from Qualifying Small Enterprises 3 15%

  BEE Procurement Spend from Exempted Micro-Enterprises 4 15%

  BEE Procurement Spend from any of the following Suppliers : 1. Suppliers that are at least 51% black owned; or

2. Suppliers that are at least 30% black women owned.

   9 4

  

40% 

12%

 Total - Preferential Procurement

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PREFERENTIAL PROCUREMENT One of the most sustainable ways an NPO can benefit from BBBEE is by

becoming a regular supplier of goods or services to corporates

There are some social enterprises who have succeeded to enter this more

lucrative space

Typically the transactions are commercially based in terms of which the NPO

supplies goods or services at a market related price

NPOs should regularly assess what role they can meaningfully play in the

supply chain of businesses

The deemed status provisions for specialised enterprises supports their

favourable recognition in the preferential procurement scorecard

What NPOs Need to do to Align themselves with BBBEE

As a Service Provider or Supplier:

An affidavit in the standard format confirming:

Statutory details of the NPO – Registered name, Registration number and

Address

Turnover in the last financial year

The percentage of beneficiaries who are black persons

Their BEE status (NPOs with more than 75% black beneficiaries are deemed to

have a Level 1 status. If between 51% and 75% the deemed status will be a

Level 2.

The affidavit can be accompanied by a confirmation letter confirming the contents

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ActivPro Business SolutionsContact Details

PETER ROSS

ActivPro Business Solutions

B3 Bloubergsands,22 Arum Road,

Bloubergrant. 7441.

Cell: 083 302 3791

eMailpeter@activpro.co.za