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Revised BEE codes raise eyebrows

Oct 03 2012 07:58 Sapa

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Johannesburg - Revised black economic empowerment codes could prejudice some companies, corporate law firm Webber Wentzel said on Tuesday.

The revised broad-based black economic empowerment codes "contain a controversial amendment which could result in a reduction (in) companies' empowerment ratings," the firm said in a statement.

Webber Wentzel partner Safiyya Patel said the most sweeping amendment was the introduction of sub-minimum targets for "priority elements".

The draft codes were released on Tuesday.

Trade and Industry Minister Rob Davies said at the launch that the revised codes were introduced to "plug the gaps" in the Broad-Based Black Economic Empowerment Act and related legislation.

This included revising the codes' scorecard to include five elements instead of seven.

Some of the elements, such as ownership, enterprise and supplier development and skills development, were now classified as "priority elements".

These were elements which companies had to meet to satisfy black economic empowerment (BEE) criteria.

"If the amendments are processed in their current form, companies will be required to achieve a minimum compliance of 40% of the targets for the priority elements," said Patel.

"If they do not achieve the minimum compliance for any of the priority elements, their overall contributor status will be reduced by two levels if they are large entities or by one level if they are qualifying small enterprises."

This would have an adverse impact on companies, particularly large companies, that had overlooked black shareholding to focus on other elements of BEE, she said.

"For example, a large company that may have seven percent black ownership, but is a level three contributor, will be automatically reduced to a level five contributor because it does not meet the 10% minimum black ownership target," Patel said.

The public had 60 days to submit comments on the codes before they were finalised.


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