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Impact of B-BBEE codes on multinationals

Oct 11 2013 15:22
Johannesburg - The new Broad-based Black Economic Empowerment (B-BBEE) Codes, soon to be released, identify B-BBEE ownership as a priority element.

Multinational companies operating in South Africa need to be aware of this, and of the fact that non-compliance with this and other areas could mean a one-level drop in their B-BBEE compliance scorecard.

"The revised codes list ownership, skills development, and enterprise and supplier development as priority elements," said Roger Latchman, chief executive officer of the B-BBEE compliance consultants, VeriFi BEE Compliance.

"Failure to achieve a sub-minimum in any of these areas will see a company, scoring sufficient points on the scorecard to quality for a level 4 rating, automatically lowered to a level 5 rating."

The criteria for most elements have also been increased, making it more difficult for most companies to maintain their current B-BBEE levels.

Developing and implementing an equity equivalent programme, an option open to multinationals, may be the best course of action for such organisations to take in the face of these more stringent B-BBEE compliance requirements.

An equity equivalent programme, which will need to be submitted to the department of trade and industry for approval, can include enterprise creation or investments in social advancement initiatives.

In essence, multinationals are measured against the value of operations in South Africa. Contributions to equity equivalent programmes are set at 25% of the value of South African operations, or at 4% of the total revenue from a multinational’s operations in South Africa over the period of continued measurement.

At present, very few multinationals have embarked upon this route.

"Across the board, companies can expect to have higher targets in terms of employment equity, skills development and procurement spend," said Latchman.

"It is essential that companies take B-BBEE compliance seriously in light of the new codes and that they do not only consider B-BBEE when renewing their compliance certificates."

- Fin24


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