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Some B-BBEE concessions still a 'mystery'

Oct 04 2013 11:40
Fin24
Cape Town - There is cause for concern because the B-BBEE scorecard concessions for qualifying small enterprise (QSE) are still a mystery, said Wade van Rooyen, managing director of Grant Thornton Verification Services.

He commented on the Amended B-BBEE Act and Refined Codes of Good Practice, which form part of a B-BBEE Summit which started under the theme “a decade of economic empowerment 2003 to 2013”.  

"There is still no clarity on the B-BBEE scorecard concessions for the important QSE segment of business," said Van Rooyen.
 
At the same time he said it is encouraging that the new B-BBEE Codes of Good Practice are well on track to be gazetted on the scheduled date of October 11 2013.

"There has been purpose to the delays and we expect maximum impact from next week’s release,” he said.

"The draft codes, which we’ve reviewed over the past few months, had a lot of provisions which were really onerous. They had the potential to seriously challenge companies if they had been passed into law in their previous forms."

After events at the summit on Thursday, the previously harsh provisions have been diluted, according to Van Rooyen.

They will now be less onerous for businesses than originally anticipated and the reduction in BEE status will be less than the draft codes proposed.

Impact on QSEs

“With the dti announcing today that the seven scorecard elements are going to be combined into five, there is still no certainty as to what this means for QSEs," said Van Rooyen.

Previously these businesses only had to measure themselves on four out of the seven scorecard elements.

"We await further clarity on the QSEs during further summit discussions. It is implied, however, that QSEs  will have to measure themselves on all five of the new elements, which will impact in this segment of businesses being disadvantaged.”

The QSE threshold has moved from a maximum of R35m to a much higher amount of R50m. If revenue is between R10m and R50m a business will qualify as a small enterprise.

"With the lack of detail in today’s summit relating specifically to QSEs, it is difficult to quantify how beneficial this will be for these businesses," said Van Rooyen.

"I sincerely hope, though, that QSEs will continue to receive an equivalent advantage over larger companies to stimulate growth in this business sector.”

It was announced at the summit that companies failing to achieve minimum targets for priority elements will be penalised with a one level drop in their BEE levels.

The priority elements are ownership, skills developments and supplier & enterprise development.

"If the subminimum target requirements in the areas of ownership are also applicable to QSEs then this will result in a penalty drop of one level for all QSEs that do not have black ownership," explained Van Rooyen.

"For example, a company under the previous codes could choose four of seven elements and elect to exclude measurement of ownership. This will no longer be an option and changes the playing field.”

Exempt micro enterprises

At the summit it was announced that the exempt micro enterprise (EME) threshold increased from a maximum of R5m to R10m turnover per annum.

"This is good news, because it gives the smaller enterprises a further competitive advantage,” said Van Rooyen.

It was announced that 100% black-owned EMEs will automatically receive a level 1 recognition and EMEs which are 51% black owned will automatically receive a level 2 recognition.

"This is an excellent incentive and we applaud the dti for making these significant amendments,” said Van Rooyen.

- Fin24

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grant thornton  |  bee  |  sa economy
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