Draft Amendments to the BEE Codes - CIPS BEE Codes.pdf · 2012-11-23 · BBBEE – Advisory...
Transcript of Draft Amendments to the BEE Codes - CIPS BEE Codes.pdf · 2012-11-23 · BBBEE – Advisory...
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Chartered Institute of Purchasing and Supply Africa
Draft Amendments to the BEE Codes
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Current status
The DTI released the draft amendments to the BEE Codes in October, which are out for public comment for a 60 day period, ending December 5th 2012
The DTI has assured us that their aim is to take the public comments into account, and will do during December and January
We do not expect these amended Codes to be gazetted under 9(1) of the BEE Act before mid 2013, and a 1 year transition period will be implemented giving companies time to adapt their BEE strategy to align with the changes
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Principles of the changes
The current seven Scorecard elements will be reduced to five elements; Management Control is combined with Employment Equity, and Enterprise Development with Preferential Procurement.
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Principles of the changes
Three of the Scorecard components are now Priority elements: Ownership, Skills Development, Enterprise and Supplier Development
QSEs have to comply with Ownership and one other Priority element
Generics have to comply with ALL Priority elements
A 40% minimum requirement (threshold) applies to all Priority elements, in some measurement categories
Companies not meeting the Priority elements threshold…
– …will drop one level if they’re a QSE
– … will drop two levels if they’re a Generic
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Qualification limits have been increased
EMEs (Exempt Micro Enterprises) – businesses with annual turnover of less than R 10 Million (previously R 5 million)
> EMEs with more than 50% Black Ownership are automatically Level 2
> EMEs with more than 100% Black Ownership are automatically Level 1
QSEs (Qualifying Small Enterprises) – businesses with annual turnover of more than R 10 Million but less than R 50 Million (previously R 5 million and R 35 million)
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Some further principles
Broader base of Black ownership
Demographically represented executive and management structures (African, Indian and Colored targets)
Training and development of employees and unemployed people
Increasing local content from part-Black owned companies
Developing the upstream supply chain, with less focus on downstream development
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Level One Contributor 100 points on the
Generic Scorecard
100 points on the
Generic Scorecard
Level One Contributor 135%
Level Two Contributor 85 but <100
points on the
Generic Scorecard
95 but <100 points
on the Generic
Scorecard
Level Two Contributor 125%
Level Three Contributor 75 but <85 on the
Generic Scorecard
90 but <95 on the
Generic Scorecard
Level Three Contributor 110%
Level Four Contributor 65 but <75 on the
Generic Scorecard
80 but <90 on the
Generic Scorecard
Level Four Contributor 100%
Level Five Contributor 55 but <65 on the
Generic Scorecard
75 but <80 on the
Generic Scorecard
Level Five Contributor 80%
Level Six Contributor 45 but <55 on the
Generic Scorecard
70 but <75 on the
Generic Scorecard
Level Six Contributor 60%
Level Seven Contributor 40 but <45 on the
Generic Scorecard
55 but <70 on the on
Generic Scorecard
Level Seven Contributor 50%
Level Eight Contributor 30 but <40 on the
Generic Scorecard
40 but <55 on the
Generic Scorecard
Level Eight Contributor 10%
Non-Compliant Contributor <30 on the Generic
Scorecard
<40 on the Generic
Scorecard
Non-Compliant
Contributor
0%
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Enterprise and Supplier Development
ED and Procurement merged into one element worth 40 points
Annual values apply i.e. no more ‘Cumulative’ confusion; only spend with Value Adding suppliers will be recognised
Some measurement categories have a 40% threshold requirement
The ‘Enhanced Recognition’ requirements change
The Benefit Factor Matrix has changed, lowered some of the factor percentages
Early payments: will likely be limited to 50% BO SMME companies and a company can only recognise up to 15% of the total available E&SD (40) points
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Enterprise Development
2.2 Enterprise and Supplier Development
2.2.1 Annual value of all Supplier Development Contributions made by the Measured Entity as a
percentage of the target 10
2%
of NPAT
2.2.2 Annual value of Enterprise Development Contributions and Sector Specific Programmes made by
the Measured Entity as a percentage of the target 5
1%
of NPAT
2.3 Bonus points for the following (during measured period)
2.3.1 New venture created (to become a value adding supplier) 1
2.3.2 Graduation from Enterprise Development to Supplier Development beneficiary 1
2.3.3 Jobs created by supported supplier from Enterprise Development to Supplier Development (a
multiplier of 1.25) 1
“Enterprise Development Contributions involves Enterprise Development Contributions to Exempted Micro-Enterprises or Qualifying Small Enterprises which are more than 50% black-owned or black-women owned”
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Enterprise Development
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Preferential Procurement
Criteria Weighting
points
Compliance
targets
2.1 Preferential Procurement
2.1.1 B-BBEE Procurement Spend from all Value-Adding Suppliers based on the B-BBEE Procurement
Recognition Levels as a percentage of Total Measured Procurement Spend 8 80%
2.1.2
B-BBEE Procurement Spend from Value-Adding Qualifying Small Enterprises or Exempted Micro
Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of
Total Measured Procurement Spend
4 30%
2.1.2.1 B-BBEE Procurement Spend from Value-Adding Suppliers that are more than 50% black owned;
and 9 40%
2.1.2.2 B-BBEE Procurement Spend from Value-Adding Suppliers that are more than 30% black women
owned 4 12%
Changes to the ‘Permissible Exclusions’… IMPORTS no longer excluded Only “Value Adding” suppliers qualify in procurement. Definition is likely to change
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Some of the requirements
Companies are encouraged to procure goods and services from:
– Black Owned QSE / EME companies that have a minimum 3 year contract with your company – a multiplier of 1,2 times is applicable
– Black Owned QSE / EME companies that are defined as “new” companies – a multiplier of 1,25 times is applicable
– “New enterprise”: means an early stage business that is typically 3 years old or less
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
So what ?
Procurement teams essentially have influence over 40% of a company’s
overall BEE compliance.
Procurement professionals will face further challenges to best practice, including procuring from many smaller companies, rather than fewer, more strategic entities (as a result of the ED requirements, and the points allocations for procuring from BO and BWO companies)
Although the definition of “Value Adding Supplier” will likely change, the
principle is to encourage increased local procurement from BEE compliant companies
The compliance targets that YOUR COMPANY sets for suppliers to achieve will need to be revised, as their (and your company) compliance levels will likely drop 2 – 4 levels !!
It may be a good time to focus on driving transformation within supply chains rather than BEE compliance
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
So what ?
Understand the principles of the proposed change, and gradually
start adapting, especially with regards to the nature of
Enterprise Development
We strongly encourage procurement professionals to understand the draft amendments to the Preferential Procurement scorecard, and to
make suggestions to the DTI on the definition of “Value Add Suppliers”, or to make suggestions on how to achieve the objective of increased local content without the “VAS” principle
CIPS and its members MUST take a view on this and engage the DTI, as you are the professionals that should be guiding the DTI on this matter !!! Please do not be apathetic about the 60 day comment period.
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
Don’t forget: https://cips.bbbeescorecards.co.za
BBBEE – Advisory – IT Systems – Outsource BBBEE IT Systems
For your information
Bruce Rowe ([email protected])
MANAGE BEE COMPLIANCE
– www.beetoolkit.co.za
AUTOMATE PREFERENTIAL PROCUREMENT
– www.suppliermanagement.co.za