Draft new BBBEE codes could see companies losing empowerment ratings under controversial amendment
The draft revised broad based black economic empowerment (BBBEE) codes unveiled by the Department of Trade and Industry (DTI) earlier today contain a controversial amendment which could result in a reduction companies empowerment ratings.
Safiyya Patel, partner and BEE expert at corporate law firm Webber Wentzel, said that the most sweeping proposed amendment is likely to be the introduction of sub-minimum targets for "priority elements".
Priorty elements include ownership, enterprise and supplier development and skills development.
"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.
"If they do not achieve the minimum compliance for any of the priority elements, their overall contributor status will be reduced by 2 levels if they are large entities or by 1 level if they are qualifying small enterprises. "
Patel noted that this means that companies - particularly large companies - that have until now overlooked any black shareholding requirements and have focussed on all the other elements of BBBEE will be seriously and adversely impacted.
"For example, a large company that may have 7% black ownership, but is a level 3 contributor, will be automatically reduced to a level 5 contributor because it does not meet the 10% minimum black ownership target," she added.
Under the revised codes, the thresholds for exempted micro-enterprises and qualifying small enterprises have been increased.
Entities with a turnover of less than R10m (currently R5m) will now qualify as exempted micro-enterprises and enterprises with a turnover of between R10m to R50m (currently R5m to R35m) will qualify as qualifying small enterprises.
Exempted micro-enterprises that are 100% black-owned will automatically qualify as level 1 BEE contributors. If they are more than 50% black-owned, they will automatically qualify as level 2 contributors.
The draft revised BBBEE Codes will be open for public comment for a period of 60 days.
About Webber Wentzel
Webber Wentzel is one of the leading corporate law firms in Africa. The firm provides clients with legal support for their operations across Africa having advised clients in Angola, Botswana and Nigeria, amongst others. Work in Africa represents a significant and growing part of the firm's practice.
The International Bar Association's official research partner, Who's Who Legal, has named Webber Wentzel South African Law Firm of the Year four times, most recently in 2012. The South African offices are situated in Johannesburg and Cape Town.
The firm is now part of ALN (Africa Legal Network), an established group of Africa's foremost law firms, the largest and only one of its kind on the African continent. Founded almost a decade ago, ALN's African coverage currently extends to 12 African countries.
With the inclusion of Webber Wentzel, ALN provides clients access to over 560 lawyers on the ground in Africa. The size of the group and its multi-lateral nature distinguish it from any network, association or international law firm with offices in African countries but more importantly the alignment creates a pan-African platform for ALN members to work together on an integrated basis on multi-jurisdictional projects.
Webber Wentzel has a staff complement of 750 people and a Level Three B-BBEE rating.
The firm provides high-quality service to meet the multiple and varying needs of a powerful client base that includes many of the South Africa's Top 100 companies in mining, banking, insurance, media, property and telecommunications.
Webber Wentzel has 21 practice groups covering virtually the entire spectrum of legal endeavour.
Statement issued by Webber Wentzel, October 2 2012
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