Department of Trade and Industry turnaround on Broad Based Empowerment

Posted On Tuesday, 09 June 2015 09:21 Published by
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The Department of Trade and Industry turnaround on Broad Based Empowerment.

 

Rob Davies

DTI caused wide spread uncertainty and confusion in its Notice 396 in the Government Gazette of 5 May 2015 which stated that black participants in broad based and employee share ownership schemes could only contribute a maximum three points (out of the total available 25 BBBEE ownership points) to a firm's BBBEE score in terms of the Codes of Good Practice issued under the Broad Based Black Empowerment Act.

On 8 May 2015, the Department issued a statement that BBBEE transactions concluded before 1 May 2015 would not be affected and that the Department would appoint a Technical Task Team to explore the “appropriate balance between active (direct) and passive (broad based schemes) ownership” and report to the Minister within thirty days. On 12 May 2015 in a radio interview, the Minister, Rob Davies very clearly and unequivocally announced that the DTI will withdraw paragraph (d) of the clarification notice and as such dispense with the 3 point cap on Broad-Based Empowerment Schemes and Employee Share Ownership Schemes.

On 15 May 2015, the Department issued a further Notice in the Government Gazette which withdrew Notice 396.  It accordingly now appears that the status quo has been restored and that broad based and employee share ownership schemes are again eligible to contribute to all (and not just three) of the 25 available BBBEE ownership points in the Codes. . It would thus appear that the Task Team that was to be created in this respect would no longer be necessary.

The Revised Notice of Clarification has however retained the following:

  • The Amended Codes of Good Practice came into effect on 1 May 2015.
  • All B-BBEE verifications conducted using the financial year ending before 30 April 2015 can still be verified using the old Codes of Good Practice, and all B-BBEE verifications conducted using the financial year ending after 1 May 2015 must be verified using the Amended Codes, with the exception of the Sector Codes. This is a welcome clarification, as companies with a financial year end in 2014 or prior to 30 April 2015 may still be rated under the old Codes.
  • The transitional period for the alignment of Sector Codes has been extended to the end of October 2015. From 1 November 2015, Sector Codes that are aligned shall be effective in accordance with the 1 May 2015 effective date. A consideration shall be made for Sector Codes not aligned by the end of October 2015 to be repealed.
  • All valid B-BBEE certificates issued under the old Codes, as well as the relevant Sector Codes should remain valid, accepted and treated as empowering suppliers.
  • All EME (Exempted Micro Enterprises) certificates issued without Empowering Supplier Status will be automatically recognised as Empowering Suppliers.

 

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