New BEE code creates opportunities for construction companies

Posted On Wednesday, 23 May 2018 22:55 Published by
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The gazetting of an amended Code of Good Practice on Broad-Based Black Economic Empowerment (BBBEE) specifically for the construction industry on 2 November 2017 opens up new opportunities for the industry, says Kwakho Mpepho, Education, Training and Transformation Manager at the Master Builders Association North.

Kwakho-Mpepho

“The Master Builders Association welcomes the new Code, which is aligned with the specifics of our industry, and was compiled with all our participation,” he says. “We urge members to acquaint themselves not only with the Code’s compliance requirements but also the spirit behind it. 

“The new Code offers us a blueprint to grow the industry and makes it inclusive, but members shouldn’t ignore the fact that compliance will open up new business opportunities, especially within the public sector. As we all know, proposed government spending on infrastructure is massive, and a BBBEE rating is your ticket to the game.”

Until now, members of the construction industry have had to abide by the Department of Trade and Industry’s generic code. Mpepho says that companies with current BBBEE certificates under the old code can continue to use it until it expires, when they will have to be assessed under the new code.

One of the major changes introduced by the new Code as compared to the generic code is the readjustment of thresholds and targets for enterprises across the various categories. For instance, Qualifying Small Enterprises (QSEs) with at least 51% black beneficiaries would qualify for elevation to BBBEE Level 2 status under the generic codes. Under the new Code, however, an entity with the same BBBEE profile is required to further comply with one of the two additional elements, namely Skills Development or Preferential Procurement and Supplier Development.

“The result is that businesses that would have enjoyed a decent BBBEE status under the generic codes will struggle to maintain their current level,” says Mpepho. “In fact, measured entities can expect to drop one or more levels. It therefore makes sense for contractors to have their BBBEE profiles immediately reviewed and updated using the new Code’s measurements and targets, so they can begin improving their ratings immediately. There are more changes, and companies need to understand them carefully. The Master Builders Association will be issuing guidance on this in due course.”

Mpepho says the new Code is very similar to the draft published for public comment in October 2016, but a few things have changed. One is that verification agencies will be compelled to surrender Construction Sector BBBEE Certificates and Scorecards (Including Reports) to the Construction Sector Charter Council, which will compile industry empowerment and transformation reports as required by the statute.

Equity Equivalent Programmes (EEPs), which are used to enable multinationals who cannot sell equity to black partners to achieve compliance in other ways, are recognised by the new code. The requirements are aligned to the provisions of the generic code but, says Mpepho, the Minister will assess how well they work within the construction industry and will give further direction within 12 months.

The new code will apply to material suppliers/ manufacturers and built environment professionals as well as traditional construction companies. Material suppliers can apply for exemption if they fall under another sector’s codes. Companies with annual turnovers below a certain threshold are exempted from the Code, and can rely on affidavits and CIPC certificates in place of a BBBEE certificate. The thresholds are R1.8 million or less for built environment professionals, and R3 million or less for contractors and manufacturers 

“Learning what the Code seeks to achieve and then using it strategically to build your business by accessing new sources of business, particularly in the public sector, and by bringing new partners on board, makes good business sense,” he concludes. “The Master Builders Association urges members not only to comply, but to use the Code strategically to serve themselves and the industry as a whole.”

Last modified on Thursday, 24 May 2018 06:10

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