Delays in sector codes endanger BEE ratings of companies

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Ayanda Mdluli

Companies representing half the economy are at risk of becoming non-compliant when evaluated against the amended broad-based black economic empowerment (BEE) codes to take effect in May next year.

Information and communications technology, agriculture, financial services, tourism and transport businesses are at risk largely due to Department of Trade and Industry delays in releasing sector-specific codes.

Experts have said that because of the delays, companies will have to follow the amended generic codes that were released in October last year to avoid non-compliance.

The Broad-based BEE Amendment Act was signed into law in January and will bring about major changes to the previous act of 2003.

On January 27, the government published the Broad-based BEE Amendment Act of 2013, which made changes to the principal act – the Broad-based BEE Act of 2003.

In November 2011, the government signed an accord where it pledged that 75 percent of goods would be procured from local suppliers.

The amendment acts have given the minister of trade and industry powers to issue sector-specific codes and allow the state to set criteria that exceed those laid out in the codes.

Keith Levenstein, the chief executive of EconoBEE, said the more controversial areas in the new codes were that the points per level had been changed and, since a company’s BEE level was measured on this points system, the new amendments would dilute these ratings.

“Since this has changed dramatically, many companies will be non-compliant… and if they cannot be compliant then they will not bother about transformation.

“The unintended consequence of this is that companies will throw their toys out the cot and if they continue with non-compliance they can lose business,” he said.

One of the key changes, highlighted by the department, is the establishment of a commission that will receive and investigate complaints and maintain a registry of major transactions. It will also be able to impose penalties for fronting practices and refer cases for criminal investigation.

In addition, the government, public entities, sector education and training authorities and listed companies will have to report compliance as their core obligation.

Also, the key changes suggest the establishment of a body to accredit and regulate verification agencies.

The department has since gone on record stating that the new sector codes would be released before the end of the year.


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