These are the changed BEE rules you need to know about – including the new Youth Employment Service

The Department of Trade and Industry recently published proposed amendments to the generic Broad-Based Black Economic Empowerment (BBBEE) Codes of Good Practice.

Some of the biggest changes include automatic recognition levels for large black-owned companies, and the introduction of a new Youth Employment Service.

Erika Holmes, partner & head of B-BBEE at Shepstone explained these and other changes below.

Automatic recognition for large black-owned companies

Automatic recognition levels will now be given to 51% and 100% black-owned large entities with annual turnovers exceeding R50 million – exactly as Exempted Micro Enterprises (EME’s) and Qualifying Smaller Enterprises (QSE’s) are currently given.

Effectively this means that if a company is 51% black-owned it will qualify for automatic level 2 BEE status, and if it is 100% black-owned it will qualify for automatic level 1 BEE status.

Youth Employment Service

A new concept of “Youth Employment Service / Y.E.S” companies will be created, entitling such an entity to move up 1 or 2 BEE recognition levels.

To qualify, the entity must:

• Meet the 40% sub-minimums for each priority element or meet an average of 50% (if a generic ompany) across the 3 priority elements or an average of 40% (if a QSE) in 2 of the 3 priority elements including ownership; and
• Improve its BEE score each year; and
• Score full points on the Skills Development Scorecard (if a generic); and
• Give 12-month full-time employment contracts to such number of Black youth (18 – 35 years) as determined by the higher of:
  • 1.5% of last year’s headcount;
  • 1.5% of average NPAT (net profit after tax) in last 3 years converted to headcount by dividing by R55,000; or
  • A target set in a table based on annual revenue or headcount.

“To move up 1 BEE level, the Y.E.S company must meet the target and achieve 2.5% absorption rate. To move up 2 BEE levels, the Y.E.S company must meet double the target and achieve 5% absorption rate,” said Holmes.

She added that the amended definition of ‘absorption’ now requires that the entity secure a ‘long-term’ contract of employment for the individual, which can be with any employer but must be permanent employment ‘until his mandatory date of retirement’, although the statutory LRA provisions would obviously still apply, she said.

Procurement

On the procurement side, Code 400 has been amended as follows:

• The scores for procuring from Empowering Supplier EME’s and QSE’s have been combined into one score, reducing the max points from a total of 7 to 5 and increasing the target from 15% to 25%;
• Increasing the points obtainable from procuring from 51% black-owned suppliers from 9 to 11 and increasing the target from 40% to 50%;
• The amended definition schedule will finally clarify that “at least 30% black-female owned” means “at least” and not “more than” as it is currently defined.  The points and targets for this element are unchanged.

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