In Issues here and beyond our borders

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Other countries make use of Social Responsibility Indexes or “Investor in People” standards to measure and report on the social responsibility of businesses.

First and foremost, Black Economic Empowerment (BEE) or Broad-Based Black Economic Empowerment (B-BBEE) is an attempt to encourage all businesses to measure and report on the role they are playing in uplifting the society they are in. It is about encouraging the formal upliftment of the “have-nots” or previously disadvantaged. That most of the “have-nots” in South Africa are black (African, Coloured or Indian) is a result of past disadvantage. That is why, in South Africa, our socio-economic empowerment programme is, for the foreseeable future, focused on black South Africans.

People who use the term “Broad Based BEE (B-BBEE)” rather than “BEE” are emphasising that Empowerment benefit the many as opposed to the few. The scorecard becomes more important than straight forward ownership, because recognition is given to management control, skills development and supplier development, Employment Equity etc.

AgriBEE is the application of B-BBEE to agricultural enterprises.

Signa’s AgriBEE questions and answers guide

Notes supplied by Melcus Nel of Signa. Write to melcus [at] signa.co.za and visit www.signa.co.za. Additional references were made by the Agribook research team. Guy Taylor of BEESA Business Services did a final read and made further suggestions.

Why do we need a sector code specific to the Agricultural Sector?

It is imperative for the Agricultural Sector to address specific challenges facing them. The AgriBEE Council was formed with the objective of developing a sector-friendly set of codes to address the challenges of the sector at large.

In developing this Sector Code, it has been necessary for the AgriBEE Council to align its criteria to the 2013 Amended Codes of Good Practice (Generic Codes), including the updates from May 2019. Changes are expected to be published during 2020.

Who falls into the AgriBEE scope of application?

The source of revenue determines which code an organisation must be measured on. If more than 50% of an organisation’s revenue is generated from the following activities, the AgriBEE must apply:

  • Primary agricultural production;
  • Provision of inputs and services to enterprises engaged in the production of agricultural products;
  • Beneficiation of agricultural products, in a primary or semi-beneficiated form; and
  • Storage, distribution and/or trading, as well as allied activities related to non-beneficiated agricultural products.

An organisation that trades in more than one sector and therefore theoretically falls under more than one sector code must be guided by the principles embodied in the General BEE Codes.

AgriBEE applies to multinationals whose business falls within the scope.

Further reference:

What are the qualifying thresholds?

Annual turnover determines qualifying thresholds:

  1. Exempt Micro-Enterprises (EME) – revenue below R10m [deemed level 4];
  2. Qualifying Small Enterprises (QSE) – between R10m and R50m; and
  3. Large Enterprises – above R50m.

A Start-up Enterprise must be measured as an EME under this statement for the first year following its formation or incorporation. This provision applies regardless of the total revenue expected. To qualify as a Start-up Enterprise, independent confirmation of this status is necessary either in the form of an Affidavit or CIPC issued certificate.

However, in terms of a Start-up Enterprise tendering for any contract, or seeking any other economic activity covered by Section 6 of the B-BBEE Amendment Act, contracts valued between R10m and R50m must be measured on the QSE Scorecard. For contracts valued at R50m or more, measurement on a Large Enterprise Scorecard is a requirement.

Further reference:

What is the AgriBEE Scorecard criteria?

As all sector codes must align to the General Codes; recent gazettes published will ultimately result in amendments to the AgriBEE. The measurement criteria and Weighting Points are outlined as follows:

 

Weighting Points
Large EnterpriseQualifying Small Enterprise (QSE)
Ownership2525
Management Control1915
Skills Development2030
Enterprise & SupplierDevelopment (ESD)               4025
Socio-EconomicDevelopment (SED)1515

 

What do AgriBEE measurements take into account?

  • As per the General Codes, the points allocated and Status Level determine the Preferential Procurement Recognition percentage. For example, a Status Level 1 affords 135% recognition, while a Status Level 8 allows for 10%. The recognition percentage is what an organisation’s client refers to for their B-BBEE recognition when calculating their scorecard.
  • The measurement date for Ownership and Management Control is at the time of verification.
  • Skills Development, ESD and SED, which all carry financial implications, are measured against the last completed fiscal period.

“B-BBEE compliance is about the extent to which the entity meets employment equity targets, procures goods and services from black-owned suppliers, enters into joint ventures with black businesses and assists in the creation of black businesses, as well as transfers a percentage of the enterprise into the ownership and control of black people” [Agri SA].

Discounting vs Enhanced Recognition (Signa guide continued)

Does the Discounting Principle apply? Does AgriBEE have identified Priority Elements and Sub-minimum requirements?

The Discounting Principle applies as a consequence for not meeting Sub-minimum requirements. Listed below are the three identified Priority Elements, as well as the Sub-minimum requirements for each.

Ownership
The Sub-minimum requirement for ‘Black’ Ownership is 40% of Net Value based on the Time Based Graduation Factor.

Skills Development
The Sub-minimum requirement is 40% of the total Weighting Points, excluding any Bonus Points for Skills Development.

Enterprise and Supplier Development
The Sub-minimum requirement is 40% for each of the three categories, excluding any Bonus Points. Included in the ESD element are Preferential Procurement, Supplier Development and Enterprise Development.

Compliance with Priority Elements applies as follows:

  1. A Large Enterprise must comply with all three Priority Elements.
  2. A QSE with <51% ‘Black’ Ownership must comply with Ownership, Skills Development or Enterprise and Supplier Development.

Further reference:

Does Enhanced Recognition apply? How is this evidenced?

Enhanced recognition for EMEs with <51% ‘Black’ Ownership:

  • Automatic Status Level 4.
  • Affidavit required.

Enhanced recognition for all EMEs and QSEs with >51% ‘Black’ Ownership:

  • Between 51% and 99%, provides for an automatic Status Level 2.
  • Affidavit required.

Enhanced recognition for all EMEs and QSEs with 100% ‘Black’ Ownership:

  • Automatic level 1 status.
  • Affidavit required.

Further reference:

What is the significance of Enhanced Recognition?

Enhanced Recognition ensures that >51% ‘Black’-owned or >30% ‘Black’ Woman-owned organisations automatically achieve a favourable Status Level and favourable Preferential Procurement Recognition.

EMEs and QSEs that are >51% ‘Black’-owned qualify as Supplier Development and Enterprise Development Beneficiaries and are not obligated to comply with any other scorecard elements.

BEE verification (Signa guide last component)

During a BEE verification you will have to submit physical proof (share certificates, EE report, proof of purchases) of activity, spending and contributions in the five elements of empowerment.

OWNERSHIP

How does land restitution influence the Ownership Scorecard?

Land restitution has two implications for the AgriBEE Scorecard:

  1. Enterprises (farms) with gazetted land claims are exempt from the Ownership element. If only a percentage of the land is subject to a claim, the exemption is proportional.
  2. The Sale of Assets vehicle may apply to land sold to ‘Black’ Farmers in exchange for Ownership points. An additional proviso is that a 30% target is met instead of 25% as in all other instances where Sale of Assets applies.

How is Ownership measured?

Ownership as a Priority Element is subject to a 40% Sub-minimum requirement. This is in relation to Net Value.

There is an allowance for the transfer of land ownership to B-BBEE Beneficiaries, with or without compensation, which can be used as the measurement criterion for Ownership points. If 30% of land ownership is transferred to ‘Black’ People, full recognition for Ownership is possible under certain conditions.

What vehicles are available to drive Ownership?

‘Black’ Ownership is recognised through:

  • Direct shareholding in the hands of ‘Black’ People;
  • Private Equity Funds;
  • Sale of Assets through qualifying transactions;
  • Employee Ownership Schemes;
  • Share Equity Schemes; and
  • Joint Venture collaboration with ‘Black’ Farm Workers and other ‘Black’ Entrepreneurs.

Upon meeting specific criteria, a multinational may apply for an Equity Equivalent Programme that allows them to claim Ownership points by investing in B-BEEE programmes in lieu of selling shares.

True or false – “I must give equity to ‘Black’ Shareholders in exchange for Ownership status and points?”

This statement is false; the word ‘give’ does not appear in any of the Codes. It is every organisation’s prerogative to decide whether to donate or sell shares either at market value or a discounted rate.

MANAGEMENT CONTROL

How is Management Control measured?

Management Control targets should be achieved within the ambit of the Employment Equity Act of 1998. The objective of this element is to increase the representation of ‘Black’ People, ‘Black’ Women and ‘Black’ Designated Groups in the sector.

A Large Enterprise must use the overall demographic representation of ‘Black’ People as defined in the Regulations pertaining to the Employment Equity Act and Commission on Employment Equity Report. Furthermore, a Large Enterprise that has operations in one province must use the relevant provincial demographic representation of ‘Black’ People. However, an enterprise that has operations in more than one province must adhere to the national demographic representation of ‘Black’ People.

The Management Control criteria are broken down as follows:

  • Executive Management;
  • ‘Black’ representation in Executive Management;
  • ‘Black’ Women representation in Executive Management;
  • ‘Black’ representation at Senior, Middle and Junior Management; and
  • ‘Black’ Women representation at Senior, Middle and Junior Management.

All other key principles of Statement 200 of the Generic Codes not addressed in this statement are applicable.

SKILLS DEVELOPMENT

The skills development element of the generic codes of good practice was changed on 1 December 2019. Sector codes are suppose to align with the generic codes on or before 1 June 2020. The AgriBEE council is currently reviewing the process.

Most important changes include:

  • an allowance for bursaries at higher education institutions, of 2,5% of the annual remuneration cost incurred;
  • the provision that 50% of expenditure must be incurred on unemployed people has been removed. This implies that all skills development expenditure can now be spend on employees.

How is Skills Development Measured?

Skills Development expenditure for ‘Black’ People is measured at 6% of the total payroll, with additional points allocated for persons with a disability. A total of 40% of the points available are awarded for ‘Black’ People entering learnerships, internships or apprenticeship agreements.

Commercial viability in agriculture demands sustained productivity, high levels of entrepreneurship, long-term commitment, resources and skills.

‘Black’ Designated Groups are targeted under this element. The focus must be placed on the development of core identified scarce or critical skills as determined by the SETA. Interventions that address identified skills shortages must account for 85% of the value of the actual contribution.

All other key principles of Statement 300 of the Generic Codes not addressed in this statement are applicable.

SUPPLIER AND ENTERPRISE DEVELOPMENT

The generic changes (1 December 2019) include some changes to procurement recognition with more emphasis being placed on Black owned businesses.

How is Supplier Development and Enterprise Development measured?

The measurement for these sub-elements is based on how an organisation supports Start-up Enterprises, EMEs or QSEs in becoming sustainable. Points can be optimised through contributing 3,5% of Net Profit After Tax (NPAT) by providing grants, loans or other resources such as facilities and/or equipment.

Preferential Procurement targets may be phased in over a four-year period, provided that an organisation is prepared to contribute 3% instead of 2% towards Supplier Development for years one through to four.

The following non-exhaustive list outlines credible Supplier Development and Enterprise Development contributions:

  • Investments in Beneficiary entities;
  • Guarantees given or securities provided on behalf of Beneficiaries;
  • Facilities made available to Beneficiary entities;
  • Grant contributions to a Beneficiary;
  • Direct costs incurred through assisting and hastening the development of a Beneficiary;
  • Overhead costs directly attributable to contributions;
  • Preferential credit terms granted to a Beneficiary ;
  • Preferential terms issued in respect of supplying goods and services to a Beneficiary;
  • Contributions made to settle service costs relating to operational or financial capacity or efficiency levels of a Beneficiary;
  • Discounts allowed for the acquisition and maintenance costs associated with a grant to a Beneficiary for franchise, license, agency, distribution or other similar business rights;
  • The creation or development of capacity and expertise for a Beneficiary required to manufacture or produce goods or services previously not manufactured, produced or provided in South Africa. However, this must have been accounted for in Government’s economic growth and local Supplier Development policies and initiatives;
  • Facilitating access to credit for a Beneficiary without access to similar credit facilities through traditional means, owing to a lack of credit history or collateral;
    Providing training or mentoring by suitably qualified individuals to Beneficiary entities, which will assist the Beneficiary entities to increase their operational or financial capacity;
  • The maintenance of an Enterprise Development and Supplier Development unit which focuses exclusively on the support of a Beneficiary or candidate Beneficiary;
  • New projects promoting beneficiation for the benefit of an Enterprise Development or Supplier Development Beneficiary;
  • The provision of preferential credit facilities to a Beneficiary may constitute a contribution. Examples include without limitation:
    1. Provision of finance to a Beneficiary at lower than commercial rates of interest;
    2. Relaxed security requirements or absence of security requirements for a Beneficiary unable to provide security for loans;
    3. Settlement of Beneficiary accounts over a shorter period. This addresses standard payment terms and provided that the shorter period is no longer than 15 days; and
    4. The training and mentoring of Beneficiary communities. Such contributions are measured by quantifying the cost of time, excluding travel, spent in carrying out such initiatives.

How is Preferential Procurement measured?

The majority of this element measures procurement with ‘Black’-owned and ‘Black’ Women-owned organisations, that are EMEs and QSEs. A phase-in period is an option provided that additional resources are allocated to Supplier Development.

The following must form part of an organisation’s Total Measured Procurement Spend (TMPS):

All goods and services procured are defined as:

  • Cost of sales;
  • Operational and capital expenditure;
  • Monopolistic procurement;
  • Third-party procurement;
  • Labour brokers and independent contractors or any outsourced labour expenditure;
  • Pension and medical aid contributions payments made to any post-retirement funding scheme or a medical aid or a similar medical insurer by an organisation on behalf of an employee, excluding any portions of such payments which are a contribution to a capital investment of an employee. The scheme or insurer must issue a certificate dividing between the capital investment portion and the balance to establish the amount that is measurable in the Total Measured Procurement Spend;
  • Trade commissions;
  • Empowerment related expenditure; all goods and services procured in carrying out B-BBEE. The TMPS does not include the actual contribution portion recognised under section 2 and 3 of statement 500, but does include any expenditure incurred in facilitating those contributions;
  • Imports; and
  • Intra-group procurement goods and services procured from subsidiaries or holding entities. A B-BBEE Certificate or Affidavit must represent the organisation supplying goods and/or services.

The following are permissible exclusions from the TMPS:

  • Taxes;
  • Salaries, wages, remunerations and emoluments; and
  • Pass-through third-party procurement. All procurement from a third-party or a client that is recorded as an expense in the third-party’s or client’s annual financial statements, but is not recorded as such in an organisation’s annual financial statements.

Further reference:

SOCIO-ECONOMIC DEVELOPMENT

How is Socio-Economic Development measured?

AgriBEE has 15 points allocated for this element for spending 1.5% NPAT.

A detailed agreement must be entered into and accepted by all parties. Proper records of all interactions and meetings are encouraged.

To optimise the points on this element, priority should be given to implementing income-generating socio-economic initiatives that create a sustainable livelihood for Beneficiaries.

Tips to remove the sting from B-BBEE compliance Essential to a favourable B-BBEE outcome are strategy, planning and providing relevant evidence. Take the following pointers into account and leave as little to chance as possible.

  • Ensure that your chosen verification agency is accredited by SANAS, the only accredited body authorised to accredit verification agencies. SANAS places a very high level of integrity on the verification analysts.
  • Have a full comprehension of the requirements applicable to your organisation.
    Address ‘low-hanging fruits’ first, which are classified as :
    1. Spend with organisations that are >51% ‘Black’-owned; where possible allocate that spend to Enterprise Development or Supplier Development Beneficiaries.
    2. Ensure supplier B-BBEE Certificates are presented in the correct format.
    3. Optimise the 15 points available for SED.
    4. Analyse the Skills Development spend. Ensure that people with disabilities are included.
    5. Ensure proper due diligence on complex transactions entered into, especially in terms of Ownership. Gain a second opinion for peace of mind. Issues such as an Ownership transaction must be adequately planned, and professional advice must be obtained to ensure that a smooth transition takes place.

Further reference:

Find “Brochures” under “Publications” at www.bbbeecommission.co.za/brochures/. There is a brochure explaining Socio-Economic Development further.

National strategy and government contacts

BEE is about broad-based activities that benefit black people. The B-BBEE framework should reinforce skills and rural development, enterprise and social development while attending to issues of job creation through procurement and entrepreneurship.

BEE Timeline:

  • BEE Act 53 of 2003 (amended by Act 46 of 2013)
  • Codes of Good Practice (COGP) 2007
  • BEE Revised B-BBEE COGP 2013
  • Statement 005 21 July 2017 Gazette No 40997 [to do with verification certificates and rating agencies]
  • The introduction of YES Programme in 2018 and ammendments to COGP in 2019.

The YES Programme is one of the biggest new additions in recent times. See www.yes4youth.co.za.

AgriBEE timeline:

  • AgriBEE Sector Charter Council – established 2008
  • AgriBEE Sector Code gazetted in 2012
  • Amended AgriBEE Sector Code gazetted on 21 November 2017

Role players

Department of Trade, Industry and Competition (the dtic)
Tel: 0861 843 384
Tel: 012 394 1609 / 1870
agribee [at] thedti.gov.za
http://bee.b1sa.co.za

See also the “Economic Empowerment” menu option on the website – www.thedti.gov.za

The B-BBEE Commission
Tel: 012 649 0910
www.bbbeecommission.co.za

Established by Section 13B of B-BBEE Act 46 of 2013, the B-BBEE Commission has national jurisdiction over matters B-BBEE.

The B-BBEE Advisory Council
Secretariat
Tel: 012 394 1915
BBBEEAC [at] thedti.gov.za

Department of Agriculture, Land Reform and Rural Development (DALRRD – previously DAFF)

Directorate: B-BBEE Charters Compliance
Tel: 012 319 8460/8459
www.daff.gov.za

Sector Transformation & Gender Mainstreaming
Tel: 012 319 8265

Directorate: Cooperatives and Enterprise Development
Tel: 012 319 8465

Department of Employment and Labour (DEL)
Tel: 012 309 4000
www.labour.gov.za

The DEL releases the annual Commission for Employment Equity (CEE) report. The CEE report looks at progress made with the Employment Equity Act (EEA) which is meant “to drive equality in the work place through equitable representation of employees from designated groups to broadly reflect the national demographics of the Economically Active Population (EAP) of South Africa”. Find the latest CEE report on the DEL website.

Find the Broad-Based Black Economic Empowerment legislation at www.thedti.gov.za/economic_empowerment/bee.jsp, and http://bee.b1sa.co.za.

Role players

SOME AGRICULTURE-SPECIFIC ROLE PLAYERS:
  • Agri SA Tel: 012 643 3400 www.agrisa.co.za
  • Agricultural Business Chamber (Agbiz) Tel: 012 807 6686 www.agbiz.co.za
  • AgriExpert Tel: 082 907 2810 www.agriexpert.co.za
  • Amadlelo Agrihttps://amadlelo.co.za, “Transforming the dairy industry and unlocking the land potential of black communities in the Eastern Cape and KwaZulu-Natal”.
  • Andisa AGRI Tel: 082 807 5587 www.andisaagri.com
  • Food and Allied Workers Union (FAWU) Tel: 021 637 9040 www.fawu.org.za
  • Senwes Agricultural Services Tel: 018 464 7800 www.senwes.co.za Advice on AgriBEE at commercial farm level
  • Signa For any enquiries contact Melcus Nel tel 082 4480356 melcus [at] signa.co.za Signa Group was founded in 2004 and has always focused on strategic transformation advise as well as developing taylor made solutions for enterprises.
  • Umsizi Sustainable Social Solutions Tel: 011 791 2157 https://umsizi.co.za Help companies reach and exceed SED and compliance deliverables
  • VinPro Transformation & Development division Tel: 021 276 0429 https://vinpro.co.za BEE advisory services
ASSOCIATIONS AND REGULATORY
  • The Association of B-BBEE Professionals (ABP) was established “to lead the Broad-Based Black Economic Empowerment (B-BBEE) Verification and BEE Consultancy industry”. Most BEE consultant and auditor companies listed below are members. Visit www.abp.org.za.
  • South African Institute of Professional Accountants (SAIPA) www.saipa.co.za
  • South African National Accreditation System (SANAS) www.sanas.co.za
GENERAL BEE CONSULTANTS/AUDITORS
FINANCE
  • The main commercial banks: ABSAFNBNedbank and Standard Bank.
  • DEC (Disability Employment Concerns) Trust www.dectrust.co.za
  • Empowerment Capital http://empowermentcapital.co.za
  • Industrial Development Corporation (IDC) Tel: 011 269 3000 www.idc.co.za
  • The Land Bank is the external agency which manages and administers the AgriBEE Equity Fund, which is geared towards increasing black entrepreneurs in the agricultural sector. Call 012 686 0500 or visit www.landbank.co.za. Find several stories of AgriBEE support provided by Land Bank on the website. Read the Parliamentary Monitoring Group record of “Transformation activities & AgriBEE Fund: Land Bank briefing”, a briefing to the Agriculture, Land Reform & Rural Development committee (15 October 2019) at https://pmg.org.za/committee-meeting/29041/.
  • National Empowerment Fund (NEF) Tel: 0861 843 633 www.nefcorp.co.za. Several funds are available: the iMbewu Fund, uMnotho Fund, Rural and Community Development Fund, the Strategic Projects Fund, Tourism Transformation Fund (TTF).
  • Old Mutual’s Masisizane Fund www.oldmutual.co.za/masisizane
  • Phatisa Tel: 011 463 1920 www.phatisa.com
  • Thebe Investment Corporation http://new.thebe.co.za
  • Umkhonto Development Solutions Tel: 012 543 0425/ 021 979 5383 . For help with accessing the different financial incentives from government i.e. Black Business Supplier Development Programme (BBSDP)
  • United Farmers’ Fund Trust (UFF) Tel: 021 421 2129 https://uff.co.za Offering “investment opportunities to clients while delivering high social impact to rural communities”
BUSINESS REPRESENTATIVE GROUPS AND OTHER ROLE PLAYERS

See also the [soon to be published] pages “People with disabilities” and “Women”

Websites and publications

Visit the websites listed earlier on this page.

  • Madi P.M. 2016. Black economic empowerment : 20 years later, the baby and the bathwater. Randburg: KR.
  • Jeffrey A. 2014. BEE: Helping or Hurting? Cape Town: Tafelberg.
  • Van Wyk C & Wiggins H. 2012. The BEE scorecard manual. Cape Town: Juta.
    Hadland A., Mangcu X., Shubane K. & Marcus G. (Eds). 2008. Visions of Black Economic Empowerment. Johannesburg: Jacana.
  • Jack V. 2007. Broad-based BEE: the complete guide. Northcliff: Frontrunner.
  • Gqubule D. 2006. Making mistakes, righting wrongs: insights into Black economic empowerment. Johannesburg: Jonathan Ball.
  • Woolley R. 2006. Everyone’s Guide to Black Economic Empowerment. Cape Town: Zebra.
  • Whiteford G. 2005. BEE: key determinants of success. Gardenview: Zytec.
  • TFM Magazine https://tfmmagazine.co.za
  • www.beenews.co.za, for “news, opinions, politics and updates on Black Economic Empowerment”
PRESENTATIONS
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