The Revised B-BBEE Codes: The impact on companies as from 01st May 2015

Posted by Trevor Tshabangu
Tuesday, 31 March 2015  |  Comments
Trevor is a director at Transcend Corporate Advisors.
Read all of Trevor Tshabangu's Posts

The Revised B-BBEE Codes: The impact on companies as from 01st May 2015

By Trevor Tshabangu

Director: Transcend Corporate Advisors

On the 11th October 2013, the current B-BBEE Codes of Good Practice were substantially amended by the Department of Trade and Industry (DTI). The Revised Codes (as they are commonly known), have significantly impacted the requirements for B-BBEE compliance. Compliance with the provisions of the Revised Codes will be compulsory from the 01st of May 2015 for all entities. Businesses have a discretion to comply with the provisions of the Revised Codes prior to such date.

With the B-BBEE Revised Codes of Good Practice (RCoGP) set to kick off on 01st May 2015, businesses that have not implemented the changes are attempting to avoid being caught off-guard by getting verified on the current codes before this important date. According to the Department of Trade and Industry (DTI), any business that goes for B-BBEE verification on or after the 01st May 2015 will be verified against the Revised codes, irrespective of their financial year or measurement period. The DTI further states that a B-BBEE verification process can be conducted on any 12-month period, regardless of the company’s financial period. This, of course, should be within reasonable limits and can include overlapping periods.

Considering that the 01st May 2015 is less than two months away, pressure is mounting on verification agencies to deliver on both the normal cycle verifications of their clients, and also clients who are trying to beat the deadline on the 01st of May 2015. What this means is that firms that would not necessarily be verified in this time are applying for verification and being audited. The reason for this rush is that most companies want to “ride” on the old codes for the next twelve months whilst they gear their strategies against the revised codes. One likely implication of this urgency is that verifications “may” be rushed and the quality might be compromised. This can be due to a number of factors, including lack of capacity, fatigue and other relevant factors related to work pressure within the verification space.

What are the challenges of not having a valid B-BBEE certificate that expires in the 2016 calendar year? Considering that most companies are being verified as we speak, their old codes certificates will expire by 01st May 2016 and this gives them an edge over those businesses whose certificates expire within the 2015 calendar year. What this also means is that some firms may have at some point, two valid certificates. Furthermore, if a business has not taken advantage of the 01st May deadline, they would have to be rated on the Revised codes regardless of their measurement period, and whether they have prepared for the Revised codes or not. This poses a serious challenge, especially when a firm is expected by their customers to have a valid B-BBEE certificate, and firms that respond to tenders for work.

In light of this and other developments, businesses need to take into account a number of strategic issues. First, companies need to make a decision as to whether they want to be audited on the old codes before the 01st of May 2015. If so, what will be the measurement period, and how soon can they prepare and get audited? Second, speak to your Verification agency now and book your B-BBEE audit date. Third, as you prepare for this current codes verification, consider your financial period and plan how the next verification cycle will be handled. Fourth, start “tilling the land” in preparation for the revised codes verification. This means putting strategies together which talk to the revised codes, taking into account how far you are from the end of your financial year, as certain interventions are income statement items. In other words, some businesses may have to run the two processes, old and revised codes strategies, side by side.

More importantly, businesses must measure their B-BBEE performance on the revised codes monthly, rather than quarterly. This will help to close the gaps over time, considering that these codes are fairly new and some of the issues within the codes are still open to wide interpretation by consultants and verification agencies.

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