AgriBEE Guidance Note: What sugar companies need to know about claiming levy contributions under BEE

The Amended AgriBEE Sector Code 2017, acknowledges the diversity and particularity of sub-sectors within the agricultural sector in South Africa. One such sub-sector is the sugar industry.

Companies in the sugar industry can increase their B-BBEE points

Per the AgriBEE Codes, the sugar industry is unique in that it contributes towards transformation and B-BBEE in a twofold manner

1. At an individual company level - milling companies and sugar cane growers contribute towards the B-BBEE scorecard and get recognition points for the elements under the AgriBEE Codes, and
2. At an industry level - millers and sugar cane growers contribute to the South African Sugar Association (“SASA”) in the form of financial levies that they pay to SASA in terms of a Sugar Industry Agreement.

Contributions made at individual company level (under point 1 above), in the form of individual scorecard contributions, are adequately accounted for in each milling company and sugar cane grower’s B-BBEE scorecard.

The purpose of the guidance note is for the Council to raise awareness for contributions made under point 2, i.e. contributions made in the form of levies imposed by SASA. The Council noted that these levies are currently not being claimed properly as transformation expenditure by millers and growers on their B-BBEE scorecards.

The Council clarified the following three principles in the guidance note:

• The guidance note clarifies that millers and growers are able to recognise their respective levy contributions to SASA under the scorecard. This recognition will be under the Preferential Procurement element of the AgriBEE scorecard with SASA as the supplier. SASA’s current B-BBEE level is a Level 4 rating which gives millers and growers a 100% procurement recognition on this contribution.
• The Council recognises that millers typically contribute 36% towards the levy based on their total Saleable Production sold into the market, and growers typically contribute 64% towards the levy based on their proportion of RV Tonnages. The guidance note therefore clarifies that the correct ratio for recognising the levy contributions on the B-BBEE scorecard is 36:64 respectively, regardless of who pays the levy. This is because levies are typically paid by millers after collecting the grower portion from growers.
• The guidance note further provides clarity on the allocation principles to be applied on the SASA levy towards the appropriate B-BBEE elements on the scorecard.

SASA makes intervention payments to qualifying and non-qualifying growers. Growers are listed by race and turnover to distinguish between qualifying and non-qualifying growers. For instance, growers who are black persons per the Codes who have a turnover of less than R50million are classified as qualifying.

Thereafter, these qualifying growers are classified as to whether they are suppliers to the measured entity or not. This determines whether the contribution will fall under the Supplier Development element, if they are a supplier, or the Enterprise Development element, if they are not.

Lastly, the guidance note also clarified the distinction between qualifying and non-qualifying initiatives to be recognised on the AgriBEE scorecard arising from SASA levy contributions by millers and growers. For example, there is a distinction between interventions that are paid directly to or for the benefit of growers in the sugar industry, versus interventions that are paid directly to or for the benefit of non-grower parties who are not in the sugar industry.

Companies need to keep records of levy payments to SASA

Companies in the sugar industry should be cognisant at all times as to the levy payments that are paid to SASA and keep accurate records of such payments and the recipients who benefitted from such levy contributions. This will be beneficial towards the overall scorecard in terms of increasing B-BBEE points.

Please contact us:

Transcend has vast experience in formulating B-BBEE strategies around the AgriBEE Sector Codes. Should you require practical tools around implementing the SASA levy contributions towards your scorecard, Transcend would welcome a discussion on the practical implications of the Council’s guidance note. Please do not hesitate to get in touch with us to arrange a call.