By: Louis McLaren

Following the recent publication of revised codes for broad-based black economic empowerment (BBEE) by the Department of Trade and Industry, many executives of entities subjected to sector codes started asking questions with respect to how these codes would impact on their sector-specific scorecards. The sectors include agriculture, construction, information and communication technology, the chartered accountancy profession, property, transport, forestry, financial services and tourism.
The revised codes clearly stipulate that, where there has been a sector code issued in terms of Section 9, the mentioned entities may only be measured in terms of their sector code.

This means that, despite the revised codes, the Construction Sector Charter, the Financial Sector Charter and the other sector charters will still be the only basis for measurement until such time as they have been formally aligned with the revised codes. According to Statement 003, all sector codes must also be fully aligned with and address all the elements in the generic scorecard, including the use of the same definitions and the application of similar calculation methodologies.

This means that entities in these sectors may not apply the revised codes, in spite of, for example, the higher threshold for exemption (R10-million) and the issuing of affidavits instead of black economic- empowerment certificates, as stated in the revised codes.

The revised codes also state that, from October 2014, all BBBEE measurement must be undertaken according to the revised codes. Effectively, this means that, if a sector code has not been aligned accordingly by then, that sector code will not be meeting the requirements imposed on it under Statement 003. For this reason, we can expect most sector councils to soon start working towards aligning their respective sector codes accordingly.

Some of the key areas in the revised codes that will have to be addressed in the sector codes are the following:
• increasing the exemption threshold (the revised codes have increased the threshold from R5-million to R10-million in yearly turnover);
• having one scorecard for both large enterprises (LE) and qualifying small enter- prises (QSE);
• measurement of black ownership for all LEs and QSEs;
• the introduc- tion of new skills development criteria; and
• combining enterprise development and supplier development.

So, what should businesses that are currently subjected to sector codes do? They should continue with their existing empowerment initiatives, with the current sector code as a reference, but they must be aware of the new measurement prin- ciples in the revised codes. Measurement under the new sector codes will start taking place only after October 2014, at the earliest, but, with the national elections around the corner and a new leadership potentially stepping in, this might be delayed until far into 2015. If an entity is measured in October 2014, its measurement will be based on the February 2014 financial statements, which means that this entity should have started implementation in March 2013 already!

• McLaren is a director of BEE@Business and has advised hundreds of companies across various sectors since 2005 on broadbased black economic empowerment - louis@bee2business.co.za