By Colette Crichton, author of BEE Simplified

B-BBEE is an element of the law of the land here in South Africa and despite varying opinions on whether it has worked in the past, or in fact whether it will work more efficiently going forward, it is a reality of doing business in this country.

As many are aware, the legislation initially promulgated in 2007 was amended in October 2013 and after an 18-month transition period became effective on 1 May 2015. Many significant changes have been made which if summed up briefly have benefitted smaller businesses needing to comply, while making it more difficult for larger companies to follow suit, especially if they have no degree of black ownership in place.

With the changes has come a degree of complexity which requires larger companies operating in South Africa to monitor and track their B-BBEE initiatives on a constant basis in order to ensure compliance within any given financial year. Gone are the days of pulling the relevant information together at the eleventh hour and hoping for the best. This complexity should send a clear message to business owners and boards of directors that B-BBEE should be taken seriously and that the B-BBEE strategy should be part of the greater business strategy of the company, in order for initiatives to be aligned with the company’s annual objectives.

The integration of B-BBEE is very possible with forward planning and a clear understanding of what the new Codes require, looking at newly introduced principles and concepts. Initiatives that fulfill B-BBEE requirements can be considered in light of initiatives that larger companies already have in place, where those initiatives take on a secondary aspect and function, bringing the business closer alignment with the fundamental B-BBEE pillars which include:

• Ownership by black South Africans
• An increase in black South Africans filling significantly more board and management roles
• Training and development of black South Africans
• Supporting black South African businesses through purchasing and development
• Focusing on socio-economic development (also known as corporate social investment) in the country

The above pillars constitute the five B-BBEE elements, of which there were previously seven.

With the new Codes, Management Control has been combined with Employment Equity, which were previously separate from one another. Preferential Procurement has also been combined with Enterprise Development and an additional new indicator called Supplier Development, which together places an increased focus on company supply chain.

The Codes make it much easier for smaller companies to obtain B-BBEE credentials; all businesses with annual revenue of less than R10-million (these are called “exempt micro enterprises” or EMEs) no longer need an annual B-BBEE certificate, for which they previously had to pay.

These certificates have been replaced by an affidavit, which must be signed in front of a Commissioner of Oaths. The affidavit must declare the details of the company, the percentage of black South African shareholding, with a separate indication of black female shareholding and must also state that the annual revenue for the previously completed financial year was less than R10-million. There should be no charge for the commissioning of this document. This declaration is binding on the conscience of the signatory.

A copy of the signed affidavit can then be presented to clients or potential clients as proof of the company’s B-BBEE credentials. In many cases, companies receiving the affidavits may also request supporting documentation, which corroborates the statements within the declaration. Supporting documentation may include:

• Certified copies of identity documents of the black South African shareholders
• Third party confirmation of the percentage of black South African shareholding
• Third party confirmation of the annual revenue for the previously completed financial year

Although the South African Treasury Department issued a notice in 2015 confirming that signed affidavits are legally acceptable, companies have the right to ask for the supporting documentation as part of their own internal audit processes. The ability to substantiate B-BBEE credentials will reduce the potential for “fronting” where EMEs declare black South African ownership, where in fact this may be untrue.

For newly registered businesses in their first year of trading, a similar declaration is required but as there is no trading history, the signatory declares that the company is not expected to make in excess of R10-million revenue within the first year.

For free affidavit templates, please e-mail enquiries@beesimplified.co.za with “EME” in the subject line and they will be sent through to you.