Black Economic Empowerment
The BWA is committed to empowering our members by providing them with as much knowledge and information as possible regarding BEE. Herewith the documentation and presentations that were used during the roadshow to all the regions with our President, Dr Namane Magau.
BEE EXEMPTION CERTIFICATES
To Companies with a Turnover of Less than R5 Million
Dear Business Owner,
Government promulgated the final Codes of Good Practice on Broad Based Black Economic Empowerment on 9 February 2007, whereby businesses with a turnover of less than R5 million per annum are exempted from BEE. There is thus no restriction on race gender or number of employees to qualify as a level 4 superior contributor to BEE. To qualify your company only needs a turnover of less than R5 million. If you are more than 50% black owned you will automatically qualify with 75 points as a level 3 contributor to BEE. Start-up enterprises also qualifies as an Exempt Micro Enterprise if they have been in operation for less than a year.
Utilize this opportunity to get your companies exemption certificate now, and qualify for procurement points with your clients in government, public and private sector.
Exemption certificates can be obtained from BEE Rating Solutions Pty Ltd, a verification and rating agency that is an associate member of ABVA (Association of BEE Verification Agencies) set up by the DTI (Department of Trade and Industry). Membership number AM00014.
BEE Rating Solutions will compile your exemption certificate, which will be valid for one year. The original will be e-mailed and posted to you. This certificate should then be forwarded to the procurement officers of your client's to ensure you get maximum benefit from BEE.
Three easy steps to receive your exemption certificate: (fill in as indicated and fax/email back with attached information required)
1. Provide the following information:
Registered Company/CC Name:
Registration number:
VAT number:
Contact Person:
Tel/cell:
Email address:
Postal Address:
Physical Address:
2. SC CONFIRM IF YOU ARE BLACK OWNED 50% OR MORE AND FORWARD PROOF OF SHAREHOLDING
Fax your latest balance sheet and income statement signed by your accounting officer/auditor to 086 500 2270 to prove that your company has a turnover of less than R5 million per annum.
3. Pay R 950.00 plus VAT into the bank account of:
BEE Rating Solutions Pty Ltd
ABSA Branch 632005
Account Number 4065540594
PLEASE FORWARD INFO REQUIRED TO fax 086 500 2270
For any further information contact Bernard at 082 885 0991 or Johan at 083 327 1976 or e-mail bernard@beeratingsolutions.co.za.
Physical Address: 33 Scott Street, Waverley, Johannesburg
Comment on the second phase of Broad-Based Black Economic Empowerment
A. Background
A significant number of the members of the Businesswomen?s Association (BWA) are small business owners. Many BWA members are also single mothers. Some of them are entrepreneurs by choice; others are entrepreneurs because they either could not find employment or could best combine the demands of a family and career by being in charge of their own life.
This group of small business owners extends across all communities, language groups and religions. What makes these women extraordinary, is the fact that they are indeed beating the odds. Most of them have been discriminated against (at work and / or at home) because of their gender at some or the other time, many of them have been discriminated against because of their race.
It has been said if you send a man to prison, twelve people suffer. On the other hand, it is said that if you educate a woman, twelve people are advanced. Members of the Businesswomen?s Association by and large tend to be leaders in their communities and to use the spin-offs from their business to advance people. That is why it is so important that the drafters of the Codes of Good Practice on Broad-Based Black Economic Empowerment take the reality of small businesswomen into consideration.
B. Developmental Role
Many women business owners we have spoken to, see business opportunities in the enterprise; skills development and social investment sections of the Codes of Good Practice. Being creative, many will probably easily achieve a satisfactory score on the QSE scorecard.
The smaller the companies are, however, the less scope they have to comply. How does one attract a black shareholder if one cannot afford to pay at least a decent salary? How do you do skills development if you have one employee?
We believe that the BWA should be a recognized recipient of funds paid by companies to entities which do enterprise or skills development or even social investment. The BWA has a data base of women business owners and is also at coal face interaction with women entrepreneurs.
The BWA is internationally linked to a world body of women entrepreneurs. Elaine Strydom (Commissioner for Africa) of the BWA is also attending the launch of new women?s organization, Network for Entrepreneurial Women Worldwide (NEWW) in Amsterdam in May 2006.
The BWA can link women entrepreneurs internationally. This is important because SA entrepreneurial activity is continuing to trail that of other developing countries. It will continue to do so unless enterprise education is drastically improved in our primary and secondary schools.
South Africa?s overall entrepreneurship ranking has dropped from 21st position in 2004, to 25th in 2005. Another serious concern is that we have a very low success rate amongst start-up businesses.
We would like to conclude this topic by stating that financial institutions say women pay loans back better than men. It pays to encourage women business owners.
C. Specific Recommendations
The following points have been raised repeatedly by small businesswomen who have attended workshops on the Codes of Good Practice for Qualifying Small Enterprises which I have conducted in my private capacity amongst members of the BWA and other business owners:
1. The fact that the codes are complicated, makes them unfriendly to the small business person. The people who benefited most from the workshops tended to have at least 3 years of tertiary education.
2. The Qualifying Small Enterprises (QSE) codes (1 000 ? 1700) are very cryptic in many instances, and the reader needs to refer to Statements 000-900 where additional clarity is required. The latter are really complicated. As one of our members has stated, it is ?too left brained? for an entrepreneur.
3. When calculating the score for a QSE, one needs to refer to statements 000-700.
a. Formula A in statement 100-19 should be revisited, as it is easier to understand when explained by way of an
X / Y Graph.
b. The QSE scorecard and statements 1000-1700 often measure different items to those measured in the generic
scorecard. Adapting the formulas to statements 1000-1700 should be done by the DTI, not the reader.
c. It would be easier for the average entrepreneur to understand how to calculate her score, if the formulas were
contained in statements 1000-1700, together with examples;
4. The level of compliance exemption for a Micro Enterprise is too low. Many of our members agree that an entrepreneur with two employees, but a turnover of more than R300 000 per annum, will battle to comply with all the elements on the QSE scorecard. A turnover of R350 000, for example, will not be able to carry the administrative burden of compliance.
5. Only a very small business with less than 10 employees in the wholesale trade sector qualifies for the QSE scorecard. Having 11 employees will make it liable to comply with the generic scorecard. Many of our members agree that such a business will be discouraged to create employment opportunities or to grow.
6. Many of our members are concerned that companies will either try to limit the number of employees or refrain from growing its turnover in order to keep the QSE scorecard applicable.
7. The statements should give guidance on when a particular business falls in one sector and not the other. Communication is slotted in with transport, but it is also a business service. But where does a company fit that deals with image consulting? Is it a personal or a business service, or does it deal with communication?
8. The formula for the calculation of realization points should be explained in detail;
9. Statement 1200 deals with the owner manager level, and not black directors who are not owners. Black directors, who are not owners, only get points in statement 1300 under employment equity. Requiring black managers to be owners too in statement 1200, is too stringent.
10. Statement 1300 deals with employment equity. It is difficult to comply with this statement if a company has few employees. It might be advisable to exempt companies with less than 10 employees from the QSE scorecard.
11. Statement 1400 deals with the QSE Skills Development scorecard. The expression ?Application submitted to the National Skills Fund? is misleading. It should read SETA. ?Application? should also be clearly defined.
12. Statement 1600 deals with Enterprise Development It is not clear whether the contributions should be per year or until when historical contributions may be included.
13. Statement 1700 deals with residual contributions. Many of our members are viewing this as an opportunity to expand their business or to obtain funding for their business. Does the DTI have plans to regulate this industry any further?
D. Proposed amendments to the Preferential Procurement Policy Framework Act Regulations, as published
Many of our members feel strongly that when the Preferential Procurement Policy Framework Act and regulations are aligned with the Codes of Good Practice, care should be taken that white women still receive some preference when it comes to points for being an HDI. All women are economically vulnerable in our society.
Apartheid entrenched male white power and in general excluded black people and white women from positions of power.
According to the Businesswomen Associations? 2005 Census the majority of women directors are black women. In 2004 women constituted only 14,7% of all executive management and only 7,1% of all directors. In 2005 there was a 5,1% and 3,6% increase respectively.
Parliament recognized the existence of inequality between men and women when passing the Preferential Procurement Policy Framework Act of 2000. It stated in Section 2(d)(i) that preference points may be awarded for ?contracting with persons historically disadvantaged by unfair discrimination on the basis of gender?.
(i) The Constitution
The proposed published regulations omit white women and white disabled people from receiving preference. We believe this is against the spirit and letter of our Constitution, as well as our international obligations.
It is clear that our diversity is recognised by the Constitution. The Preamble recognises that there are divisions and that we should strive to a future where the potential of each person is freed:
?We therefore, through our freely elected representatives, adopt this Constitution as the supreme law of the Republic so as to?
? Improve the quality of life of all citizens and free the potential of each person.?
In terms of section 1 of the Constitution the Republic of South Africa is one, sovereign, democratic state founded on inter alia the values of non-racialism and non-sexism.
Section 9 of the Constitution deals with equality.
9(1) Everyone is equal before the law and has the right to equal protection and benefit of the law.
9(2) ?Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken.?
The Broad Based Black Economic Empowerment Act of 2004 was adopted to give effect to section 9. Please note that the persons who may be advanced in terms of section 9(2) are those disadvantaged by unfair discrimination.
In the recent Van Heerden judgement in the Constitutional Court , Moseneke J held that:
The enquiry to determine whether a measure falls within section 9(2) is threefold.
(1) Does the measure target persons or categories of persons who have been disadvantaged by unfair discrimination?
(2) Is the measure designed to protect or advance such persons or categories of persons?
(3) Is the measure reasonably capable of achieving the desired end?
With regard to the last question, Moseneke said: ?The question is, will it promote the achievement of equality?? In the Van Heerden case Moseneke held in paragraph 44 that:
?Determining whether a measure will in the long run promote the achievement of equality requires an appreciation of the effect of the measure in the context of our broader society.
?However, it is also clear that the long-term goal of our society is a non- racial, non-sexist society in which each person will be recognised and treated as a human being of equal worth and dignity. Central to this vision is the recognition that ours is a diverse society, comprised of people of different races, different language groups, different religions and both sexes. This diversity, and our equality as citizens within it, is something our Constitution celebrates and protects. In assessing therefore whether a measure will in the long- term promote equality, we must bear in mind this constitutional vision. In particular, a measure should not constitute an abuse of power or impose such substantial and undue harm on those excluded from its benefits that our long- term constitutional goal would be threatened.?
We submit that the effect of the exclusion of white women and disabled people from the measure will be devastating to them in the broader context of our society, as they have also been disadvantaged by unfair discrimination in the past. The exclusion of white disabled people and white women, in many instances has a discriminatory effect. White women will be in a much weaker position than black women and white disabled people will be in a much weaker position than black disabled people. Our long term Constitutional goal of non-racialism and non-sexism, will not be met.
It is important to note that the section in our Constitution which deals with preferential procurement is section 217.
Section 217(2) states that:
Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for-
(a) categories of preference in the allocation of contracts; and
(b) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.
It is clear that s 217, like s 9, allows for a policy to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination. S217 (3) states that national legislation must prescribe a framework within which the policy referred to in subsection (2) must be implemented. The Act that gave effect to s217 is the Preferential Procurement Policy Framework Act (PPPFA).
In terms of s 2(1)(d) of the PPPFA, the specific goals may include?
(i) contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability;
The draft regulations ignore the act when it excludes persons historically disadvantaged by unfair discrimination on the basis of gender or disability. We submit that the BBBEE goals should be incorporated in the regulations, as it forms a part of the PPPFA goals. The BBBEE goals should, however, not be the only goals in the regulations, as ?South Africa belongs to all those who live in it, united in our diversity?.
(ii) International Obligations
The exclusion of white women (and white disabled people) from receiving preference in terms of the draft Preferential Procurement Regulations, may be an embarrassment when the country next has to report to the UN Committee on the Elimination of Discrimination against Women. The convention deals with all women.
Having ratified the UN Convention on the Elimination of Discrimination against Women (CEDAW), South Africa is legally bound to put its provisions into practice. She is committed to submit national reports, at least every four years, on measures she has taken to comply with her treaty obligations.
In terms of Article 3 of the convention:
?States Parties shall take in all fields, in particular in the political, social, economic and cultural fields, all appropriate measures, including legislation, to ensure the full development and advancement of women, for the purpose of guaranteeing them the exercise and enjoyment of human rights and fundamental freedoms on a basis of equality with men.?
We believe that the exclusion of white women from receiving preference in terms of the draft regulations is contrary to the spirit of the convention. The proposed exclusion of white disabled people will in the foreseeable future also be contrary to proposed conventions on the rights of disabled people.
E. Conclusion
- The Businesswomen?s Association is all too aware of the structural inequalities in our economy and supports the concept of Broad-Based Black Economic Empowerment. We believe it is a system in which we can take part in order to help build our nation (and to make money and create employment). We just do not want some women to be left behind in the process.
- This submission was drafted on behalf of the BWA by (advocate) Marika Van Der Walt, of the Highveld Centre for Alternative Dispute Resolution (Pty) Ltd. Her contact details are:
Tel: 012 667 4962 or 082 900 7300
2ND PHASE OF CODES OF GOOD PRACTICE ON B-BBEE
Comment on the draft by: Dr Kent McNamara (MA PhD)
Background
The draft 2nd Phase of the Codes of Good Practice on Broad-Based Black Economic Empowerment (B-BBEE) was released during December 2005, for a public commentary process. Written comments are to be received no later than 30th March 2006.
The draft 2nd Phase document includes the proposed treatment of qualifying small enterprises, and is covered by Codes 1000 to 1700.
The stated purpose of the Code is to ?provide a much less onerous compliance regime by providing certain exceptions? (p.10 of Notice 2036, December 2005).
The consideration given to small enterprises is welcomed. However, in certain respects the requirements remain onerous and unworkable for smaller enterprises, and may well endanger the livelihood of many thousands of individual self-employed South Africans who do not fall under the definition of ?black people? provided in the Code.
To safeguard the livelihood of these individuals, and encourage further job creation and growth, it is suggested that a change be effected to the draft Code, as motivated below.
Summary of Definitions of Exempted Micro Enterprises and Qualifying Small Enterprises
In terms of the draft 2nd Phase Code, an ?exempted micro enterprise? means one which qualifies for exemption because the enterprise has an annual turnover of less than the VAT registration limit, as per the VAT Tax act of 1991 (from R300 000 onwards, depending on sector category).
In all industrial sectors, an exempted micro enterprise must also have less than 5 full-time paid employees or the equivalent (Annexe 1000-B). The exempted enterprise must also meet the stated principles of non-circumvention (S 1.8 of Code).
An exempted micro enterprise will have a deemed BEE contribution level of Four, which will entitle such an enterprise to a 100 percent BEE recognition level of more than 65 and less than 75 points.
Annexe 1000-B also defines a ?very small? enterprise as having less than between 10-20 employees (depending on the sector) and an annual turnover greater than the VAT registration limit, but less than the stated limit for different sectors (which ranges from R0.4 million to R5 million).
?Qualifying small enterprises? which are either ?very small? or ?small? must comply with at least five of the seven elements listed in the code. These include ownership, management control, employment equity, skills development, preferential procurement, enterprise development and a residual element.
Comment
The definitions of exempted micro enterprises and qualifying small enterprises, both assume that turnover is directly and invariably linked with numbers employed (as do the other definitions in Annexe 1000-B).
However, it is not unrealistic to expect that some micro enterprises may have a turnover lower than the VAT limit, but at the same time employ more than 5 people. Similarly, some enterprises employing less than 5 people may have an annual turnover in excess of the VAT registration limit.
Clearly, to comply with B-BBEE, enterprises need to have sufficient financial means and adequate numbers of employees to realistically support skills development, procurement, employment equity and so on. If either one of these conditions is limited or absent, a smaller enterprise will find it difficult, onerous and in some cases impossible to meet the requirements.
For example, a sole trader may meet the turnover requirements of a qualifying small enterprise, but as the sole owner of the business and perhaps employing one other person as a bookkeeper, cannot reasonably be expected to implement employment equity or facilitate black ownership in his or her own enterprise.
Accordingly, it is recommended that :
q Enterprises with turnover less than the annual VAT registration limit, but employing up to 20 employees, should be deemed ?exempt micro enterprises?; and
q Enterprises with an annual turnover greater than the VAT registration limit but less than the (relevant) turnover limit for ?very small? enterprises, and employing less than 5 employees, also be deemed ?exempt micro enterprises?.
Alternatively, the legislator could decide to grant exemption status to both ?micro? and ?very small? enterprises.
Conclusion
The undersigned requests that the legislators consider extending the qualifying limits for Exempted Micro Enterprises and Qualifying Small Enterprises so as to ensure that certain micro and very small enterprises in South Africa are granted exemption status.
This change will ensure that the legislation will not wipe out the livelihood of many thousands of small traders and provisional taxpayers, but will encourage individual South Africans to continue to take the initiative to set up and develop micro and very small enterprises.
Instead of being subject to onerous or unreasonable legal conditions, micro and very small enterprises should be given the freedom to grow in financial strength over time, so that they can eventually employ more people, qualify as small and medium sized enterprises under the law and make a positive contribution to black economic empowerment in future.