The draft Amended Construction Sector Code was published for comment on 28 October 2016. The period for public comments to be submitted for this document is 60 days.
The Amended Construction Sector Code is likely to have a large impact on companies operating in the construction sector. In this article I will highlight the differences for this sector in the EME companies.
This draft sector code separates Construction Contractor and Built Environment Professional organisations (BEPs).
BEPs include, but are not limited to consulting engineers, architects, quantity surveyors and town planners.
What is an EME?
An EME (Exempted Micro Enterprise) is classified as a company with a turnover of less than R 10 million for Contractors and less than R 6 million for BEPs.
The automatic level to be assigned to EME companies is as follows:
Black ownership less than 30% = Level 5 – 80% compliant
Black ownership 30% = Level 4 – 100% compliant
Black ownership 51% = Level 2 – 125% compliant
Black ownership 100% = Level 1 – 135% compliant
What about discounting?
EME companies with a turnover of over R 3 million for contractors and R 1.8 million for BEPs will also have to comply with the Skills Development priority element in order to avoid discounting.
In order to avoid discounting these companies will need to achieve at least 40% of the skills development spend target of the QSE scorecard. The target is 1.5% of payroll and so 40% of this target would equate to 0.6% of payroll.
EME companies with a turnover of less than R 3 million for contractors and less than R 1.8 million for BEPs are exempt from the above discounting requirement, however, should they choose to enhance their level by any of the below means, this exemption will no longer be available to them in subsequent years.
How do EMEs enhance their level?
EME companies have the opportunity to enhance their final level in three ways
Obtain measurement on the full QSE scorecard with all elements taken into account
Spend the full 1.5% of payroll under the QSE skills development element – this will allow a 1 level enhancement
Spend the full 1% of NPAT (Contractors) or 0.2% of payroll (BEPs) under the QSE supplier development element – this will allow a 1 level enhancement.
This would mean that an EME which is automatically a level 5 contributor to B-BBEE could potentially claim enhancement to a level 3 contributor if the required spends are made in the Skills Development and Supplier Development areas.
For any queries regarding B-BBEE, contact Oriole Consulting on 011 346 2422 or email@example.com