Sanette Viljoen

The old construction BEE codes contained many regulations which had to be complied with by every enterprise dependent on state tenders. Ever since the possibility of new BEE codes was raised, many undertakings have been concerned.

The draft amended construction sector BEE codes (“draft construction codes”) were published on 28 October 2016 for public comment, with the expectation that the final codes would be in place by early 2017. As with the old construction codes, the draft construction codes contain unique regulations that construction companies need to be aware of for their future BEE verification.

Here are a few key points for which you should be on the outlook in the new BEE codes:

1. Verification agencies must in future report to the Construction Sector Manifesto Council, hereafter referred to as the CMC –

Agencies who issue BEE certificates, will be obliged to annually provide the CMC with the score cards of the company they verify. The CMC in its turn will check the progress of compliance and report to the BEE commissioner.

2. Numerous unique regulations are included for companies who rely on automatic levels:

• The amended flow-through principle may not be used for automatic level recognition of QSE companies; only the flow-through principle may be used.

• An exempt micro-enterprise (hereafter referred to as an EME) with less than 30% black ownership will only reach level 5 recognition.

• An EME with less than 30% black ownership that does not reach 40% of its skills development target, will be scaled down to a level 6.

• The outcome of this regulation will possible mean that EMEs without at least 30% black ownership will not be as competitive for tender purposes.

• An EME can improve its levels by obtaining full marks for Skills Development and Supplier Development.

• A qualified small enterprise (hereafter referred to as a QSE) that qualifies for an automatic level (level 2 on the basis of 51% black ownership) will be downscaled by one level if a subminimum of 40% of its Skill Development target is not reached.

• An automatic level QSE can improve its recognition by obtaining full marks for Skills and Supplier Development. This will result in QSE companies still having to spend more on skills development, in spite of them qualifying for automatic levels.

3. Building Environmental Professional Companies (BEP):

The black shareholders of a BEP company who own more than 50% of the issued shares in the company, must register professionally and be a member of the executive council of the company. This stipulation will have the greatest impact on BEPs that are not yet subject to the strict ownership requirements of their applicable professional bodies.

4. Enterprise and Supplier Development:

The Enterprise Development element has been omitted from the scorecard and Supplier Development now makes out 15 points of the total scorecard.

5. Suppliers of material to construction companies:

Suppliers of material to construction companies will fall within the scope of the draft construction codes and not the amended BEE codes of good practice issued by the Department of Trade and Industry. This regulation will mean that numerous companies will have to re-align to comply with the draft construction codes.

The draft construction codes contain many potentially challenging regulations that will have a large impact on construction companies’ BEE strategy and planning. So do your homework timeously and get assistance from a BEE specialist to align your construction enterprise with these new regulations.