Doing Business In South Africa

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Broad-Based Black Economic Empowerment

Broad-Based Black Economic Empowerment

World Business People

Broad-Based Black Economic Empowerment (B-BBEE) is the South African Government's set of policies intended to bring about the involvement or participation of previously disadvantaged communities (PDCs) into the mainstream economy. The definition of PDCs is people of colour, women of all races, and the disabled.

B-BBEE is all about good corporate governance. It does not apply to those who are just exporting goods to South Africa or manufacturing goods for export from South Africa.

However, if you intend to set up any kind of business or acquire a running business in South Africa whose annual revenue is likely to exceed R5 million and which will carry out business with government departments, public entities or enterprises, or with companies who supply goods and services to them, you will be asked to provide your B-BBEE status. B-BBEE should be seen as a positive lever to achieve business success in South Africa and not as a deterrent.

The Government is seeking to achieve B-BBEE by:
• increasing the number of PDCs who manage, own and control businesses,

• facilitating the ownership and management of such businesses by communities, workers and other collective enterprises,

• boosting human resource and skills development,

• achieving equitable representation in all categories and levels of the workforce,

• promoting preferential procurement which would involve the purchase of goods and services with a strong B-BBEE score

• encouraging investment in enterprises that are PDC-owned or managed.

Any new company setting up in South Africa needs to be aware of this government legislation and regulation that governs B-BBEE. These Acts include the Skills Development Act, the Employment Equity Act, the Preferential Procurement Act and the Broad Based Black Economic Empowerment Act. Companies looking to setup in South Africa should seek professional guidance from a local legal firm and familiarise themselves with the following:

B-BBEE Strategy Document
This document outlines the South African Government's ten-year B-BBEE plan. It describes the various policies, reasoning behind B-BBEE and means of implementing B-BBEE policies. The document has been produced by the Department of Trade & Industry and is available on its website www.dti.gov.za

Codes of Good Practice
These are the codes that companies can use in order to evaluate and track their B-BBEE efforts. Specific targets need to be met.The codes help businesses get an accurate rating which they can include in their company profile.

Industry Charters
In order to make B-BBEE implementation more effective in each industry, the generic score card has been adjusted with weightings that are sector-specific.

Verification
Verification agencies currently use different methods and systems to evaluate a company's empowerment credentials. The South African National Accreditation System (SANAS) has been appointed by the DTI to devise the criteria for the accreditation of B-BBEE verification agencies, which will in turn standardise systems and ensure consistency and credibility across the verification industry.

Multinationals
There is some confusion about the position of multinational companies, to which the Codes of Good Practice do not currently apply.

In terms of the new codes, equity ownership accounts for 20 points out of 100, but foreign companies will be allowed to accumulate the 100 points through other requirements.

Preferential procurement, skills development and small-business development have been cited as areas in which multinationals can score points. Foreign companies will also have the option of participating in public programmes, which will be regarded as equity equivalents. Participation will, however, have to equal 25 per cent of their local operations for them to score full ownership points.

London-listed companies are specifically excluded, as the codes make it clear that the exemptions do not apply to South African multinationals, for example those headquartered in South Africa.

For further information on B-BBEE visit www.dti.gov.za

 

Source - UKTI

 

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