In 2017, there have been key developments regarding transformation in SA, where businesses need to be prepared, or face serious potential risks for their companies. I have highlighted some of the key challenges affecting companies with regards to B-BBEE, Employment Equity(EE) and Skills Development(SD) in the attached newsletter.

1. 26 July 2017
KEY CONSIDERATIONS FOR transformation
in 2017
In 2017, there have been key
developments regarding transformation
in SA, where businesses need to be
prepared, or face serious potential risks
for their companies.
I will highlight some of the key
challenges affecting companies with
regards to B-BBEE, Employment
Equity(EE) and Skills
Development(SD).
One of the most critical challenges /
changes that took place end of
December 2016, was that IRBA B-
BBEE Verification agencies are no
longer able to audit and issue B-BBEE
certificates.
The impact of this decision is that close
to 400 B-BBEE verification agencies
were closed by 31 December 2017,
where currently there are
approximately 60 SANAS B-BBEE
accredited verification agencies.
Moreover, with there being a
difference in the audit methodologies
by SANAS agencies (more stringent), as
well as the interpretation of certain
elements, failure to plan could result in
an unexpected negative B-BBEE rating.
It is imperative that companies ensure
that their own B-BBEE Champions or
external consultants are not only up to
date with the Amended B-BBEE Codes,
but that they also understand the
information required for audit purposes
together with any interpretive issues.
NB: Liaise with verification agencies at
the planning phase of your financial
period to avoid any surprises on audit
date. E.G. On DTI Generic scorecard,
different interpretations of having
employed and unemployed on
Learnerships / Apprenticeships or
Internships:
• Some agencies will only recognise
Learnerships / Apprenticeships
and Internships for Unemployed
training, whereas
• Other agencies will score points
for any training in learning matrix
for Unemployed:
This will amount to a significant Cost
Saving.
Lastly, with the changes to the
Preferential Procurement Regulations
coming into effect 1 April 2017 (even
though most Government departments
are yet to implement this), a valid B-
BBEE certificate has become even more
vital for businesses operating in SA.
WHAT FINANCIAL PERIOD CAN I USE TO BE MEASURED AGAINST?
This is a key question, as previously a company could use any 12-month period to be rated against.
Meaning organisations who did not do enough to score B-BBEE points, were allowed to ‘top-up’ and
then use 12-month management accounts the following month to be rated against.
SANAS agencies appear to have taken the stance that a company must be measured against their
financial period. Moreover, the financials cannot be older than 18 months, i.e. Organisations who
have a financial year ending February, have until end August 2017 to be able to use their Feb 2016
Financial Statements.

2. Lorem Ipsum
The importance of skills
development
COMPANIES STILL STRUGGLING WITH
EMPLOYMENT EQUITY COMPLIANCE?
You do not want to lose all points for
Management Control because you have not
complied with the Employment Equity Act, and
submitted the necessary EEA 2 and 4 reports.
More importantly, not complying with all the
requirements of the EEAct could lead to massive
fines and penalties; R1.5 Million for first time
offence.
We have found quite a few organisations
who only submit their EEA 2 and 4 returns,
but do not comply with the other
provisions of the EEAct.
Companies are sometimes unaware of all the
requirements of the act, and most would fail the
substantive EE Checklist conducted by Labour
Inspectors.
So what is lacking?
i.EE awareness campaign for all staff (are all staff
informed of EE?); If your staff compliment is
over 50, you must have a consultative forum in
place, and it must be as representative as
possible for the entire organisation (race,
gender, occupational levels);
ii.This consultative forum (EE Committee / or
combination of EE and Skills Development
Committee [SETA's require that these
companies have minimum of 3 signatures on the
WSP, with one being a member of the
consultative committee]) must have had the
appropriate training and must meet within the
year with minutes being taken;
iii.The organisation must complete the EEA 12 (EE
Analysis), where this information must filter into
the preparation and implementation of:
§ An Employment Equity Plan (EEA13) (can
be 1-5 years in length).
Lastly, companies are sometimes unaware that
their own staff may be classified as disabled.
Important to engage with staff using the EEA 1 as
a guide to get information on disability from your
staff.
Skills Development is a vital
component for B-BBEE and
rightfully so. Without Ownership, if
organisations do not maximize on all
the other elements, it is extremely
difficult to have a compliant B-BBEE
Certificate.
Deadline for submitting mandatory
grants is 30 April for most SETA’s.
More importantly, it is no longer
enough to just submit your returns,
a company must also have its
WSP/ATR/Pivotal reports
approved, failure could result in
your company scoring zero points
for Skills Development, which
amounts to a major business risk.
To maximize Skills Development
spend, most companies should
consider enrolling staff on either a
Learnership/ Apprenticeship or
Internship program (If an internship,
should be a certificate, degree or
diploma as the outcome, NB:
minimum notional hours for a
Certificate is generally 120 hrs. and
short courses may not count).
Furthermore, besides been able to
include the salaries / wages for these
learners, there are tax incentives as
well, i.e. Able bodied Learnerships
amount to R40K tax deduction at
beginning of period and another
R40K on completion (disabled is
R60K).

3. 3
SUMMARY OF KEY RISKS ASSOCIATED WITH THE NEW B-BBEE CODES OF GOOD PRACTICE:-
1) Ownership (Priority Area)
a. Organisations not achieving the 40% subminimum of net value (Generally will be 10% shares in the hands of
Black people). Your company will drop one level if not achieved!
b. Companies not being able to maximize points for Trusts, Broad-Based Schemes etc., primarily because they do
not check prior to audit if they comply with all requirements to score the full points.
2) Management Control
a. Companies not submitting their EE Returns, NB: If you have less than 50 staff but your Turnover is more than
the Industry norm, you must comply with the provisions of the EEAct. Should your company not have a PAYE
number, you cannot submit your returns online (1 Sep 2017 – 15 Jan 2018 is online submission period), but can
do so manually between 1 Sep – 2 Oct 2017;
b. For Generic companies, if you do not distinguish between Other Top Management and Senior Management, you
are allowed to collapse into one element with combining points: Where sub-racial categories will not be
applied;
c. Don’t forget to update your Employment Equity and Skills Development with latest EAP targets (CEE 17 report),
as this could impact on the points you are scoring.
3) Skills Development (Priority Area)
a. Ensure that your company not only submits their WSP / ATR / Pivotal reports, but more importantly that it has
been accepted. If not, you may be disadvantaged and could score no points for Skills Development. Verification
agencies will require a letter from your SETA stating that the reports were successful; alternatively the company
can show grant payments received from the SETA;
b. Learnerships / Apprenticeships and Internships should be prioritized, as companies can maximise the overall skills
spend as well as benefit by the tax allowances offered;
c. 15% cap for non-core training costs such as accommodation, travel, etc.
4) Enterprise and Supplier Development (Priority Area)
a. Empowering Supplier status has been extended; however, it is important that companies ensure they have this in
place for when the change comes about …mitigate this now!
b. Monitor your Supplier BEE Certificates, with over 80% of BEE certificates still on the old scorecard criteria, you
do not want to be surprised by the sudden drop in points as those same suppliers score levels drop (most will on
the Amended Scorecard);
c. Moreover, are you aware that the Preferential Procurement Regulations came into effect 1 April 2017?
i. What points will you score for your Tender on the 80 / 20 and 90 / 10 principle with regards to the B-
BBEE points?
ii. If you apply for a tender over R10 Mill, you may be required to have a QSE scorecard even if your
business is less than R10 Mill and you are classified as an EME. Likewise, for applying for a Tender over
R50 mill, you may be required to have a Generic Certificate even if your business is classified as a QSE.
5) Socio Economic Development
a. Ensure initiatives fall within scope of SED, especially when wanting to include additional spend with own staff,
e.g. Onsite Clinic (Some agencies will score you these points while others will not).

4. CONCLUSION
To have a valid and compliant B-BBEE Certificate has become paramount for Organisations operating in South Africa, and
without proper planning, your company risks being non-compliance, or at best achieving a low B-BBEE Contributor Level.
Furthermore, it is now clear that organisations must ensure compliance to both the Employment Equity and Skills
Development Acts, while continuously linking these initiatives back to their Broad-Based Black Economic Empowerment
plan.
Do not delay. The financial implications of not starting sooner could be devastating to your business.
Contact DH Solutions for an appointment to guide and assist you in your Transformation requirements.
Yours Truly,
Donovan Hornsby
B-BBEE & Transformation Specialist
167 Hoosen Haffejee Street, PMB, 3201
033 394 7525 (Office)
082 339 7302 (Cell)
donovan@dhtransform.org
BA; HONS: Org Psych