The 2019 amendments to BBBEE legislation

Government gazetted amendments to the BBBEE legislation on 31 May 2019, with a six-month implementation timeframe. This limited implementation period could negatively impact on your business, depending on your financial year end, and the date of the next BBBEE verification.

Have you taken time to consider the impact of these amendments on your BBBEE status? Let’s unpack these together.

Sector councils

Sector councils have been given until 31 May 2020 to update and align their sector codes to the new amended provisions (see a full listing of all sector codes here). Accordingly, businesses operating within these sectors must have their BBBEE verification performed in terms of the amended sector code provisions.

Something of a snag enters the discussion at this point. South African BBBEE legislation requires that an entity be measured for a consecutive period of 12 months, usually the registered financial year. This raises a question of practical implementation.

Retrospective implementation

An illustrative example may be helpful at this point. Let’s assume your business’s financial year end is 31 March 2019 and your BBBEE verification is done any time after 1 December 2019 (the implementation date). The new provisions of the code are applied during the verification, as they are applied retrospectively. This is despite the fact that the amendments were published after the end of the measurement period (the financial year end). To further frustrate matters, once a measurement period has ended, a business may not go back and adjust or add in any BBBEE initiatives.

Of course, the corollary applies and is favourable. Should your financial period end on a date after 31 May 2019, you would have had time to peruse the amendments and make any changes to BBBEE initiatives, to take full advantage of the amended provisions.

The way forward

From the above it is clear that the six-month implementation period is inadequate and, in reality, may reduce a business’s financial competitiveness. Our current economic climate can ill afford this.

One solution is to amend your financial year end, but this may not be the most feasible option, and certainly does not align with the original spirit of the codes.

The Department of Trade and Industry (the dti) needs to provide clarity. A second possibility is that implementation could apply only for financial year ends after 1 December 2019. The dti adopted this approach when the codes that were amended in 2013 came into operation on 1 May 2015.