Professional services company KPMG has warned South African businesses that the current employment equity targets, contained in the Codes of Good Practice for Black Economic Empowerment (BEE), are set to increase from 2013 as stipulated in the measurement scorecard targets included in the BEE codes. This will require some businesses to revisit and significantly restructure their employment targets to maintain their current overall BEE scorecard compliance level, says KPMG restructuring advisory MD Sandile Hlophe.

“Some companies have approached the broad-based black economic-empowerment (BBBEE) scorecards in different ways. Others have prepared in advance for the future changes by creating long-term plans that will address any difficulties they might encounter. This could positively affect the outcome of their BEE scorecard recognition levels in 2013,” Hlophe notes.

The Codes of Good Practice for BEE were gazetted in 2007. The first phase, which runs from 2007 to 2012, encourages achievement of the initial targets that have been set. Thereafter, the requirements will increase over the next five years.

When looking at a scorecard, large businesses, defined as companies with a turnover of over R35-million a year, are assessed on various elements, which affect the outcome of their BEE scorecard. These elements include ownership, management control, employment equity, skills development, preferential procurement, enterprise development and corporate social development.
Under the generic scorecard, the revision of BEE targets will affect only the employment equity and the preferential procurement aspects. The points allocated to each of these elements will not change, but the targets will increase, affecting the points obtained for each of these elements. For some organisations, industry sector charters may reflect target increases in other elements.

“Essentially, two areas will be affected on the scorecard. In the employment equity element of the BEE scorecard, the percentages for black and female employees at each of the employment levels will increase from 2013,” explains Hlophe.

These changes will have an impact on companies that are scoring well for employment equity and have reached the current target. “Some companies that are currently scoring well for employment equity might not, however, meet the future targets,” says Hlophe.

“Companies will have to reassess their employment equity targets to determine whether they will be able to reach the future targets in 2013,” he notes.

“The latest Employment Equity Commission report reveals that companies have not made much progress on employment equity, thus, many companies will fail to meet the new targets,” he says.
“KPMG is continuously looking at its employment equity numbers. We have a forecasting model that assists the company in maintaining the required levels of its employment equity requirements,” says Hlophe.

“Businesses should start preparing now for these changes, so that when these increases occur, they can be managed proactively. Early preparation will give businesses time to redesign their employment equity plan to see what action should be taken, if any. If a business finds itself in a situation where its employment equity is not up to standard, more emphasis will be needed in the other elements whose targets are not changing in order to maximise the equity points,” concludes Hlophe.