Many government entities remain unaware of amended Broad-Based Black Economic Empowerment (BBBEE) legislation requiring them to report on compliance in their annual financial statements. In addition, most entities fail to understand the amended codes of good practice and the verification process too.

“The majority have never undergone any verification and are therefore ill-prepared to align their processes and policies with the new requirements,” says Jenni Lawrence, managing director: Verification Services at Grant Thornton. “While penalties for the public sector’s failure to report on its status remain unclear, it is obviously government’s intention to apply the B-BBEE legislation upon itself.”

Under the requirements of the amended B-BBEE Act of 2013, government entities are required to report on compliance in their annual reports.

The public sector — including government departments, municipalities and state-owned entities — now has to be measured against the Amended Codes of Good Practice (2013), under the specialised scorecard. This scorecard does not measure ownership, but allocates the points to other elements: management control, skills development, enterprise & supplier development and socio economic development.

The new reporting requirements, which extend to universities and JSE-listed public companies as well, were gazetted in the Broad-Based Black Economic Empowerment Amendment Act, 2013, gazetted in January 2014.  According to the Act (Reporting 13G):

(1) All spheres of government, public entities and organs of state must report on their compliance with broad-based black economic empowerment in their audited annual financial statements and annual reports required under the Public Finance Management Act, 1999 (Act No. 1 of 1999).

(2) All public companies listed on the Johannesburg Stock Exchange must provide to the Commission, in such manner as may be prescribed, a report on their compliance with broad-based black economic empowerment.

(3) All Sectoral Education and Training Authorities contemplated in the Skills Development Act, 1998 (Act No. 97 of 1998), must report on skills development spending and programmes to the Commission.

“It is therefore clear that government means to apply the B-BBEE legislation upon itself,” explains Lawrence. “Most government entities, however, are not geared up to comply with the requirements.”

Lawrence suggests the Broad-Based Black Economic Empowerment Advisory Council (B-BBEEAC) may establish a sub-committee to assist them, or help to establish communication between them and the individual sectors under which they fall.

While the general scorecard for specialised enterprises has been gazetted under the amended codes, government entities which fall under a specific sector need to apply the relevant scorecard for that sector.

“For example, Transnet is a government entity, but would fall under a specialised scorecard specifically for transport sector, rather than the general amended scorecard’s specialised enterprise targets,” explains Lawrence.

To date, only a handful of the amended sector scorecards have been gazetted for comment, meaning some entities will only know which scorecard is applicable after 15 November, when the dti will either repeal or extend existing sector scorecards.

The sector scorecards for property, forestry, marketing advertising and communication (MAC) and AgriBEE have been gazetted for comment, aligned to the new amended B-BBEE scorecard. The tourism sector scorecard has been finally approved and is effective for all tourism entities being measured with a financial period ending after 12 November 2015.

Issued by Grant Thornton