Charities to be hard-hit by new BEE codes

Charities have been dealt another blow with the release of the new black economic empowerment codes. It has emerged that companies will no longer score meaningful BEE points by giving to the poor. The new codes, released last Friday, have cut social development funding scores by 20 points, and businesses which supported non-profit organisations, are now exempted from compliance. Last year the proposed codes were met with outrage when it was suggested that any business that helped a charity with white beneficiaries would not be able to use this to qualify for BEE points. This propsal was disregarded. Black war veterans, listed as a priority group in the codes for the first time, said they were gearing up to monitor companies and the government to ensure members benefited from tenders.

Experts interviewed by The Mercury yesterday described the codes as controversial, error-laden and designed to promote “narrow” ownership rather than spreading the benefits of compliance. They said small and large family-owned and owner-managed businesses that did not have majority black ownership, would be worst hit. Andrew Layman, the chief executive of the Durban Chamber of Commerce and Industry, said input from business on the codes appeared to have been ignored. Tony Balshaw, a BEE expert at national business adviser firm Mazars, said the codes had moved away from being broad-based to “narrow-based ownership-centric”. While Balshaw predicted their impact would be “disastrous”, business tycoon and member of the government’s black economic empowerment advisory council, Sandile Zungu, said they would promote entrepreneurship, especially among new black companies. Charities should “never have benefited” from the codes in the first place, he said.

Durban empowerment expert Brigitte Brun said mainly big business and companies with a black ownership of 49.9 percent and less would be forced to comply. Brun said medium-sized businesses, in the R50 million turnover bracket, which were required to adhere to the codes before, could now turn their backs on skills development, empowerment of women, and supporting charities, as contributors to their scorecards. “Previously, medium-sized businesses scored 25 points out of the required 100 points for supporting charities; that has now dropped to five points. It’s the same for big business. Charities could be the biggest losers here,” she said. Balshaw said the cut in socio-economic development funding would hit poor black communities the hardest. Childline’s national fund-raising co-ordinator, Joan van Niekerk, said companies in the R50 million turnover bracket were the biggest contributors to charities: “Sometimes they give quite small amounts, but they do add up.”

Durban’s Ethelbert Child and Youth Centre director, Weekend Ngubane, said 70 percent of their funding was from corporates. “We rely on them. We appreciate our government grant, but it is not nearly enough,” he said. Head of the Umkhonto we Sizwe Military Veterans’ Association, Kebby Maphatsoe, said workshops and a road show campaign were planned to make members aware of the codes. “We will monitor every tender that goes out. We will guard against our members being used,” he said. Brun said the most distressing aspect of the amended codes was the number of errors, incorrect definitions and figures not adding up. A confusing issue was the transitional period for the application of the new amendments. “A business can choose immediate application or compulsory application within 12 months. “That means there is a trio of legislation concurrently applicable. That includes the sector codes which are also still applicable,” she said.

“Also, the Preferential Procurement Policy Framework Amendments and Regulations issued by the Treasury in 2011 do not take into account any of the requirements of these amended codes.”