Amended B-BBEE Construction Sector Code effective from 1 December 2017

​On 1 December 2017, the Department of Trade and Industry published the amended construction sector code of good practice on broad-based black economic empowerment (B-BBEE) (Amended CSC). The Amended CSC is effective from 1 December 2017. Construction sector businesses​ that have a valid B-BBEE certificate issued in terms of the amended generic B-BBEE Codes can elect to retain their measurement until their current scorecard expires. Thereafter, construction sector businesses will be verified against the new scorecard.

On 1 December 2017, the Department of Trade and Industry published the amended construction sector code of good practice on broad-based black economic empowerment (B-BBEE) (Amended CSC). The Amended CSC is effective from 1 December 2017. Construction sector businesses that have a valid B-BBEE certificate issued in terms of the amended generic B-BBEE Codes can elect to retain their measurement until their current scorecard expires. Thereafter, construction sector businesses will be verified against the new scorecard.

The following are some of the key amendments now applicable to the construction sector in respect of B-BBEE measurement and compliance:

The scorecards for measuring the B-BBEE compliance of different types of construction entities are as follows:

The qualification criteria for achieving B-BBEE status and recognition levels have also been amended as follows:

Some issues to note in relation to the scorecards and B-BBEE measurement:

• There are sub-minimum requirements for the following priority elements: ownership, skills development, and preferential procurement and supplier development. Non-compliance with sub-minimum requirements will result in the measured entities B-BBEE status level and corresponding B-BBEE recognition levels being discounted by one level.
• Contractors with a total annual revenue of ZAR 10 million or less, or ZAR 6 million or less in the case of BEPs, qualify as Exempted Micro-Enterprises (EMEs). Contractors with a total annual revenue of more than ZAR 10 million but less than ZAR 50 million and BEPs with a total annual revenue of more than ZAR 6 million but less than ZAR 25 million qualify as Qualifying Small Enterprises (QSE).
• EMEs and QSEs
• An EME with the following black ownership levels is deemed to have the following B-BBEE contributor Status:
• If less than 30% black owned - Level Five Contributor;
• If at least 30% black owned but less than 51% black owned - Level Four Contributor;
• If at least 51% black owned but less than 100% black owned - Level Two Contributor; and
• If 100% black owned - Level One Contributor.
• A QSE which is 100% black owned qualifies for Level One B-BBEE recognition and a QSE which is at least 51% black owned qualifies for a Level Two B-BBEE recognition level.
• EMEs and QSE's are expected to be verified for compliance with the 40% sub-minimum requirement for skills development to enable them to maintain their enhanced recognition levels.
• With regards to public sector procurement, an entity may not sub-contract 25% or more of the value of a contract to another entity that does not have the same or better B-BBEE status, unless the work is sub-contracted to an EME that has the capability to execute the work and it is below the EME threshold. In such cases in respect of public sector procurement where more than 25% of the project costs flow to the other entity that does not have an equal or better B-BBEE status level, joint ventures or consortia should be formed with a combined scorecard for all entities in the joint venture or consortium, in line with applicable regulations.
• The overall black ownership targets for both contractors and BEPs are 32.5% for years 1 to 3 after the effective date of the Amended CSC and 35% for year 4 onwards. The black women ownership targets for both contractors and BEPs are 10% for years 1 to 3 after the effective date of the Amended CSC and 14% for year 4 onwards.
• The management control element of the scorecard measures the extent of participation of black people on the board of a construction entity and at executive management, senior management, middle management and junior management levels against pre-defined targets for each of those categories.
• The extent of participation of black professionally registered employees as a percentage of all professionally registered employees is now also separately measured against a target of 50%. Black employees that are "youth" as a percentage of all employees is also separately measured against a target of 30%.
• Skills expenditure targets of 2% (for years 1 and 2 after the effective date of the Amended CSC), 2.5% (for years 3 and 4 after the effective date of the Amended CSC) and 3% for year 5 onwards. Interestingly, points are also allocated for the implementation of an approved and verified mentorship programme.
• Higher targets have been set for procurement from empowering suppliers that are at least 51% black owned and empowering suppliers that are at least 35% black women owned. Bonus points are allocated to procurement from 51% black women owned entities. Points have also been allocated towards supplier development contributions to 51% black women owned entities.

There are a number of other issues to note:

• The Construction Sector Charter Council (Council) has been tasked to oversee and monitor the implementation of the Amended CSC. The Council will act with executive authority and provide the necessary links to relevant government institutions at the reporting and compliance levels.
• The Council is also required to perform and release annual reporting as a way to review quantitative and qualitative progress towards transformation in the construction sector.
• Measured entities are obliged to provide their verification certificates to the Council on an annual basis in the prescribed format. The Council will report any incidents of fronting and fraudulent scorecard credentials to the B-BBEE Commission to investigate and prosecute.