Keith Levenstein, CEO of BEE advisory firm, EconoBEE is calling upon the dti minister to issue a notice as soon as possible about the status of the sector codes, the Qualifying Small Enterprises (QSE) codes and the amended codes. The intention is that the amended codes will come into effect on 1st May 2015. The problem is that sector codes and the QSE codes (businesses with a turnover of R5m to R35m) have not yet been issued, with just over seven months to go to the start date.
Says Levenstein: “The dti has been saying since October 2013 that they will be issuing the codes shortly. Initially it was the first quarter of 2014, then by June, now before the end of the third quarter.
“There is the possibility that the dti will issue the outstanding codes in time. However, the chances are that this will not be done in time. Either way, we need clarity. If the codes are not ready, we need to know how the dti will react and what they expect of businesses wanting to support the transformation process. We cannot do this without the minister issuing a notice guiding businesses.”
Levenstein further queries “If the QSE codes are not finalised, do we follow the 2007 codes? What do companies with a turnover of between R35m and R50 million do? The 2007 codes define a QSE as one with a turnover of R5m to R35m. The Amended codes define a QSE as one with a turnover of up to R50m. For example, a R49-million company is in no man’s land.”
Similar issues exist for the sector codes. If they are not ready, then which set of codes will an ICT company follow as well as the other sectors such as construction, tourism, transport, forestry, accounting profession, agriculture, financial and property.
The issue arises that if an IT company continues to use the current ICT codes, it will be unfair to all other sectors using the Amended codes. This is a serious contradiction for some companies to be allowed to use the more lenient Sector Codes while others are required to use the Amended Codes. At the same time it will be unfair to companies in the sectors to be told on 1st May 2015 that they now have to follow the Amended Codes.
“We have been saying and have heard rumours that if a sector code is not ready by the 1st May 2015 the dti will expect a company to follow the Amended codes. While not perfect, this is an acceptable solution. However, the dti minister needs to make this announcement soon. It is already too late for companies to start planning for the Amended Codes. They could be excused for saying they were awaiting their sector code prior to planning for it.
“Let us assume that all Sector Codes will be ready by 1st May 2015. There is still no harm in the minister issuing a notice as a precautionary measure just in case one of the Sector Codes are delayed. We know there is a problem if the minister does announce that sector codes will be scrapped on 1st May, leaving the Amended Codes as the only code to follow until the new sector code is released.
“The problem is the sector councils are working furiously to try to release their Sector Code, and if the minister gives them an extension, they will take their foot off the pedal. While a delay in Sector Codes is a potential solution, we see no solution to the potential delay in issuing the QSE codes. If the dti does not get the QSE codes ready, the minister cannot reinstate code 800 of the 2007 codes.
“We cannot see any solution other than to delay the Amended Codes by a further 12 months, or exempt all QSEs from BEE, ie extend the threshold of EMEs – and watch fronting increase dramatically. By delaying the issuing of some of the codes and not thinking through the process, the dti has painted itself into a corner. We urgently call upon the minister to make it clear what will happen as from 1st May 2015,” said Levenstein.