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ICT codes bring new challenges for SA firms

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The Amended ICT codes, gazetted on 7 November, are similar to the draft codes, but in our opinion are unnecessary, as with the other sector-specific codes. The sector codes introduce rules and complexities to all companies who invariably need consultants to help navigate their way, writes Lianne Levenstein, CEO of BEE advisory firm EconoBEE, a BEE advisory firm.
It is impossible for QSE in the ICT industry to get to a level 1. Due to the points to level table changing so drastically, there aren’t enough points on the QSE scorecard to get a level 1.
The changes in the ICT sector codes are mainly in the points-to-level table, which means companies are now going to be getting a lower level of compliance than they had been planning. Their strategy needs to change quickly to negate this important change and still get a compliant level. We have an ICT client who had been highly compliant in the past and was planning on achieving a level 2 using the amended codes, unfortunately they are now going to be a level 4.
On the positive side, EMEs that are 75% black owned are now level 1. For Skills Development, accommodation for people with disabilities will be included as skills development spend – also new and a positive.
There are numerous international ICT companies operating in SA. This does affect them. The revised points-to-level table means another challenge for international companies who will be rated at a lower level as well as being discounted due to the priority elements. (Ownership, Skills Development and Enterprise and Supplier Development).
An alternative to ownership was introduced some time ago, known as equity equivalents. This encourages multinationals, who cannot have local ownership, to spend more on skills development and enterprise development – up to an equivalent of 25% of their net value. Microsoft has qualified for Equity Equivalents but we don’t think many other companies will qualify.
Although there are more points available for the ICT generic scorecard(130, 141 with bonus points), the QSE scorecard (for businesses with a turnover of R10m to R50m per annum) is much harsher with less points available as a result it will be much more difficult for a QSE to get a good score.

Summary of the scorecard

Elements Generic Scorecard     QSE Scorecard
Ownership 25 25
Management Control 23 15
Skills Development 20 25
Enterprise and Supplier Development – Preferential procurement 25 20
Supplier Development 10 5
Enterprise Development 15 5
Socio Economic Development 12 12
Total 130 107

 

 

Points to level table

B-BBEE Status Qualification B-BBEE recognition level
Level  One Contributor >=120 points on the ICT Scorecard 135%
Level  Two Contributor >=115 points on the ICT Scorecard 125%
Level  Three Contributor >=110 points on the ICT Scorecard 110%
Level  Four Contributor >=100 points on the ICT Scorecard 100%
Level  Five Contributor >=95 points on the ICT Scorecard 80%
Level  Six Contributor >=90 points on the ICT Scorecard 60%
Level  Seven Contributor >=75 points on the ICT Scorecard 50%
Level  Eight Contributor >=55 points on the ICT Scorecard 10%
Non-Compliant Contributor <55 points on the ICT Scorecard 0%