South African Institute of Professional Accountants
23 June 2014
B-BBEE to play key role in boosting small business
“Government understands that small business is the engine of national economic growth and job creation. That’s why the B-BBEE Act aims to create a legislative environment for small business that facilitates support,” says Faith Ngwenya, Technical and Standards Executive at the South African Institute of Professional Accountants (SAIPA).
The President in his State of the Nation address delivered on 17 June 2014 pledged the government’s commitment to sharpen the implementation of the amended Broad-Based Black Economic Empowerment Act and the Employment Equity Act in order to transform the ownership, management and control of the economy.
“Our members have a major role to play in helping new B-BBEE legislation to achieve its goal of boosting small business,” says Ngwenya. “However, the implementation of the new provisions will demand co-operation and support from all sectors, and that includes accounting professionals.”
The B-BBEE Act makes provision for the establishment of the B-BBEE Commission, which SAIPA says it hopes will soon be installed, along with the new B-BBEE Commissioner who will be appointed by Minister of Trade and Industry, Dr Rob Davies.
“We can’t emphasise enough the importance of the Commission – as well as the new Ministry of Small Business – for the role they have to play in developing the SME sector in South Africa. They are geared towards providing SMEs with the support they need to succeed, for the benefit of the entire economy as jobs are created. As SAIPA, we’re here to help in any way we can!”
New additions to the B-BBEE Act
The recently gazetted additions to the B-BBEE Act 46 of 2013, made on 27 January 2014, focus on the key strategic objective of boosting small business in South Africa. The additions aim to:
· Empower rural and local communities by enabling access to economic activities, land, infrastructure, ownership and skills;
· Promote access to finance for black start-ups, small, medium and micro enterprises, co-operatives and black entrepreneurs, including those in the informal business sector
· Increase effective economic participation and black owned and managed enterprises, including SMMEs and co-operatives and enhancing their access to financial and non-financial support.
These additions to the revised Act will be key components of policy for the Ministry of Small Businesses, headed by Ms Lindiwe Zulu.
“The success of the ministry will certainly be measured, amongst other things, by the growth and achievement of these objectives in the Act,” adds Ngwenya. “SAIPA is excited about supporting the ministry in this way and seeing the development of this sector.”
Areas to note when implementing the Codes
The new B-BBEE Codes of Good Practice that were gazetted by government on 11 October 2013 will become effective on 30 April 2015. They will govern the implementation of empowerment policies for all businesses, however there remain certain grey areas in implementing the codes.
The 12-month delay in implementation happened because the Section 9 Sector Codes had to be revised in line with the new generic codes of good practice. The Section 9 Codes are intended to provide a standardised set of best practice codes for all business sectors, since some sectors developed codes independently, and may have stricter or less stringent criteria than others.
A key issue that needs to further clarification regards the exact nature of the sworn affidavit that small businesses need to produce to confirm their status as falling into the Exempt Micro entity (EME) and Qualifying Small Entity (QSE) categories. The turnover thresholds for these entities have been revised upwards to R10 million for EME and R50 million for QSE for entities excluding those with different thresholds prescribed by the various Sector codes. Around 93% of businesses fall into the under R10 million threshold whilst a further 2% have turnover under R50 million. That means 98% of SA businesses will be in the sworn affidavit-producing entities.
“For SAIPA, this constitutes a very grey area as the affidavits are meant to confirm technical elements of the entity i.e. turnover and ownership compliance for EMEs, and the satisfaction of turnover threshold criteria for the QSE,” says Ngwenya. QSEs must satisfy the turnover threshold, but also comply with the compulsory elements stipulated in the new Codes of Good Practice of 2013 i.e. Ownership; Skills Development and Supplier and Enterprise Development.
In SAIPA’s view, such information requires the confirmation of professional accountants and BEE verification professionals. “Currently”, concludes Technical and Standards Executive at SAIPA Faith Ngwenya, “the sworn affidavit required by the Codes may be done at police stations and other justice related entities who may not know anything about the B-BBEE legislative requirements. This is a priority that the DTI needs to address urgently. SAIPA is very willing to assist in this regard.”