The Amended Forest Sector Code was published in Gazette 40803 on 21 April 2017.
This is the first in a series of articles listing the basics of this sector code.
The sector code lists a few objectives as shown below:
- Specify the measurement principles and industry-specific principles of Broad-Based Black Economic Empowerment (B-BBEE).
- Specify the application of the Amended FSC and the basis for measurement under the Amended FSC;
- Indicate the qualifying threshold for Measured Entities to qualify as Exempted Micro Enterprises (EME) or Qualifying Small Enterprises (QSE);
- Specify the method of measuring start-up enterprises.
- Specify the elements of B-BBEE measurable under the Generic Scorecard and Qualifying Small Enterprises Scorecard;
- Specify the basis for determining compliance by Entities with the Amended FSC; and
- Provide for the Effective Date and Transitional Arrangements.
KEY PRINCIPLES
MEASUREMENT PRINCIPLES
The fundamental principle for measuring B-BBEE compliance is that substance takes precedence over legal form.
In interpreting the provisions of the Codes, any reasonable interpretation consistent with the objectives of the B-BBEE Act as amended and the B-BBEE Strategy must take precedence.
The basis for measuring B-BBEE initiatives under the Codes:
a. For the ‘Ownership’ and ‘Management Control’ elements, the B-BBEE compliance of the Measured Entity at the Date of Measurement; and
b. For the ‘Skills Development’, ‘Enterprise and Supplier Development’, and ‘Socio-Economic Development’ elements, the B-BBEE compliance of the Measured Entity over the Measurement Period.
Any misrepresentation or attempt to misrepresent a measured entity’s true B-BBEE status will be dealt with in accordance with the provisions as set out in the B-BBEE Act as amended and may lead to the disqualification of the entire scorecard of the entities concerned.
Initiatives which split, separate or divide a measured entity with the intent of ensuring eligibility as an exempted micro-enterprise, a qualifying small enterprise or a start-up enterprise will constitute an offence and will be dealt with in accordance with the provisions as set out in the B-BBEE Act as amended.
When determining eligibility as an Exempted Micro-Enterprise, a Qualifying Small Enterprise, or a Generic Enterprise, only the revenue of the Measured Entity will be considered, unless the Measured Entity is seeking a consolidated verification that includes its subsidiaries. The aggregate revenue of related enterprises will only be considered as per par 8.4.11 of Appendix 2 of the “Ownership Section” of the Draft Verification Manual (Gazetted 39378, 6 November 2015) as finalised and amended, where:
An intent to defraud is present, or where a holding entity that does not house the operations of the group is measured separately.Any representation made by an entity about its B-BBEE compliance must be supported by suitable evidence or documentation. A measured entity that does not provide suitable evidence or documentation supporting any initiative must not receive any recognition for that initiative.
Wherever a standard valuation method applies to measuring an indicator, the same standard should apply, as far as reasonably possible, consistently in all other applicable calculations in this statement.
The measurement of unincorporated joint ventures will be done as follows in line with the draft verification manual as finalised and amended:
a. Unincorporated Joint Ventures are required to compile a consolidated verification certificate. A consolidated verification certificate will consolidate the verified compliance data of joint venture partners in accordance with paragraph "b" below as if those Measured Entities were a single Measured Entity.
b. The consolidation of compliance data shall be based on a weighting in accordance with the joint venture agreement relevant to the specific joint venture. Therefore, should two companies enter into an Unincorporated Joint Venture their respective scores in terms of the Amended FSC will be weighted
according to their proportionate share in the joint venture and added together for a combined score out of 100.
c. Should a company qualify in terms of the Qualifying Small Enterprise Scorecard, its B-BBEE score out of 100 must be used to calculate the consolidated score.
d. 51% Black Owned or 100% Black Owned EME’s and QSE’s will qualify for a score of 95 or 100, respectively.
e. EME’s other than those in paragraph 2.1.9.4 above will qualify for a score of 85.
f. Where all the partners in the joint venture are Empowering Suppliers, the Unincorporated Joint Venture will also qualify as an Empowering Supplier. If not, the compliance of the Unincorporated Joint Venture with the Empowering Supplier requirements must be measured as though it is a single Measured Entity, with each partner contributing to the categories of measurement for Empowering Supplier status in proportion to its share in the joint venture.
Where a matter is not expressly dealt with in terms of this Amended FSC, the general Codes of Good Practice will take precedence. In all other matters this Amended FSC will take precedence.
To the extent that the following statements contained in the Codes and as amended from time to time do not contradict a provision of this Amended FSC, they are expressly incorporated into the Amended FSC as per the table below:
Statement Description
004 Scorecards for SPECIALISED Enterprises
005 BROAD-BASED BLACK ECONOMIC EMPOWERMENT VERIFICATION
102 RECOGNITION IN THE SALE OF ASSETS
103 THE RECOGNITION OF EQUITY EQUIVALENTS FOR MULTINATIONALSMeasured entities are only measurable against their South African operations. This applies to the measurement of all the elements and indicators of the scorecard.
The next article will list sector-specific principles and applications of the code.
