Amended Forest Sector Code (FSC) – Part 3

PRIORITY ELEMENTS, SUB-MINIMUM AND DISCOUNTING PRINCIPLES, and COMPLIANCE TO PRIORITY ELEMENTS

The Amended Forest Sector Code was published in Gazette 40803 on 21 April 2017.

This is the third in a series of articles listing the basics of this sector code.

PRIORITY ELEMENTS, SUB-MINIMUM AND DISCOUNTING PRINCIPLE

The priority Elements are as follows:

1. Ownership:
   The sub-minimum requirement for Ownership is 40% of Net Value (40% of the 8 points) based on the Time Based Graduation Factor provided in Annexure FSC100 (E).
2. Skills Development:
   The sub-minimum requirements for Skills Development is 40% of the total weighting points (excluding bonus points) for Skills Development.
3. Enterprise and Supplier Development:
   The sub-minimum for Enterprise and Supplier Development is 40% of the total weighting points (excluding bonus points) of each of the three broad categories, within the Enterprise and Supplier Development element, namely Preferential Procurement; Supplier Development and Enterprise Development.

The Measured Entity must achieve at least:

(i) 9.2 points under the Preferential Procurement category;
(ii) 4 points under the Supplier Development category;
(iii) 4 points under the Enterprise Development category;

COMPLIANCE TO PRIORITY ELEMENTS

1. A Large Enterprise is required to comply with all the Priority Elements;
2. A Qualifying Small Enterprise is required to comply with Ownership as a compulsory element, and either Skills Development or Enterprise and Supplier Development.

DISCOUNTING PRINCIPLE EFFECT

1. Non-compliance with the 40% sub-minimum requirements of any of the priority elements will result in the following outcomes for both Large Enterprises and Qualifying Small Enterprises: a. The actual points scored by the Measured Entity and the consequent level that the Measured Entity would have achieved were it not for non-compliance with the 40% sub-minimum requirements will be recognised by the Verification Agency (“the B BBEE Status Level”); b. Notwithstanding the recognition in a. above, the Measured Entity’s B-BBEE Status Level and corresponding B-BBEE Recognition Level will be discounted by one level down. This discounted status and level is what will be reflected on the
   certificate of the Measured Entity.

COMPLIANCE WITH EMPLOYMENT EQUITY ACT

1. The requirement to submit data to the Department of Labour under the Employment Equity Act 55 of 1998 is not the same for all employers. Some employers will initially only need to report to the Department of Labour every second year as opposed to every year.
2. Generic and Qualifying Small Entities that employ less than 150 employees are required to submit sufficient evidence for verification purposes, notwithstanding the fact that they may not be required to report to the Department of Labour each year as contemplated above.
3. Compliance with the reporting requirements of the Employment Equity Act 55 of 1998, is not a pre-requisite for claiming points under the Management Control element as long as the Measured Entity is able to submit sufficient evidence for verification purposes to support its claim under that element.

Non-compliance will disqualify the Measured Entity from being recognised as an Empowering Supplier given the requirement that a Measured Entity must comply with all regulatory requirements of the Employment Equity Act for it to qualify as an Empowering Supplier.

ELIGIBILITY AS AN EXEMPTED MICRO ENTERPRISE (EME)

1. Any enterprise with a total annual Revenue of R10 Million or less qualifies as an Exempted Micro-Enterprise.
2. An Exempted Micro-Enterprise is deemed to have a B-BBEE Status of “Level Four Contributor” and a B-BBEE recognition level of 100%.
3. Enhanced B-BBEE recognition level for an Exempted Micro-Enterprise: a. An EME which is 100% Black Owned qualifies for elevation to “Level One Contributor” having a B-BBEE recognition level of 135%.
   b. An EME which is at least 51% Black Owned qualifies for elevation to “Level Two Contributor” having a B-BBEE recognition level of 125%.
   c. An EME is allowed to be measured in terms of the QSE scorecard should they wish to maximise their points and move to a higher B BBEE recognition level.

An EME is only required to obtain a sworn affidavit or a Certificate issued by Companies and Intellectual Property Commission (CIPC), on an annual basis, confirming the Total annual Revenue of R10 million or less, and level of Black ownership.

Any misrepresentation constitutes a criminal offence as set out in the B-BBEE Act as amended.

An EME may elect to obtain a verification certificate from an accounting officer or verification professional approved in terms of Statement 005.

ELIGIBILITY AS A QUALIFYING SMALL ENTERPRISE (QSE)

1. A Measured Entity with a total annual Revenue of more than R10 million but less than R50 million qualifies as a Qualifying Small Enterprise.
2. A QSE must comply with all of the elements of B-BBEE for the purposes of measurement.
3. Enhanced B-BBEE recognition level for QSE: a. Qualifying Small Enterprise which is 100% Black Owned qualifies for Level One B-BBEE recognition.
   b. QSE which is at least 51% Black Owned qualifies for a Level Two B-BBEE recognition level.
   c. A QSE that is 51% Black Owned or 100% Black Owned is only required to obtain a sworn affidavit on an annual basis, confirming the Total annual Revenue of R50 million or less, and Level of Black ownership, and Empowering Supplier status.

Any misrepresentation above constitutes a criminal offence as set out in the B-BBEE Act as amended.

A QSE that is 51% Black Owned or 100% Black Owned may elect to obtain a verification certificate from a verification professional approved in terms of statement 005. For the avoidance of doubt, all QSE’s other than those referred to above, will be required to obtain a verification certificate to substantiate their B-BBEE status.

All QSE’s in the Forest Sector, other than those referred to above, will be measured in terms of the QSE scorecard as per Code FSC 600 for Measurement Periods of theirs that commences after the effective date hereof.

Measurement Periods that commenced prior to the effective date hereof will be measured under the Original Forest Sector Code.

START-UP ENTERPRISES

1. A Start-Up Enterprise must be measured as an Exempted Micro-Enterprise under this statement for the first year following the commencement of its operations. This provision applies regardless of the expected total Revenue of the Start-Up Enterprise.
2. A Start-up Enterprise is deemed to have the qualifying B-BBEE Status in accordance with the principles of this Statement.
3. In order to qualify as a Start-up Enterprise, the enterprise must provide confirmation of its status.
4. A Start-up Enterprise must submit a QSE scorecard when tendering for any contract, or seeking any other economic activity covered by Section 10 of the Act, with a value higher than R10 million but less than R50 million. For contracts of R50 million or more they should submit the Generic scorecard. The preparation of such scorecards must use annualised data.

THE ELEMENTS IN TERMS OF THE GENERIC SCORECARD

1. The Ownership Element, as set out in Code series FSC100, measures effective ownership of entities by Black people.
2. The Management Control element, as set out in Code series FSC200, measures the effective control of entities by Black people.
3. The Skills Development element, as set out in Code series FSC300, measures the extent to which employers carry out initiatives designed to develop the competencies of Black employees and Black people internally and externally.
4. The Enterprise and Supplier Development element, as set out in Code series FSC400, measures the extent to which entities buy goods and services from Empowering Suppliers with strong B-BBEE recognition levels. This element also measures the extent to which enterprises carry out supplier development and enterprise development initiatives intended to assist and accelerate the growth and sustainability of black enterprises.
5. The Socio-Economic Development and Sector Specific Contributions element, as set out in Code series FSC500, measures the extent to which entities carry out initiatives that contribute towards Socio-Economic Development or sector specific
   initiatives that promote access to the economy for Black people.

ENHANCED RECOGNITION FOR CERTAIN CATEGORIES OF BLACK PEOPLE

Throughout the Codes, various criteria appear which advance the interests of certain categories of Black People. These include:

1. Black women should form between 40% and 50% of the beneficiaries of the relevant Elements of the scorecard;
2. Black People with disabilities, Black youth, Black People living in rural areas and Black unemployed people form part of the beneficiaries of the relevant Elements of the Scorecard.