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Draft Amended Aviation sub-sector code of 2016 – part 2

This is part two of a series of articles explaining the draft Aviation sub-sector code.

In March 2021 the Department of Transport hosted a summit for the Review of Civil Aviation Policy and specifically B-BBEE transformation.

During the summit reference were made to the following legislation, Policies, Strategies, and information:

  • The B-BBEE Act (53/2003): Transport Sector Broad-Based Black Economic Empowerment (B-BBEE) Codes in Gazette 39744 dated February 2016
  • Broad-Based Black Economic Empowerment Amendment Act
  • The National Development Plan (NDP – 2030)
  • The Aviation Sector Code
  • The Employment Equity Act
  • The Skills Development Act
  • The Competition Act
  • White Paper on National Transport Policy, 1996
  • National Civil Aviation Policy, 2017
  • Draft National Civil Aviation Transformation Strategy, 2018

PRIORITY ELEMENTS, SUBMINIMUM AND DISCOUNTING PRINCIPLE

The priority Elements are as follows:

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 Code 100.

Skills Development:
The sub-minimum requirement for Skills Development is 40% of the total weighting points (excluding bonus points) for Skills Development.

Enterprise and Supplier Development:
The sub-minimum requirement 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.

This means that the Measured Entity must achieve at least:

I. 10 points under the Preferential Procurement category;
II. 4 points under the Supplier Development category; and
III. 2 points under the Enterprise Development category.

COMPLIANCE WITH PRIORITY ELEMENTS

A Large Enterprise is required to comply with all the Priority Elements;
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
Non-compliance with the 40% sub-minimum requirements of any of the priority elements will result in a reduction of one level of the BEE outcome for both Large Enterprises and Qualifying Small Enterprises.

WEIGHTINGS
The weighting of each element reflects the relative importance that the sector places thereon. Weightings are measured in percentage.

TARGETS
The target represents the ideal scenario in which measured entities will score full points for the respective indicator. Aviation enterprises under measurement will score proportional points on each indicator, according to the proportion of the relevant target achieved for that particular indicator. The milestone set for each indicator varies in order to drive an active transformation of the sector towards greater localisation and development of black-owned enterprises.

ELIGIBILITY AS A BLACK NEW ENTRANT
A Black New Entrant is a Black participant who holds rights of ownership in a measured Entity and who, before holding the Equity Instrument in the measured entity, has not held Equity instruments in other Entities which has a total cumulative value of more than R 50 million, measured using a standard valuation method.

ELIGIBILITY AS A LARGE ENTERPRISE
Any enterprise within the scope of the application, excluding airline operators with a total annual revenue of above R35 Million qualifies as a Large Enterprise.
Airline operators with a total annual revenue of above R50 Million qualify as a Large Enterprise.
The Code complies with all principles and methodologies listed in Statement 000 issued for measuring a Large Enterprise.

ELIGIBILITY AS QUALIFYING SMALL ENTERPRISE (QSE)
Any enterprise within the scope of application para 4, excluding airline operators with a total annual revenue of above R 5 Million or less than R35 Million qualifies as a Qualifying Small Enterprise.
Airline operators with a total annual revenue of R 10 Million or less than R50 Million qualify as a Qualifying Small Enterprise.
A QSE must comply with all of the elements of the Aviation Sector Qualifying Small Enterprise Scorecard (Code ASC 600) for the purposes of measurement.

Enhanced B-BBEE recognition level for QSE:
A Qualifying Small Enterprise which is 100% Black Owned qualifies for Level One B-BBEE recognition.
A QSE which is at least 51% Black Owned qualifies for a Level Two B-BBEE recognition level.

A QSE that is 51% Black owned or 100% Black owned is only required to obtain a sworn affidavit or CIPC-issued certificate on an annual basis, confirming the following:

Total Annual Revenue of more than R 5 Million but less than R35 Million or between R10 million and R50 million for airline operators, Level of Black ownership, and Empowering Supplier status.

ELIGIBILITY AS AN EXEMPTED MIRCO ENTERPRISE (EME)

Any enterprise within the scope of application para 4, excluding airline operators with a Total Annual Revenue of R5 Million or less qualifies as an Exempted Micro-Enterprise.
Airline operators with a Total Annual Revenue of R10 Million or less qualify as an Exempted Micro-Enterprise.
An Exempted Micro-Enterprise is deemed to have a B-BBEE Status of “Level Four Contributor” having a B-BBEE recognition level of 100%.

Enhanced B-BBEE recognition level for an Exempted Micro-Enterprise:

An EME which is 100% Black Owned qualifies for elevation to “Level One Contributor” having a B-BBEE recognition level of 135%.
An EME which is at least 51% Black Owned qualifies for elevation to “Level Two Contributor” having a B-BBEE recognition level of 125%.
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 Certificate issued by the Companies and Intellectual Property Commission (CIPC) on an annual basis, confirming the following:

Total Annual Revenue of R 5 Million or less or R10 million or less for airline operators; and Level of Black ownership.

START-UP ENTERPRISES
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. In order to qualify as a Start-up Enterprise, the enterprise must provide confirmation of its status.

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 R 5 Million but less than R35 Million. For contracts of R35 Million or more, they should submit the Large Enterprises scorecard. The preparation of such scorecards must use annualised data.

A third article will discuss the key measurement principles of each element in this sub-sector code.

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