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The Petroleum and Liquid Fuels Sector BBBEE Codes Demystified – Part 1

March 28, 2018

The Petroleum and Liquid Fuels Sector BBBEE Codes Demystified – Part 1

An introduction. Register to receive more insights, news and perspectives on transformation in the South African Fuel Retail Industry 

Over the past month, the Fuel-Retailers Association (FRA) hosted roadshows across South Africa to inform and invite the dealer network for comment on the new Petroleum and Liquid Fuel BBBEE Sector Codes. The PetroCONNECT team attended the roadshows in the Western Cape, Kwazulu-Natal and Gauteng.  

Having listened intently to questions and comments from the dealers, the Department of Energy (DOE) and the Charter Council we have worked to put together a perspective on some frequently asked questions on the topic. 

A quick perspective on BEE 

  • Black Economic Empowerment (BEE) is not affirmative action, nor is its goal to take wealth from one group of people and give it to another.  

  • BEE is a growth strategy which not only seeks to repair South Africa from its past legislation that created economic barriers for a vast number of South Africans, but to address inequality and promote inclusive ownership.  

  • No economy can grow successfully and move forward without the participation and contribution of all its people. 

  • BEE is not an exclusive law to South Africa. Similar laws and acts have been passed in Canada, Australia and Malaysia to promote inclusive ownership. It is therefore a global phenomenon.  

What is the difference between BEE and BBBEE? 

  • While BEE is focused on inclusive ownership, Broad Based Black Economic Empowerment (BBBEE) is aimed at distributing wealth across races and genders. 

What are the goals of BBBEE in a nutshell? 

  • The BBBEE Strategy was published as a precursor to the B-BBEE Act, No. 53 of 2003 with its clear mandate to increasing the number of black people participating in the country’s economy. 

  • BBBEE Legislation is constantly being reviewed and adjusted, with the rollout of the latest amended BBBEE Codes of Good Practice on the 11th October 2013, which made BBBEE compliance almost unavoidable for many industries and especially for larger business entities.  

What is the definition of Black? 

  • The definition of black is any person whose race is African, Coloured or Indian of the Republic of South Africa by birth or descent or who became citizens of the Republic of South Africa by naturalization before 27 April 1994 or on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalization prior to that date.  

  • Dealers have often asked questions during the roadshows about their employment of foreign nationals from other African countries. It is worth considering and keeping in mind that while the goal of BBBEE is to promote inclusive economic participation for South African citizens in accordance with the above definition, business owners should not be concerned that they have to 'let go' of their foreign nationals currently employed given that BBBEE has various scorecard elements to address in a service station's overall transformation strategy. 

What is the purpose of a sector code?  

  • Various sector-specific codes detail the manner in which BBBEE must be measured for businesses operating in particular sectors. 

  • Existing sector codes include Information communication, transport, finance, construction, agriculture, chartered accountancy, forestry and tourism. 

  • The Petroleum and Liquid Fuels Sector Code is anticipated to be gazetted by government later in 2018, and will be one of the last sectors to receive its own sector code. 

What thresholds are proposed for the measurement of service stations?  

  • Three thresholds were proposed - Volume, Turnover and Gross Profit for the entire business entity.  

  • The FRA is proposing that Gross Profit be used for many reasons stated by dealers at the meetings.  

  • The FRA further argues that focusing on volumes will attract a third-party verification process thus adding compliance costs. This further supports the argument in favour of using Gross Profit as measurement.  

What are the main differences between the different business classifications? 

  • Exempt Micro Enterprise 

  • Qualifying Small Enterprise 

  • Generic Enterprise 

What are the main elements of the Scorecard?  

  • Ownership 

  • Management Control 

  • Skills development 

  • Enterprise and supplier development 

  • Socio economic development 

Register for your subscription to receive part two of our content series, where we help make sense of  the different business classifications and main elements for each scorecard.  To register, click here.

 

 

 

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