The draft broad-based black economic empowerment (B-BBEE) codes for the tourism industry is causing concern within the sector. Currently facing a slump brought about by the change in visa regulations, which requires potential visitors to South Africa to apply in person at the office of an embassy or for those travelling with minors to be in possession of an unabridged birth certificate, the requirements will add to the administrative burden and cost of compliance to companies.
“The Black Economic Empowerment industry has attracted considerable attention over the last few months. Some people are not entirely sure about the scope of recent changes and the effect these mandates may have on their business,” says Robin Matthews, Managing Director of Invasset Compliance and FEDHASA Cape member and expert on issues relating to B-BBEE.
Although still in draft phase, one of the major impacts the “new” codes will have is the change in qualifying revenue thresholds for exempted micro-enterprises, qualifying small enterprises and large enterprises compared with the generic codes. “The majority of businesses in the industry will drop at least two levels – this is especially evident with companies that achieve more than R10 million in turnover and who do not have black ownership,” says Matthews.
Since 2009 average B-BBEE levels have improved from level 5 to level 3 however, should the draft codes be implemented, the progress over the last 5 years is at risk of being reversed.
B-BBEE is here to stay and it will affect businesses in one way or another. There is a very small percentage of business in South Africa not actually influenced by this legislation. Therefore, it is not very easy or advisable to simply ‘ignore’ a legislation of this magnitude, especially since government now consumes 32% of national income each year. The effect is that a large part of the economy is connected to government and its business.
The new draft tourism codes have way more challenges than the current codes and therefore, companies will have to ensure they adopt the correct strategy. “Be prepared to obtain expert advice to ensure you are educated in terms of the new codes,” says Matthews. “It will have an extra cost on your business, but if done correctly, this can be a cost saving in the long run,” he ends.