Inyathelo in the Headlines

Charities get BEE changes canned - 30 Nov 2012 - Business Report

Ann Crotty

Non-profit organisations (NPOs) have welcomed the decision of the Department of Trade and Industry (dti) to withdraw proposed changes to the broad-based black economic empowerment (BEE) codes that would have severely hampered their ability to raise funds from the corporate sector.

In terms of the proposed changes, companies would only have received points towards their BEE scorecards if they funded NPOs with 100 percent black beneficiaries and if the NPOs were involved in income-generating activities.

The dti’s decision followed its consideration of input from scores of concerned stakeholders and, significantly, was taken ahead of next Wednesday’s deadline for the period of public consultation.

Inyathelo executive director Shelagh Gastrow said yesterday that she was thankful that the government had listened to civil society and responded positively to their concerns.

“We explained that the proposed changes would have a devastating impact on the non-profit sector that provides nearly 70 percent of all welfare services in South Africa. We also pointed out that the amendments would provide a perverse incentive to turn away needy people who are not black or who are refugees,” Gastrow said.

On Wednesday, the dti announced the withdrawal of Statement 500, which dealt with donations to NPOs in the context of the BEE codes.

The department referred to a previous statement in which it argued the amendments “would not raise the bar” and said the dti would clarify any “misinterpretations” on completion of the public consultation process.

The dti acknowledged that the earlier statement did not ease the anxiety of NPOs.

“The department therefore concluded that withdrawing the statement [500] immediately would be the most appropriate response.”

Yesterday Louise Bick, a public interest lawyer at Werksmans who advises several NPOs, commended the dti for its decision. She described the effective and co-ordinated response by the NPOs to the proposed amendments as “phenomenal”. Bick noted that NPOs did not have the resources to employ dedicated people to track all of the considerable amounts of legislation that affected them.

“But the fact is that all of these NPOs came forward and managed to provide effective input into the process. This shows that NPOs are using the public consultation process effectively and that the dti is taking [the process] seriously.”

Bick said the department’s earlier statement aimed at easing anxiety did not adequately address the concerns raised by Statement 500.

“For NPOs the broad-based BEE code is critical as the potential to score broad-based BEE points incentivises companies to give 1 percent of net profit after tax. The code has helped to formalise a corporate social investment culture,” Bick said.

She raised concerns about the dti introducing further provisions that would make the codes too difficult for companies to qualify for compliance.

“At this stage the codes are voluntary, but if the provisions are too tough some companies might decide not to bother.”

Colleen du Toit, the chief executive of Charities Aid Foundation Southern Africa, welcomed signs that the government was listening, but queried whether the dti was planning alternative proposals for the canned Statement 500.

“Government departments should be working together to ensure that the so-called ‘enabling environment’ for civil society becomes a reality. This can only happen when a systemic and co-ordinated approach is taken to the various policies/legislation affecting our sector. So [the SA Revenue Service], the dti, Department of Social Development, [National] Lotteries [Board] et al should be working together – rather than shooting off unco-ordinated salvoes such as this Statement 500 controversy.”