Understanding import exclusions allowed in terms of the BBBEE Codes: Guidelines and Considerations

In the realm of procurement, it’s essential for businesses to grasp the regulations surrounding import exclusions, particularly within the framework of South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) Act. Understanding how to exclude imports from the Total Measured Procurement Spend (TMPS) can significantly impact a company’s B-BBEE compliance and contribute to local economic development. This article will clarify when imports can be excluded from TMPS without needing an Enterprise & Supplier Development (ESD) Plan, as well as when such a plan becomes necessary.

Exclusion Criteria without an ESD Plan

The Codes of Good Practice, under section 9 (1) of the B-BBEE Act, allow for certain imports to be excluded from TMPS without requiring an ESD Plan. Specifically, imported capital goods or components that are essential for value-added production within South Africa can be excluded, provided that:

• No Local Production Exists: There is no existing local production of the capital goods or components in question.
• Promotion of Local Production: Importing these goods promotes further value-added production within South Africa.

When an ESD Plan is Necessary

For imports that don’t meet the criteria outlined above, an ESD Plan is required to exclude them from TMPS. This includes scenarios where:

• No Local Alternatives: There are no local production alternatives available.
• Different Brands or Specifications: The goods carry different brands or have technical specifications that differ from locally produced items.

The ESD Plan should include clear objectives, priority interventions, key performance indicators, and a detailed implementation plan with defined milestones. Without an ESD Plan, a company will not be permitted to exclude these imports during their B-BBEE verification process.

Navigating Designated Sectors

It’s important to note that designated sectors identified by the Department of Trade and Industry (DTI) may impose limitations on import exclusions, which can affect procurement strategies. For instance, in sectors with local content thresholds, only a certain percentage of the imported spend may be excluded from TMPS. Businesses must carefully assess sectoral dynamics and align their procurement practices with regulatory requirements to maximize the benefits of import exclusions.

Impact Analysis

Let’s consider an example involving Galvanized and Coated Steel Pipe fittings, classified as 80% local content spend. In this scenario, only 20% of the total spend on the specific supplier can be excluded from TMPS. For instance, if a company imports R1 million worth of these fittings, the allowable import value for exclusion would be R200,000, calculated based on the local procurement threshold.

In conclusion; Understanding the nuances of import exclusions in procurement is crucial for businesses aiming to comply with regulatory frameworks like the B-BBEE Act. By implementing a well-structured ESD Plan, companies can navigate procurement processes more effectively while fostering local economic growth. However, special attention is needed when dealing with designated sectors to optimize procurement outcomes.

For expert guidance in navigating the provisions of the BBBEE Act and for support in developing and implementing an ESD Plan, feel free to reach out to Elevate Advisory Partners.

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