The sector code costs the taxpayer and industry a lot of money to create and administer – staff costs, office costs, legal costs and department costs – yet it is not being followed sufficiently or enforced, argues KEITH LEVENSTEIN
Sector codes were designed to allow industries to change their BEE scorecard to be more applicable to a particular industry. For example, the financial sector code identifies “access to finance” as one of the important elements applicable to the finance industry. The Construction sector code uses a different adjustment for gender because it recognises that the industry, by its nature, is male dominated.
The tourism sector code, issued in 2009, has some differences to the generic codes, but it has significant impact on how it is followed. For example, the threshold for Exempt Micro Enterprises (EMEs) is R2 500 000. There must be a good reason why the tourism industry wants to limit the size of an EME – and it generally only effects guesthouses and B&Bs.
Gross transgressions
There is one problem; due to the differing thresholds, companies intentionally or in error issue an EME certificate with the wrong threshold – showing that the company is an EME because its turnover is less than R5-million. We have uncovered hundreds of certificates that use a threshold of R5-million. In addition, many companies simply ignore the sector code and get verified in terms of the codes of good practice.
We report these transgressions whenever we can to the sector council. Unfortunately, nothing gets done about it. Although the Department of Tourism accepts that this practice is happening, they are powerless or refuse to do anything about it.
These are not isolated instances. It is pervasive through the industry. It is not only EMEs but all size tourism companies that do not bother to follow their own sector code. We contend that if the sector code is not followed or enforced, it serves no purpose.
Inadequate enforcement
We have been trying since 2009 to get the sector code enforced. Today, five years later, the tourism sector council is still busy, wasting tax payers’ money trying to re-write the sector code for the Amended Codes.
Do they have any idea how this new code, costing millions of rands is going to be enforced? The answer is clearly NO. They will say they are waiting for the dti, or SANAS, or IRBA or the BEE Commissioner to do their job.
A costly exercise
This leaves us with no choice but to suggest to the Minister of Tourism that the sector code should be abolished. The sector code costs the taxpayer and industry a lot of money to create and administer in terms of staff costs, office costs, legal costs and department costs, yet it is not being followed sufficiently or enforced.
While we are waiting for every organisation to do its job, we don’t need the sector code. The simple conclusion is the sector code serves no purpose and should be abolished. If it is abolished, tourism companies will follow the Amended Codes.
In the interest of transformation, Minister please abolish the tourism sector code, until such time as you can make it work.
*Keith Levenstein is CEO of BEE advisory firm, EconoBEE. He is passionate about issues relating to transformation.