Projects aiming to reach financial close in the third round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) in November 2014 will be affected by the amended Broad-Based Black Economic Empowerment Codes of Good Practice (Amended B-BBEE Codes) following amendments to the Implementation Agreement.
Some of the most significant changes to the Implementation Agreement have been made in response to the promulgation of the Amended B-BBEE Codes, which come into force on 1 May 2015. The Amended B-BBEE Codes will have a direct impact on the ability of Round 3 projects to achieve the economic development commitments made regarding preferential procurement of goods and services from suppliers with B-BBEE recognition levels.
The Amended B-BBEE Codes could result in a 2 to 3 level drop in the B-BBEE recognition levels of most suppliers.
All Round 3 projects that chose to make preferential procurement commitments made such commitments in August 2013 under the then current B-BBEE Codes. Bidders could not have been aware of the impact of the Amended B-BBEE Codes on preferential procurement commitments at the time of bidding, as the Amended B-BBEE Codes were only gazetted in October 2013. Generally, the Amended B-BBEE Codes could result in a 2 to 3 level drop in the B-BBEE recognition levels of most suppliers. Thus, Round 3 projects will not be able to meet the commitments they made in respect of preferential procurement at bid submission when the Amended B-BBEE Codes become applicable on 1 May 2015. As a result projects may incur either financial penalties or termination points for breach of the Implementation Agreement.
No doubt, the Department of Energy (DoE) has been flooded with queries relating to the impact of the Amended B-BBEE Codes on the ability of Round 3 projects to meet their economic development obligations. The DoE has a number of practical options available to it, but if it insists on requiring Round 3 projects to comply with the Amended B-BBEE Codes, then one would expect that such projects will need to reassess all of their suppliers based on the Amended B-BBEE Codes and to amend their preferential procurement commitments based on such assessment.