UNDERSTANDING THE FINALISED BEE CODES

A JSE & CIDA EMPOWERMENT FUND CONFERENCE

07 MARCH 2007

HOW B-BBEE RELATES TO THE BROADER 2014 GOVERNMENT VISION?

Governments Vision (2014)
To have a restructured and adaptive economy characterized by: Growth Employment and Equity

The dtis Objective

To contribute towards a higher level of economic growth so as: to create employment; and reduce the levels of inequality The dti will seek to achieve this goal by among others things acting as a catalyst for the transformation and development of the economy

BACKGROUND: BEE STRATEGY

Since 1994 BEE has been a major thrust of all government policies but there was no coherent strategy towards the implementation of BEE
The BEE commission released a report in 2000 which gave the first attempt at broadly defining BEE The receipt of this report by government played a pivotal role in the development by government of a strategy towards the implementation of BEE In 2003 a strategy for Broad-Based Black Economic Empowerment (B-BBEE) was released

BACKGROUND: BEE STRATEGY

The dtis BEE Strategy document was informed by a vision of developing comprehensible, uniform and consistent strategy with clear guidelines and targets
In 2003 a strategy for Broad-Based Black Economic Empowerment (B-BBEE) was released which defines B-BBEE as
an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings about significant increases in the numbers of black people that manage, own and control the countrys economy, as well as significant decreases in income inequalities. Thus the BEE process will include elements of human resource development, employment equity, enterprise development, preferential procurement, as well as investment, ownership and control of enterprises and economic assets.

BACKGROUND: BEE ACT 53 OF 2003

The strategy laid the foundation for the B-BBEE Act
Section 9 of the B-BBEE Act states that the Minister may by notice in the Gazette issue codes of good practice on black economic empowerment that may include the further interpretation and definition of broad-based black economic empowerment and the interpretation and definition of different categories of black empowerment entities; qualification criteria for preferential purposes for procurement and other economic activities indicators to measure broad-based black economic empowerment: the weighting to be attached to broad-based black economic empowerment indicators guidelines for stakeholders in the relevant sectors of the economy to draw up transformation charters for their sector; and any other matter necessary to achieve the objectives of this Act.

BACKGROUND: BEE ACT 53 OF 2003

Section 10 of the B-BBEE Act further gives the status of the codes by stating that:

Every Organ of State and Public Entity must take into account and, as far as is reasonably possible, apply any relevant code of good practice issued in terms of this Act in
Determining qualification criteria for the issuing of licenses, concessions or other authorisations in terms of any law; Developing and implementing a preferential procurement policy; Determining qualification criteria for the sale of state-owned enterprises; and

Developing criteria for entering into partnerships with the private sector

TRANSFORMATION IMPERATIVES
Governments objective to overcome economic disparities To redress economic imbalances of the past to achieve a sustainable economic growth and development. Economic Transformation Strategy values and principles of equity enshrined in the Constitution Governments vision: South Africans Transformation : A strategy for broadbased black economic empowerment: The county requires an economy that can meet the needs of all its citizens its people and their enterprises- in a sustainable manner. Will be possible if the economy builds on a full potential of all persons and communities across the length and breath of this country. Governments objectives is to achieve this vision of an adaptive economy characterized by growth, employment, and equity by 2014

TRANSFORMATION IMPERATIVES CONT

Changing the complexion of business from largely white dominance to one reflecting the demographic mix and diversity of talent in SA B-BBEE will unlock the full potential of all South Africans B-BBEE Act ( Act 53 of 2003) is an essential tool in transforming the South African economy. Government to use BEE as a tool for Economic Growth Model for this country Economic transformation is a necessity, not an option, to create stability and a growing economy

ECONOMIC IMPLICATIONS OF BROAD-BASED BEE

Increase level of participation by black people in mainstream economy Increase real market size in SA economy Increase income through resulting economic growth More economic participants will result in sustainable economic growth and development

POLICY OBJECTIVES OF BROADBASED BEE

Increase in the number of black people who have ownership and control of enterprises Increase in the number of black owned or black women owned enterprises Increase in the number of black people in executive and senior management of enterprises Accelerated and shared economic growth Increased income levels of black persons and a reduction of income inequalities between and within race groups. Increased inclusion of community and broad-based enterprises, and co-operatives as the form of enterprises.

POLICY OBJECTIVES OF BROADBASED BEE, cont

Increase in employment and skilling of black people (Employment Equity and Skills Development)
Increase in access to markets for black owned and controlled enterprises( Preferential Procurement) Increase in access to financial and non-financial assistance to black owned and controlled enterprises (Enterprise Development)

POLICY INSTRUMENTS TO ACHIEVE BEE

Legislation Enabling framework for promotion of BEE Will enable issuing of the Codes Regulation Licences, concession, public private partnerships Sale of equity stake in SOEs Preferential Procurement Government biggest buyer of goods and services Monitoring and Evaluation of BEE (Advisory Council) Partnerships and Charters Partnership with private sector

BROAD BASED BENEFICIARY BASE

Equitable Economic Opportunities
Ownership And Management

Emerging black middle class & Investors

The Opportunity Barrier

Affirmative Procurement Enterprise Development

Black Entrepreneurs

The Business Barrier

Skills Development & Employment Equity

Black workers and job-seekers

The Skills Barrier

Employment Equity/Job creation Corporate Social Investment

Black unemployed & rural poor

The Poverty Barrier

B-BBEE Framework
Broad-based BEE Act No. 53 of 2003 Broad-based BEE Strategy Legislative Enabling Framework Strategic Framework Implementation Framework and Guidelines
Guidelines Guidelines to maintain to draw Institutional up BEE Framework (BEE Council charters
/Accreditation Agencies)

Codes of Good Practice

Set BEE Generic or Interpret Indicators, Sector-specific BEE Weightings BEE Definitions and Scorecards & Principles Targets

ARRANGEMENT OF THE CODES

Code 000 100 200 300 What is it? General Principles and the Generic Scorecard Conceptual Framework of B-BBEE Ownership Management Control Employment Equity Measures effective ownership of enterprises by black people Measures effective control of enterprises by black people Measures initiatives intended to achieve equity in the workplace Measures the extent that employers carry out initiatives designed to develop the competencies of black employees Measures the extent that enterprises buy goods and services from BEE Compliant suppliers as well as black owned entities Measures the extent to which enterprises carry out initiatives contributing to Enterprise Development Measures the extent to which enterprises carry out initiatives contributing to socio-economic development Measures the extent to which enterprises carry out contributions made by Qualifying Small Enterprises

400

Skills Development

500

Preferential Procurement

600

Enterprise Development

700 800

Socio- Economic Development Qualifying Small Enterprises

CODE 000 : GENERIC SCORECARD

Element Ownership Weighting 20 points Compliance Targets 25% +1

Management control

10 points

(40% to 50%)

Employment Equity

15 points

(43% to 80%)

Skills Development

15 points

3% of payroll

Preferential Procurement

20 points

70%

Enterprise Development Socio-Economic Development TOTAL

15 points

3% (NPAT)

5 points

1% (NPAT)

100 points

BLACK ECONOMIC EMPOWERMENT: AN ECONOMIC GROWTH MODEL

Boost and generate higher economic growth 6% and beyond Transform and deracialise the South African economy Bridging the divide between the first and second economy Reduction of income inequality

BLACK ECONOMIC EMPOWERMENT: AN ECONOMIC GROWTH MODEL, cont

Contribute towards the growth of small enterprises and co-operatives Contribute towards the reduction of poverty Aims to accelerate the participation of black people in the economy Contribute towards the consolidation of democracy

THE JOURNEY THUS FAR

Process of consultation and drafting Labour, business, Community Organisations, sector councils, other key government departments Approval by Cabinet on 6th December 2006 of the Codes Approval by Cabinet on gazetting of FSC and Construction Charter for information purposes Gazetting of Codes and Charters

THE SECTOR TRANSFORMATION CHARTERS

Cabinet gave the dti generic approval to gazette all sector transformation charters under section 12 and 9 of the BEE Act

The Sector Codes will add transformation in South Africa.

momentum

on

Sector Transformation Charters are instruments that involve a partnership between government and private sector in promoting BEE. Alignment of transformation charters to be gazetted as Sector Codes of Good Practice will ensure consistency in the application of measurement of BBBEE across the economy

THE SECTOR TRANSFORMATION THE SECTOR TRANSFORMATION THE THE SECTOR SECTOR TRANSFORMATION TRANSFORMATION CHARTERS, CONT; CHARTERS, CONT; CHARTERS, CHARTERS, CONT; CONT;

Sector Codes (s 9 of BBBEE Act)

Gazetted as a Codes of Good Practice

Transformation Charter (s 12 of B-BBEE)

Gazetted for information purposes only (industrys commitment to transformation) No legal status, not legally binding on Organs of the State and Public Entities.

Same legal status as the Code of good practice, legally binding on Organs of the State and Public Entities.

THE SECTOR TRANSFORMATION CHARTERS, CONT;

No Not binding, can be expressed as a document of intent (Government to use the Codes of Good Practice when interacting with the sector) Apply to be Gazetted under s 12: Binding on signatories to the charter, but not on government or other sectors; Gives credibility to the charter; Meet requirements for gazetting as a Sector Code? -No deviation from definitions and principles -Sufficiently comparable to the codes, in terms of -Elements -Targets -Weightings - Justify any differences to the codes No (Government to use the Codes of Good Practice when interacting with the sector)

Meet s12 requirements? -Sufficiently consultative -Advances BEE objectives

Yes

Apply to be Gazetted under s 9 Yes

Government to use the gazetted sector Codes of Good Practice when interacting with the sector.

THE WAY FORWARD

Marketing and Communication of B-BBEE

BEE Advisory Council

Alignment of other legislations with B-BBEE Act

Strategy on transformation of other sectors Retail and Manufacturing Sectors

Review of B-BBEE Act