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An overview of the revised Generic BEE codes of good practice

Clarification statements – application of revised & sector codes

Revised Sector Charters i.e. MAC ( Media, Advertising and

Communications, Tourism, Agri)

Implications of poor performing suppliers on your scorecard

Scenario Plan

What to do going forward

Enterprise & Supplier Development - Gezajozi

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” the secret of change is to focus all of your energy, Not on fighting the old but on building the new”

…………………………Socrates

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5

CURRENT

Ownership

Management Control

Employment Equity

Skills Development

Procurement

Enterprise Development

Socio-Economic Development

REVISED

Ownership

Management Control

Skills Development

Supplier & Enterprise Development

Socio-Economic Development

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7

100% Black owned = Level 1

> 50,1% to 99% Black owned = Level 2

≤ 50% Black owned = Level 4

White owned = Level 4

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• Sworn affidavit confirming:

– Annual total revenue is less

than R10 million

– Level of black ownership

• The above must be done on an

annual basis

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Turnover between R10m to R 50 million pa

Measure all 5 elements

Comply with at least 2 priority elements:

• Ownership (compulsory) and

• Ent & Supplier Dev or Skills Development

Entities who do not meet priority element thresholds

the overall score will with be discounted by 1 level

Sub minimum’s

Enhanced recognition for black owned QSE’s:

100% Black owned = Level 1

Greater than 51% black owned = Level 2

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For >50% Black owned entities:

Sworn affidavit confirming:

Annual revenue is less than R50 million

Level of black ownership

The above must be done on an annual basis

For <50% Black owned entities:

BEE Certificate

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Turnover > R50 m per annum

Measure all 5 elements

Comply with all 3 priority elements

• Ownership, Ent & Supplier Dev, Skills Dev

Entities who do not meet priority element

sub minimum targets the overall score will

be discounted by 1 level

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Priority element for both Generic and QSE’s

Sub minimum requirements:

• Minimum of 40% of Net Value targets, based

on time graduation factor

Non-compliance with Threshold targets:

• Result in the achieved B-BBEE status level

being discounted by one level

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Junior Managers now included

Staff excluded for QSE’s

Targets broken down into different race sub groups

ME can elect to apply national or provincial EAP targets

EEA2 & EEA4 are pre-requisites to qualify as empowering

suppliers.

• African Male

• Indian male

• Coloured Male

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African 40.7 African 34.2

Coloured 5.8 Coloured 5.0

Indian 1.9 Indian 1.1

White 6.4 White 4.9

54.8 45.2

Male Female

Province A C I W A C I W Total

Western Cape 17.8% 27.1% 0.2% 7.8% 16.1% 23.9% 0.1% 7.0% 100.0%

Eastern Cape 39.9% 7.7% 0.4% 5.7% 35.5% 5.5% 0.4% 4.8% 100.0%

Northern Cape 28.0% 20.7% 0.1% 4.9% 24.2% 19.0% 0.0% 3.0% 100.0%

Free State 47.1% 1.7% 0.2% 5.3% 40.4% 1.2% 0.1% 4.1% 100.0%

KwaZulu-Natal 42.3% 1.3% 7.3% 3.3% 38.3% 0.8% 4.4% 2.3% 100.0%

North West 52.2% 0.8% 0.2% 5.7% 37.7% 0.4% 0.0% 3.1% 100.0%

Gauteng 42.5% 1.9% 1.5% 9.8% 34.2% 1.9% 0.9% 7.2% 100.0%

Mpumalanga 47.8% 0.3% 0.5% 4.7% 42.9% 0.1% 0.1% 3.6% 100.0%

Limpopo 54.5% 0.2% 0.5% 1.8% 41.3% 0.1% 0.2% 1.5% 100.0%

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16

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Targets based on overall demographic representation of

black people as defined (African, Coloured, Indian)

Require Workplace Skills Plan, Annual Training Report,

SETA approved Pivotal report, Implementation of priority

skills programme for black employees

External training for unemployed black people included

Mandatory training as prescribed by SETA has been

excluded

Trainee tracking tool developed for bonus points

Sub minimum of 40% of targets to be achieved to avoid

discounting principle

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19

Cat Narrative

Description

Delivery

Mode

Learning Site Learning Achievement

A Institution-based theoretical

instruction alone – formally

assessed by the institution

Institutional

instruction

Institutions such as universities

and colleges, schools, ABET

providers

Recognised theoretical knowledge resulting in

the achievement of a degree, diploma or

certificate issued by an accredited or

registered formal institution of learning

B Institution-based theoretical

instruction as well as some

practical learning with an

employer or in a simulated

work environment – formally

assessed through the

institution

Mixed mode

delivery with

institutional

instruction as well

as supervised

learning in an

appropriate

workplace or

simulated work

environment

Institutions such as universities

and colleges, schools, ABET

providers and workplace

Theoretical knowledge and workplace

experience with set requirements resulting in

the achievement of a degree, diploma or

certificate issued by an accredited or

registered formal institution of learning

C Recognised or registered

structured experiential

learning in the workplace

that is required after the

achievement of a

qualification – formally

assessed by a statutory

occupational or professional

body

Structured learning

in the workplace

with mentoring or

coaching

Workplace Occupational or professional knowledge and

experience formally recognised through

registration or licensing

D Occupationally-directed

instructional and work based

learning programme

that requires a formal

contract – formally

assessed by an accredited

body

Institutional

instruction together

with structured,

supervised

experiential

learning

in the workplace

Institution and workplace Theoretical knowledge and workplace

learning, resulting in the achievement of a

South African Qualifications Authority

registered qualification, a certificate or other

similar occupational or professional

qualification issued by an accredited or

registered formal institution of learning

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Cat Narrative Description Delivery Mode Learning Site Learning

Achievement

E Occupationally-directed instructional and

work based learning programme that does

not require a formal contract – formally

assessed by an accredited body

Structured, supervised

experiential learning

in the workplace which may

include some institutional

instruction

Workplace and some

institutional as well as ABET

providers

Credits awarded for

registered unit standards

F Occupationally-directed informal

instructional programmes

Structured information

sharing or direct instruction

involving workshops,

seminars and conferences

and short courses

Institutions, conferences

and meetings

Continuing professional

development,Attendance

certificates and credits

against registered unit

standards (in some

instances)

G Work-based informal programmes Informal training Workplace Increased understand of

job or work context or

improved performance or

skills

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Value adding suppliers replaced with

‘Empowering Supplier’

Combine Procurement & Enterprise Development

Procurement (25 points)

Supplier Development (10 points)

Enterprise Development (5 points)

Bonus points (4 points)

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WHO QUALIFIES AS AN ‘EMPOWERING SUPPLIER’?

EME’s and Start-Ups are automatically

recognised as Empowering Suppliers

100 % Black owned QSE with turnover below

R 50 million

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Meet at least 3 criteria if Generic and 1 if QSE:

25% of Cost of Sales (excl Labour & depreciation) procured

locally

50% jobs created are for Black people in the last measured

period

25% transformation of raw materials

12 days pa assisting Black EME & QSE’s to increase operational

and financial capacity

Atleast 85% of labour costs should be paid to South African

employees by services industry entities

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Remains as 1% of NPAT

Approved Socio-Economic Development

contributions / Beneficiaries

75% of the Socio-Economic Development

contributions must benefit Black persons directly

Grants, Discounts, Overhead Costs = 100%

benefit

Services rendered, Employee time = 80%

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AFFIDAVITS

The wording of the affidavit must meet the guidelines

provided for in the Dti’s template (see attached)

MANAGEMENT CONTROL

ME can elect to be measured against either National or

Provincial targets

SKILLS DEVELOPMENT

Mandatory training as prescribed by the SETA does not

count towards skills development expenditure

Absorption points will only be earnt after the completion of

the learnership/apprenticeship/internship

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Training has to be inline with Annual Training Report(ATR)

Expenditure on unemployed learners will count towards skills

development expenditure

Training conducted outside of S.A. has to meet SAQA requirements

for it to count as category B,C,D otherwise its recognised as E or F

ENTERPRISE & SUPPLIER DEVELOPMENT

ESD invoices raised but are not paid within the period cannot count

towards ESD expenditure

The distinction between an Enterprise development beneficiary and

supplier development beneficiary is whether or not the beneficiary is

an empowering supplier.

An SD beneficiary can be an ED beneficiary but an ED beneficiary

can NEVER be a SD beneficiary if they are not an empowering

supplier

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Procurement – Imports based on technical specifications and brand can only

be excluded if an ESD programme has been developed and implemented

In order to obtain an additional 1.20% enhanced recognition for supplier

development the ME must demonstrate the following:-

- provide evidence that a signed, valid and acceptable contract

of a minimum 3 years exists between the ME and the beneficiary

- provide evidence that a first-time supplier has not supplied to the

ME prior to the measurement period

EMPOWERING SUPPLIER

Skills Development Levies are a pre-requisite in order to qualify as an

empowering supplier

EEA2 & EEA4 are not pre-requisites for measuring MC but they are for

determining ‘empowering supplier’ status

50% of jobs created should be for black south african citizens and the number

of black south african employees should have been maintained since the last

verification

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AGRI BEE (28/12/2012)

Integrated Transport (21/08/2009) -

Chartered Accountancy (10/05/2011) -

Property (01/06/2012) -

Information & Communication Technology (06/06/2012)

Financial Services (29/11/12)

Construction (05/06/2009)

Forestry (12/06/2009)

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INDUSTRY Sub-Sector GENERIC/Large Entity

Public Relations Industry > R 10 million

Advertising Industry > R 50 million

Marketing, Advertising and Communication Research

Industry> R 50 million

INDUSTRY Sub-Sector QSE

Public Relations Industry R 1 million - R 10 million

Advertising Industry R 10 million - R 50 million

Marketing, Advertising and Communication Research

IndustryR 10 million - R 50 million

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ELEMENT WEIGHTING WEIGHTING

Ownership 25 25

Management Control 27 15

Skills Development 30 25

Enterprise and Supplier Development 42 30

Socio-economic Development 5 5

Responsible Marketing and

Communications

5 5

134 Points 105 Points

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Remains as 1% of NPAT

Approved Socio-Economic Development contributions / sector

specific programs of the entity to promote responsible behavioural

changes in line with Government’s strategic objectives.

75% of the Socio-Economic Development contributions must

benefit Black persons directly

Grants, Discounts, Overhead Costs = 100% benefit

Services rendered, Employee time = 80%

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Government

Mining

Banks

Insurers

Retail

Tourism

Telecoms

M.E.

M.E.Supplier

SuppliersSuppliers

Suppliers

M.E.

Suppliers

Suppliers

Suppliers

Suppliers

Suppliers

Suppliers Suppliers

Suppliers

Suppliers

Suppliers

M.E.

Suppliers

Suppliers

SuppliersSuppliers

M.E.

Suppliers

Suppliers

M.E.

Suppliers

Suppliers

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WHAT IS THE BENEFIT?Spend with suppliers with higher BEE Levels are

advantageous. Suppliers with levels above Level4 will contribute more than the actual spendtowards your procurement spend and suppliersbelow Level 4 will contribute less than actualspend. The way in which companies haveapproached Preferential Procurement in thepast is simply no longer relevant. Innovative,strategic thinking is now required.

IMPACT ON YOUR SCORECARD?1. Reduced procurement recognition spend, thereby increasing your

TMPS (total Measured Procurement spend) target.

2. Potential discounting due to not meeting the sub-minimum target for ESD(includes Preferential Procurement)

3. Create ESD programmes , which could be costly.4. When used strategically suppliers with higher BEE levels will often

reduce the effects of having suppliers with a level lower than 4 or no

certificate or a Non-Compliant certificate because the enhanced spend with other suppliers can fill the gaps.

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On the Codes of Good Practice five criteria are measured

1. Spend on BEE compliant suppliers

2. Spend on QSE and EME supplier

3. Spend on 50% Black Owned suppliers

4. Spend on 30% black female owned suppliers

5. Spend with designated group suppliers that are 51% black owned

(Bonus Points)

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WHAT IS THE SCENARIO PLAN?

• Based on an in-depth analysis of your current score, we identify

initiatives that need to be undertaken in order to achieve your desired

level of compliance during the current financial period. This allows the

ME to make flexible long-term plans.

• A cost benefit analysis is compiled in the report, thereby giving the ME

an actual cost estimate in order for to achieve the desired level of

compliance.

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ELEMENT Weighting BONUS POINTS Current Year to date Scenario: Revised Codes

OWNERSHIP EQUITY

25 0 0

MANAGEMENT CONTROL

19 0 4.59

SKILLS DEVELOPMENT

20 5 0.98

ENTERPRISE AND SUPPLIER DEVELOPMENT

40 4 5.27

SOCIO-ECONOMIC DEVELOPMENT

5 0 0.76

TOTAL SCORE 109 9 11.60

Current Year to date Scenario

ELEMENT Weighting BONUS POINTS Future Scenario: Revised Codes

OWNERSHIP EQUITY

25 0 0

MANAGEMENT CONTROL

19 0 4.59

SKILLS DEVELOPMENT

20 5 25

ENTERPRISE AND SUPPLIER DEVELOPMENT

40 4 28.73

SOCIO-ECONOMIC DEVELOPMENT

5 0 5

TOTAL SCORE 109 9 63.32

Proposed Future Scenario

Future Estimated Score NON - COMPLIANT

Discounted by 1 level YES – remains non-compliant

Procurement recognition level 0%

Empowering Supplier Status UNKNOWN

Future Estimated Score LEVEL 7

Discounted by 1 level YES to level 8

Procurement recognition level 10%

Empowering Supplier Status UNKNOWN

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Start preparing your BEE Strategy NOW – needs to be driven from the top

down, systems in place to capture evidence, allocate a low level resource to

do the ground work.

Succession Planning - start identifying employees that you can upskill in order

for them to move up the hierarchy into management roles.

Start gearing up for the revised codes NOW.

Consider engaging a reputable B-BBEE Consultant to help you formulate a

sound strategy.

Look to recruit black disabled female employees as they have higher

recognition on the scorecard

Look for more black owned EME’s or QSE’s or Female Owned entities to

procure from

Consider offering suppliers training on the revised Codes, offer them access to

a workshop on the practical elements of how to assess the impact of the new

scorecard, and how to engage in a strategic intervention to identify how toimprove their B-BBEE scorecard over the next four years.

“If you can’t fly then run, if you can’t run then walk, if you can’t walk then crawl, but whatever you do you have to keep moving forward.”

~ Martin Luther King Jr.

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Engage a Skills Development Facilitator to ensure that the correct

interventions have been implemented and that all learnerships

meet the learnership requirements under the revised codes.

Consider doing a Gap Analysis/Scenario Plan to understand your

areas of weakness in order to prepare you for the revised codes.

Don’t engage your suppliers like you have previously – it won’t work.

There will be many empty promises and limited buy-in and

commitment. We recommend contractual obligations, committing

suppliers to achieve four-year targets, and financial penalties for

those who do not attain them

Establish a supplier portal where prospective suppliers can register

their interest in becoming a supplier to your company

conduct an analysis into your spend and identify commodities that

could offer opportunities for a change in supply.

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Identify an Enterprise and Supplier Development Beneficiary that

you can start to develop, as this involves setting out a detailed

program which needs to have:

Clear objectives

Priority Interventions

Key Performance Indicators

Concise implementation plan with clearly articulated milestones

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