Government’s strategy for Broad-based
Black Economic Empowerment
OverviewOverview
• B-BBEE StrategyB-BBEE Strategy• B-BBEE ActB-BBEE Act• Review of StrategyReview of Strategy• Old scorecar vs New scorecardOld scorecar vs New scorecard• Concerns & Risk around BEEConcerns & Risk around BEE• COGP as a BEE implementation frameworkCOGP as a BEE implementation framework• COGP StructureCOGP Structure• Debates around BEEDebates around BEE• BEE SupportBEE Support• NEFNEF• Other SupportOther Support• ConclusionConclusion
B-BBEE StrategyB-BBEE Strategy
•B-BBEE Strategy document released in B-BBEE Strategy document released in March ’03;March ’03;
•B-BBEE Act no. 53 of 2003;B-BBEE Act no. 53 of 2003;
•Codes of Good Practice;Codes of Good Practice;
B-BBEE Strategy (Cont.)B-BBEE Strategy (Cont.)
A process that:A process that:
•directly contributes to the economic directly contributes to the economic transformation of South Africa;transformation of South Africa;
•brings about significant increases in the brings about significant increases in the numbers of black people who manage, numbers of black people who manage, own and control the country’s economy; own and control the country’s economy; andand
•Results in significant decreases in Results in significant decreases in income inequalitiesincome inequalities
B-BBEE Strategy (Cont.)B-BBEE Strategy (Cont.)
The broad objectives of this initiative are The broad objectives of this initiative are
•Contribute towards economic transformation and Contribute towards economic transformation and growthgrowth
•Ensuring an increased participation of Blacks in Ensuring an increased participation of Blacks in the economy.the economy.
•Ensure optimum intermediation of finance and Ensure optimum intermediation of finance and capital from Black households and redirecting capital from Black households and redirecting these towards productive investments that benefit these towards productive investments that benefit the same communities.the same communities.
•Ensuring state assets are allocated first to Black Ensuring state assets are allocated first to Black Entrepreneurs and as such remain in the hands Entrepreneurs and as such remain in the hands of SA citizens.of SA citizens.
B-BBEE Strategy (Cont.)B-BBEE Strategy (Cont.)
Core elementsCore elements WeightingsWeightings
OwnershipOwnership 20 %20 %
ManagementManagement 10 %10 %
Skills DevelopmentSkills Development 20 %20 %
Employment EquityEmployment Equity 10 %10 %
Preferential ProcurementPreferential Procurement 20 %20 %
Enterprise DevelopmentEnterprise Development10 %10 %
ResidualResidual 10 %10 %
THE B-BBEE ACTTHE B-BBEE ACT
KEY ELEMENTSKEY ELEMENTS
• Setting clear objectives for broad based Setting clear objectives for broad based empowermentempowerment
• Enabling framework for Codes of Good PractiseEnabling framework for Codes of Good Practise
• Creation of a BEE Advisory CouncilCreation of a BEE Advisory Council
• Legislative endorsement for sector ChartersLegislative endorsement for sector Charters
Review of StrategyReview of Strategy
• Public hearings held in 2003 where inputs into draft strategy were made
• Such changes have been incorporated into new revised strategy
• Revised strategy to be issued together with the codes of good practice
• Revised strategy to include new scorecard
Old scorecard vs New Old scorecard vs New scorecardscorecard
OldOld NewNew
No targets includedNo targets included Targets includedTargets included
No points allocated for No points allocated for womenwomen
Points allocated for womenPoints allocated for women
Preferential procurement Preferential procurement based on black ownershipbased on black ownership
Preferential procurement Preferential procurement based on BEE contributionbased on BEE contribution
No bonus points for over-No bonus points for over-performanceperformance
Bonus points given for over-Bonus points given for over-performanceperformance
Indicators limitedIndicators limited More options for indicatorsMore options for indicators
No sub-minimum score No sub-minimum score required for considerationrequired for consideration
Sub-minimum score Sub-minimum score required for considerationrequired for consideration
Current Concerns and Risks Current Concerns and Risks around Broad-based BEE Processaround Broad-based BEE Process
1.1. Inconsistent application of BEE – by private sector and Inconsistent application of BEE – by private sector and different state organs resulting in confusion in the marketdifferent state organs resulting in confusion in the market
2.2. Lack of full understanding and appreciation of the Lack of full understanding and appreciation of the principles of broad-based BEE – People interpret and principles of broad-based BEE – People interpret and apply BEE principle to meet their own requirementapply BEE principle to meet their own requirement
3.3. Extensive debates and delays due to differences in Extensive debates and delays due to differences in interpretation - Market participants debate specific BEE interpretation - Market participants debate specific BEE issuesissues
4. Disparity in Charter Definitions and Targets – Results in 4. Disparity in Charter Definitions and Targets – Results in dilution/negation of potential B-BBEEE impactdilution/negation of potential B-BBEEE impact
5. Lack of Implementation Guidelines can result in ‘Fronting’ 5. Lack of Implementation Guidelines can result in ‘Fronting’ or ‘Sham’ transactions promotedor ‘Sham’ transactions promoted
Code of Good Practice as the BEE Code of Good Practice as the BEE Implementation FrameworkImplementation Framework
Broad-based BEE ActNo. 53 of 2003Broad-based BEE Strategy
Codes of Good Practice
Legislative Enabling FrameworkStrategic
Framework
Implementation Frameworkand Guidelines
InterpretBEE
Definitions
Set BEEIndicators,Weightings
andTargets
Guidelinesto drawup BEEcharters
Guidelinesto maintainInstitutionalFramework(BEE Council /Accreditation
Agencies)
Generic or Sector-specific
BEE Scorecards
Code of Good Practice (Structure)Code of Good Practice (Structure)
Code 000: Framework
Statement 000: Conceptual Framework
Code 100: Ownership
Code 200: Management
Code 300: Employment Equity
Code 400: Skills Development
Code 500: Affirmative Procurement
Code 600: Enterprise Development
Code 700: CSI and Industry Specific
Code 800: BEE Practice Notes
Codeof
GoodPractice
Phase 1
Phase2
Statement 020: Charter Guidelines
Statement 030: BEE Council
Statement 070: Broad-based BEE
ImplementationStatement 090:
Glossary
Statement 100: Ownership
Statement 140: Government Ownership
Statement 200: Management
Each Code explains all issues pertaining to a key BEE element and can consist of
one or more statements
A Statement include a related set of principles that guides the
implementation of one BEE issue
Preferential Procurement Policy Preferential Procurement Policy Framework ActFramework Act
•Changes made to the PPPFA Changes made to the PPPFA regulations in order to align them with the regulations in order to align them with the B-BBEE strategyB-BBEE strategy
•Use of balanced scorecard in Use of balanced scorecard in determining preference pointsdetermining preference points
•Minimum BEE points required for Minimum BEE points required for preference points to be givenpreference points to be given
•Move from narrow-based to broad-Move from narrow-based to broad-based BEE in determining preference based BEE in determining preference pointspoints
•Next to review the PPPF Act to align it Next to review the PPPF Act to align it with the B-BBEE Actwith the B-BBEE Act
BEE SupportBEE Support
• Relaunch of the NEF on 31 May 2004Relaunch of the NEF on 31 May 2004
• Products with focus on addressing market failuresProducts with focus on addressing market failures
• R2bn capitalisation from National TreasuryR2bn capitalisation from National Treasury
• Leadership problems experiencedLeadership problems experienced
• Fraud allegations quickly and decisively dealt withFraud allegations quickly and decisively dealt with
• Reconstitution and strengthening of management Reconstitution and strengthening of management structures structures
NationalNational Empowerment FundEmpowerment Fund
Group and entrepreneurial schemesGroup and entrepreneurial schemes
-Black SMME sectorBlack SMME sector
-Community and rural development Community and rural development projectsprojects
Start-ups, expansion and buy-ins/outsStart-ups, expansion and buy-ins/outs
Debt and/or equity fundingDebt and/or equity funding
Funding of R250k –R10mFunding of R250k –R10m
NationalNational Empowerment FundEmpowerment Fund
Contact details - (011) 772 8000Contact details - (011) 772 8000
-Group and entrepreneurial schemes-Group and entrepreneurial schemes
-SMME sectorSMME sector
-Community and rural development Community and rural development projectsprojects
-Start-ups, expansion and buy-ins/outs-Start-ups, expansion and buy-ins/outs
-Development projects-Development projects
Debt and/or equity fundingDebt and/or equity funding
Funding of R250k –R10mFunding of R250k –R10m
• Khula Enterprise FinanceKhula Enterprise Finance
• Industrial Development CorporationIndustrial Development Corporation
• Small and Medium Enterprise Development Small and Medium Enterprise Development ProgrammeProgramme
• Black Business Supplier Development Black Business Supplier Development ProgrammeProgramme
Other SupportOther Support
Transformation charter processTransformation charter process
•the dti coordinates and provides strategic input and leadership in the drafting process of the transformation charters for seven priority sectors for BEE:
•Financial service charter;
•Transport and maritime charter;
•Agriculture charter;
•Auto and Aerospace Industry Charter;
•ICT charter;
•Construction Services;
•Engineering Services;
Transformation Charter Process, cont.Transformation Charter Process, cont.Phase 3: almost
complete stage of negotiation and
drafting
Phase 3: almost complete stage of negotiation and
drafting
7 Sub-SectorsPublic -proclamation
of charter
7 Sub-SectorsPublic -proclamation
of charter
Phase 1: consultation and early negotiation and draftting
Phase 1: consultation and early negotiation and draftting
Phase 2: advanced stage of negotiation and drafting
Phase 2: advanced stage of negotiation and drafting
Agriculture sector charter
Agriculture sector charter
ICT charterICT charter
Automobile charter
Automobile charter
Transport Services charter
Transport Services charter
Engineering service charter
Engineering service charter
Financial Service charter
Financial Service charter
Construction sector charterConstruction sector charter
Transport service charter:All 8 sub-sectors have
completed negotiation on balanced score card. 80% of work is done and with
20% remaining.
Transport service charter:All 8 sub-sectors have
completed negotiation on balanced score card. 80% of work is done and with
20% remaining. Automobile sector charter:•Task team established
•Negotiations are at the early stage
•Seven OEMs are drafting their enterprise charters with
scorecards•Components & Retail drafting
sub-sector charters
Automobile sector charter:•Task team established
•Negotiations are at the early stage
•Seven OEMs are drafting their enterprise charters with
scorecards•Components & Retail drafting
sub-sector charters
Last Phase:Submission of draft to Advisory
Council for comments and ratification – dti to publish
charter after ratification
Last Phase:Submission of draft to Advisory
Council for comments and ratification – dti to publish
charter after ratification
FSC-Negotiations and drafting of the charter almost completed. Still
working on targets. Charter council
appointed
FSC-Negotiations and drafting of the charter almost completed. Still
working on targets. Charter council
appointed
ICT- Negotiations and drafting almost
completed. Still to appoint charter council.
Ready to submit the draft to the line dept.
ICT- Negotiations and drafting almost
completed. Still to appoint charter council.
Ready to submit the draft to the line dept.
Agriculture- Negotiations and drafting still
continuing. Consultation process being undertaken
with stakeholders to ensure inclusivity.
Agriculture- Negotiations and drafting still
continuing. Consultation process being undertaken
with stakeholders to ensure inclusivity.
Engineering Services Charter-???
Engineering Services Charter-???
•June 2005 is a deadline date for the formulation
of all charters.•Submission of drafts to the Advisory Council for
comments and ratification.
•dti to publish charters after ratification.
•Dti to gazzette all charters
•Implementation, Monitoring & Evaluation
process
•June 2005 is a deadline date for the formulation
of all charters.•Submission of drafts to the Advisory Council for
comments and ratification.
•dti to publish charters after ratification.
•Dti to gazzette all charters
•Implementation, Monitoring & Evaluation
process
Construction sector charter-negotiations and
drafting almost completed. Still to
appoint charter council.
Construction sector charter-negotiations and
drafting almost completed. Still to
appoint charter council.
Transformation charter process, cont.Transformation charter process, cont.•Additional Sectors developing charters - dti providing technical advice and leadership as well:
–Property sector charter;•(consultation process completed, negotiation and drafting started)
–Cosmetics and toiletry sector charter;•(consulting with all stakeholders and starting negotiation and drafting)
–Clothing and Textile Footwear Manufacturing charter;•(consulting with all stakeholders and starting negotiation and drafting)
–Pharmaceutical Manufacturing;•(consultation process completed, negotiation and drafting is at advanced stage)
–Advertising, Marketing and Communication charter; •(drafting of the charter is completed-to be presented to parliament, dti and charter council for ratification)
–The South African Institute of Chartered Accountants charter•(consultation process completed, negotiation and drafting is at advanced stage)
– Health sector charter process;
•(consultation process still to take place, task team appointed, develop framework-early phase of negotiation and drafting of charter)
05
10
1520253035
4045
R Bn
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Bee deals in R billion - source E & Y
0
50
100
150
200
No
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Number of BEE deals - source E & Y
The benefits of empowerment should be shared The benefits of empowerment should be shared across society and impact as widely as possibleacross society and impact as widely as possible
The Strategy aims to mobilize all South Africans to The Strategy aims to mobilize all South Africans to support BEE as an integral component of economic support BEE as an integral component of economic stability and of efforts to increase South Africa and stability and of efforts to increase South Africa and the regions productive capacity. the regions productive capacity.
Partnership initiatives are thus critical. Partnership initiatives are thus critical.
• Since the adoption of the broad-based BEE strategy Since the adoption of the broad-based BEE strategy much has been achieved:much has been achieved:
• Sixty two BEE deals in 2003 , valued @ R 21.2 bSixty two BEE deals in 2003 , valued @ R 21.2 b
ConclusionConclusion