dti 07-03-07

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UNDERSTANDING THE FINALISED BEE

CODES

A JSE & CIDA EMPOWERMENT FUND

CONFERENCE

07 MARCH 2007

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HOW B-BBEE RELATES TO THE

BROADER 2014 GOVERNMENT

VISION?

Government’s Vision (2014)• To have a restructured and adaptive economy

characterized by:

– Growth

– Employment and – Equity

The dti’s 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

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• 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 EconomicEmpowerment (B-BBEE) was released

BACKGROUND: BEE STRATEGY

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• The dti’s 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 country’s

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 STRATEGY

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The strategy laid the foundation for the B-BBEE Act

• Section 9 of the B-BBEE Act states that the Minister may by notice inthe Gazette issue codes of good practice on black economicempowerment that may include-

– the further interpretation and definition of broad-based black economicempowerment and the interpretation and definition of different categories of

black empowerment entities;

– qualification criteria for preferential purposes for procurement and other economicactivities

– 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 uptransformation charters for their sector; and any other matter necessary toachieve the objectives of this Act.

BACKGROUND: BEE ACT 53 OF 2003

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• 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

BACKGROUND: BEE ACT 53 OF 2003

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TRANSFORMATION IMPERATIVES

• Government’s objective to overcome economic disparities

• To redress economic imbalances of the past – to achieve asustainable economic growth and development.

• Economic Transformation Strategy – values and principles of

equity enshrined in the Constitution

• Government’s vision:

South African’s Transformation : A strategy for broad-

based 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 allpersons and communities across the length and breath of

this country. Government’s objectives is to achieve this

vision of an adaptive economy characterized by growth,

employment, and equity by 2014

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TRANSFORMATION IMPERATIVES

CONT’

• Changing the complexion of business from largely whitedominance 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

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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

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POLICY OBJECTIVES OF BROAD-

BASED BEE

• Increase in the number of black people who haveownership and control of enterprises

• Increase in the number of black owned or black womenowned enterprises

• Increase in the number of black people in executive andsenior management of enterprises

• Accelerated and shared economic growth

• Increased income levels of black persons and areduction of income inequalities between and within racegroups.

• Increased inclusion of community and broad-basedenterprises, and co-operatives as the form of enterprises.

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POLICY OBJECTIVES OF BROAD-

BASED BEE, cont’

• Increase in employment and skilling of black people(Employment Equity and Skills Development)

• Increase in access to markets for black owned andcontrolled enterprises( Preferential Procurement)

• Increase in access to financial and non-financialassistance to black owned and controlledenterprises (Enterprise Development)

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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 SOE’s

• Preferential Procurement

– Government biggest buyer of goods and services

• Monitoring and Evaluation of BEE (Advisory Council)

• Partnerships and Charters

– Partnership with private sector

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The Poverty Barrier

The Skills Barrier

The Business Barrier

The Opportunity Barrier

Employment

Equity/Job creation

Corporate

Social Investment

Skills

Development &

Employment

Equity

Affirmative

Procurement

Ownership

And Management

Equitable Economic Opportunities

Enterprise

Development

Emerging blackmiddle class & Investors

Black

Entrepreneurs

Black workers and job-seekers

Black unemployed & rural poor

BROAD BASED BENEFICIARY BASE

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B-BBEE Framework

Broad-based BEE ActNo. 53 of 2003

Broad-based BEE

Strategy

Legislative EnablingFramework

Strategic

Framework

Codes of Good PracticeImplementation Framework

and Guidelines

Generic or

Sector-specific

BEE

Scorecards

Interpret

BEE

Definitions

& Principles

Set BEE

Indicators,

Weightings

and

Targets

Guidelines

to draw

up BEE

charters

Guidelinesto maintain

Institutional

Framework (BEE Council

/Accreditation

Agencies)

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ARRANGEMENT OF THE CODES

Code What is it?

000 Conceptual Framework of B-BBEE

100 Ownership

200 Management Control

300 Employment Equity

400 Skills Development

500 Preferential Procurement

600 Enterprise Development

700 Socio- Economic Development

General Principles and the Generic Scorecard

Measures effective ownership of enterprises byblack people

Measures effective control of enterprises by black

people

Measures the extent to which enterprises carry out

initiatives contributing to Enterprise Development

Measures the extent that enterprises buy goods and

services from BEE Compliant suppliers as well as

black owned entities

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


initiatives contributing to socio-economic

development 800 Qualifying Small Enterprises


contributions made by Qualifying Small Enterprises

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CODE 000 : GENERIC SCORECARD

Element WeightingCompliance

Targets

Ownership 20 points 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 15 points 3% (NPAT)

Socio-Economic

Development5 points 1% (NPAT)

TOTAL 100 points

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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 secondeconomy

• Reduction of income inequality

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BLACK ECONOMIC

EMPOWERMENT: AN ECONOMIC

GROWTH MODEL, cont’

• Contribute towards the growth of smallenterprises and co-operatives

• Contribute towards the reduction of poverty

• Aims to accelerate the participation of blackpeople in the economy

• Contribute towards the consolidation of democracy

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• 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 JOURNEY THUS FAR

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

• The Sector Codes will add momentum ontransformation in South Africa.

• Sector Transformation Charters are instrumentsthat involve a partnership between government andprivate sector in promoting BEE.

• Alignment of transformation charters to be gazettedas Sector Codes of Good Practice will ensureconsistency in the application of measurement of B-BBEE across the economy

THE SECTOR TRANSFORMATION CHARTERS

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THE SECTOR TRANSFORMATION

CHARTERS, CONT;

• Sector Codes (s 9 of B-

BBEE Act)

• Gazetted as a Codes of

Good Practice

• Same legal status as the

Code of good practice,

legally binding on Organs

of the State and Public

Entities.

• Transformation Charter (s

12 of B-BBEE)

• Gazetted for information

purposes only (industry’s

commitment to

transformation)

• No legal status, not

legally binding on Organsof the State and Public

Entities.


CHARTERS, CONT;


CHARTERS, CONT;


CHARTERS, CONT;

THE SECTOR TRANSFORMATION CHARTERS

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THE SECTOR TRANSFORMATION CHARTERS,

CONT;

Meet s12 requirements?

-Sufficiently consultative

-Advances BEE objectives

No

Yes

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, butnot on government or other sectors;

Gives credibility to the charter;

(Government to use the Codes of Good

Practice when interacting with the

sector)

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

Yes

Apply to be Gazetted under s 9

Government to use the gazetted sector

Codes of Good Practice when

interacting with the sector.

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• 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

THE WAY FORWARD

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dti 07-03-07

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