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B-BBEE CODES OF GOOD PRACTICE

Portfolio Committee on Trade & Industry

18 August 2010

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DELEGATIONDELEGATION

Mr Sipho Zikode

Acting DDG – Empowerment and Enterprise

Development Division

Ms Nomonde Mesatywa

Chief Director – Black Economic Empowerment Unit

Mr Takalani Tambani

Director – Black Economic Empowerment Unit

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2001 BEE Commission Report

2003 Publication of the BB-BEE Strategy

2004 Promulgation of BB-BEE Act

2007 Release of the Codes of Good Practice

2007 – 2010 – Road thus far ………

2007 – 2010 – Institutional Mechanisms

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COMMISSION REPORT

• To develop a transformation process with political, social and economic dimensions

• To create a more equitable economy to support the drive for economic growth

SocialUpliftment

EconomicDevelopment

PoliticalCommitment

Broad-basedBEE Strategy

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• BBBEE is 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 who manage, own and control the country’s economy, as well as significant decreases in income inequalities

• BBBEE includes elements of human resource development, enterprise development, preferential procurement, as well as investment, ownership and control of enterprises and economic assets.

WHAT IS B-BBEE?

*Black people include all African, Indian and Coloured South African Citizens

(Source: Broad-based Black Economic Empowerment Strategy

Department of Trade and Industry, March 2003)

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POLICY OBJECTIVESPOLICY OBJECTIVES

Policy Objectives of B-BBEE

• A substantial increase in the number of black people who have ownership and control of existing and new enterprises in the key sectors of the economy,

• A significant increase in the number of new black enterprises, black-empowered enterprises and black-women owned enterprises,

• A significant increase in the number of new black enterprises, black-empowered enterprises and black-engendered enterprises,

• A significant increase in number of black people in executive and senior management of enterprises,

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BBBEE: AN ECONOMIC BBBEE: AN ECONOMIC GROWTH MODELGROWTH MODEL

• Boost and generate higher economic growth, job creation, skills, access to opportunities and poverty alleviation.

• Bridging the divide between the first and second economy.

• Linking B-BBEE with the lead sectors identified for industrial policy to facilitate growth and employment.

• Contribute towards the sustainable growth of small and medium enterprises

• Accelerate the participation of black people in the mainstream of the economy at all levels

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Inclusion of a broader base of beneficiaries in BBBEE equity transactions;

Proper implementation of the Employment Equity Act to achieve equity throughout the economy;

Greater skills spend on black employees to bring SA’s skills in line with our developmental needs and in line with international best practice;

Diversification of companies’ supply chains through the inclusion of new suppliers (black/BEE compliant entrepreneurs);

Creation of business opportunities for small businesses on a more sustainable basis;

BEE GROWTH STRATEGY

9The Poverty Barrier

The Skills Barrier

The Business Barrier

The Opportunity Barrier

EmploymentEquity

CorporateSocial Investment

Skills Development &

Employment Equity

AffirmativeProcurement

OwnershipAnd Management

Equitable Economic Opportunities

EnterpriseDevelopment

BROAD BASED BENEFICIARY BASE

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PROCESS POST GAZETTING OF COGP

Codes of GoodPractice Gazetted

(Feb 2007)/

Setting up Institutional systems

Accreditation of VAs

Development ofVerification Guidelines

Draft Amended PPPFA

National Equity Equivalent Secretariat

Gazette Sector Charters

BEE Advisory Council

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BBBEE ADVISORY COUNCIL

• The B-BBEE Advisory Council was established on the 3rd December 2009 in terms of Section 4 of the B-BBEE Act

• Inaugurated on the 4th February 2010

• Ministerial induction session on the 6th April 2010

• 2nd Presidential meeting on the 20th May 2010

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BBBEE ADVISORY COUNCIL

Four sub-committees constituted:

• Ownership, Management Control, and B-BBEE deals structuring

• Enterprise Development , Procurement, Access to Finance and Socio-Economic Development

• Skill Development and Employment Equity

• Instruments to promote BBBEE (Legislation, Verification, Charters and Fronting)

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BBBEE ADVISORY COUNCIL

The dti with the BEE Advisory Council are considering:

• Reviewing the B-BBEE Act with the view of possible amendments:

• Updating the codes of good practice;

• Investigating and recommending legal instruments for the regulation of the B-BBEE verification system; and

• To criminalise fronting as punishable offence;

• Established a Co-operation agreement with the Special Investigating Unit to investigate fronting and make recommendations for possible prosecution.

• Aligning Industrial Policy to B-BBEE

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BBBEE ADVISORY COUNCIL

Commission research:

– Follow up on 2007 Baseline Study on B-BBEE and

– In-depth study on BEE deals for “designated groups” as defined in the Codes of Good Practice for B-BBEE. (Designated groups – Black women, people in rural areas, people with disabilities and the youth)

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VERIFICATION & ACCREDITATION

• In 2007 SANAS started accrediting Verification Agencies;

• To date 129 Verification Agencies applied for accreditation;

• Currently there are 42 Accredited Verification Agencies.

• Challenges in the Verification Industry: – Slow pace of accreditation of Verification Agencies by

SANAS;– Unethical conduct of the Verification Agencies;– Insufficient capacity and– Inadequate technical capacity.

VERIFICATION

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DTI Interventions:

• To establish a statutory body to regulate the verification industry;

• Recognise Independent Regulatory Board of Auditors (IRBA) and South African Institute of Professional Accountants (SAIPA) for BB-BEE verification and other regulated professional bodies and;

• Develop a National Training Programme on B-BBEE Verification in collaboration with Institutions of Higher Education.

VERIFICATION

VERIFICATION & ACCREDITATION

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Cabinet mandated the dti and NT to amend PPPFA to address objectives of B-BBEE:

Due to protracted process of amending legislations; both departments agreed on the following;

Amendment of Preferential Procurement Regulations as interim measures;

Draft Preferential Procurement Regulations were issued for public commentary in August 2009;

ALIGNMENT PPPFA AND B-ALIGNMENT PPPFA AND B-BBEEBBEE

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The dti, Department of Economic Development and NT technical committee convened and incorporated all comments from the public and NEDLAC.

Draft Preferential Procurement Regulations address: 10 and 20 Preferential Points for B-BBEE Inclusion of Local content as a pre-requisite on

designated industries

The three departments still need to work on the overhauling of PPPFA

ALIGNMENT PPPFA AND B-ALIGNMENT PPPFA AND B-BBEEBBEE

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BBBEE IT PORTAL

• Operational BEE IT portal which is on the dti website.

• Currently 31 302 entities registered on the dti website, and 261 178 hits

• A publicly accessible central database for promoting business opportunities, reporting fronting, and management of flow of information to the dti, and a self assessment tool / BEE Calculator that will assist companies to gauge their BEE performance.

• Facilitate match making between large enterprises and SMMEs

• Furthermore, this BEE IT Portal will be useful for reporting and monitoring of the overall BEE performance in the economy.

• Linking BEE IT Portal with the following Stakeholders: - ACSA, TELKOM, MTN, Gauteng Provincial Government, Sector Charter Councils and SOEPF.

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The following Transformation Charters have been approved:

CHARTERS

CHARTER FORMULATION PROCESS

Section 12 of the B-BBEE Act

Section 9 of the B-BBEE Act

•Financial Services•Marketing & Communication•Agriculture

•Transport•Property•Tourism •Construction

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• Effective Marketing and Communication of BBBEE- advocate and engage effectively and strategically to entrench awareness of BBBEE

• “Eyethu Sonke le B-BBEE National Campaign in conjunction with the dti agencies”

18 towns across 9 provinces

• targeting approximately 3200 black people from under-developed and rural communities

• On going Radio and Print media communication on various aspects of B-BBEE

• Stakeholder interactions with Inter-governmental and external

• National Stakeholder Forum

• Soweto Roadshow

MARKETING AND COMMUNICATION

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BBBEE BASELINE REPORTBBBEE BASELINE REPORT

• In 2007/8 the dti conducted baseline study on BBBEE, covering both private and public entities, it was found that:

• National Scorecard equivalent of Level 8-compliance (33.89 score on the Generic scorecard).– Large Business = Composite score of 37.02 (Level 8-compliance)– Medium Business showed the best progress with BBBEE, (Level 7-

compliance = 40.98 points)– Small Business = Level 8 with a score of 30.15

• Focus on narrow based BEE contributed largely to Ownership and Management elements. (The average level of 15.13% Black ownership against the target of 25.1% Black ownership was achieved)

• Second best progress was made in the Skills Development element with 43.8% of the targeted points achieved by South African companies.

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The broader economic developmental agenda must address inter alia:

• How broad based growth can be achieved

• The enhancement and implementation of the B-BBEE framework through the Presidential Advisory Council and other stakeholders

• Create a conducive environment for access to economic opportunities

• Promotion of entrepreneurial initiatives among the majority of SA

• Alignment and consistency in policies, legislation and programmes of Government

IN CONCLUSIONIN CONCLUSION

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