SAMED survey on the draft amendments to the B-BBEE Codes of Good Practice. - published 5 Oct

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1 SAMED survey on the draft amendments to the B-BBEE Codes of Good Practice - published 5 Oct

2 About the survey Significant number of SAMED members responded, the majority being larger enterprises For competition law reasons actual numbers are not provided, but percentages Undertaken by third party entity, SAMED has no access to raw data

3 In which current BB BEE category does your company fall? 10.8% 18.9% Exempted micro enterprise (EME) - turnover less than R5m Qualifying small enterprise (QSE) - turnover R5m - R35m 70.3% Larger enterprise - turnover more than R35m Under the proposed dispensation, the change in BEE turnover levels will only affect a single respondent, the percentage split remains virtually unchanged under the current, or the proposed dispensation

4 Amongst QSE respondents - 57% of respondents found it difficult to comply with BEE, - whilst 43% found it easy to comply with, but are uncertain as to how the new QSE Codes would look Amongst EME respondents - all welcomed the increased turnover threshold to be an EME of up to R10m

5 Is your company a VAS? Yes No No Yes 41.7% 58.3% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% A Value-added Supplier (VAS) is "an Entity registered as a VAT vendor whose Net Profit Before Tax summed with its Total Labour Cost exceeds 25% of the value of its Total Revenue"

6 More than 68% of respondents distribute exclusively international products (45.7% as subsidiaries of multinationals and 22.9% as local distributors), with another 25.7% distributing both international and local products 5.70% Local subsidiary of multinational 25.70% 45.70% Local distributor of international products Local distributor of international and local products Local manufacturer 22.90%

7 Amongst local (non-multinational) companies, ito ownership targets, companies felt that they could 5.30% 21% Can achieve 11% (the threshold to prevent downgrade) Can achieve between 12% and 25.1% 52.60% 21% Not possible achieve 11% Not possible to achieve 12% %

8 Amongst subsidiaries of multinationals 6% An Equity Equivalent Programme is a possibility 94% Ownership or alternatives for multinationals not an option No multinational respondents chose selling shares or the :sale of an asset as an option

9 100.0% Size of senior management amongst all respondent companies in device industry 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 94.0% Most companies have small senior management contingents, limiting the possibility to mathematically, mirror the EAP in terms of race and gender 30.0% 20.0% 10.0% 0.0% 6.0% 0.0% 0.0% 0-10 persons persons persons more than 30 persons 0-10 persons persons persons more than 30 persons

10 Size of middle management amongst all respondent companies in device industry 70% 60% 50% 40% 30% Most companies have middle management contingents that are not large enough to completely mirror the EAP in terms of race and gender 20% 10% 0% 0-10 persons persons persons persons persons More than 50 persons

11 Are the targets for board, executive and top management achievable? 20% Yes, but only over a number of years Yes, can achieve immediately No, not within next 5 years 8.60% 71.40% Comments by respondents include: flat structure ; young management limited movement/turnover ; low employment numbers ; skills shortage ; not sufficient experienced and qualified candidates ; multinat has limited options.

12 40% % of informal, in-company and non-accredited training as % of total training: more than 50% of respondents say that more than half their training events fall within this category, with another 14% stating that between 26 and 50% of training events fall within this category 35% 30% 25% 20% 15% 10% 5% 0% 0-15% 16-25% 26-50% 51-75% more than 75% 64% of SAMED respondents have limited possibility to achieve under the amended skills development Code if informal / incompany / nonaccredited training is excluded from recognition

13 Comments by respondents on the possible non-recognition of internal / information training and why this is predominant /necessary in the devices industry: Too much effort and cost (no / low budget / small business x 4) Training on specialised products / technical training x 6; we offer the best training on our own products x 2; agreement with global product co /supplier requires this x 3 International sales training is not locally accredited; accredited by the international body No SETA accredited courses available.

14 Is the 6% skills development spend target achievable? Yes, immediately achievable Yes, only over time 14.28% No, not achievable in 5 yrs 48.57% 37.14% In a separate question 43% of respondents stated that they would not even make a target of 2.4% of payroll to be spend on skills development of black persons Respondents provided the following explanations for the target not being immediately achievable: - Multinational - a lot of product & job specific training at a global level - Insufficient number of equity employees x 5 - Our payroll costs are very high due to the nature of our business; We need to keep costs down to justify our existence in SA; not enough profit to do this - Training staff just for the sake of wasting money is not feasible - Money could be put to use on introducing new product ranges which would then warrant further skills development

15 How many learners, interns, etc would companies be able to absorb? 60.00% All of them 50.00% 48.57% Cannot say, depends on headcount 40.00% At least half of them 34.28% Less than half of them 30.00% 20.00% 14.28% 10.00% 0.00% All of them Cannot say, depends on headcount 2.85% At least half of them Less than half of them Only 16% of respondents would be able to employ all or at least half of learners

16 In fact, most respondents do not even have learnership programmes Yes No 55.30% 45.70% COMMENTS BY RESPONDENTS AS TO WHY THEY DO NOT HAVE PROGRAMMES: The main challenge with the learnerships is the SETA; lack of accredited learnerships in our field; Seta accreditation Value and volume growth in a sluggish market makes it difficult to justify additional headcount; Not supported & headcount restrictions time We need skilled labour instantly; Good candidates lack of students from education facilities; skills, qualification; access to qualifing learners has been an issue; Our company focuses on niche products with the majority of our employees being sales representatives, offering internships or learnerships are not feasible; the nature of our business It is under development; haven t previously explored it

17 Number of value-added suppliers from which respondents procure (but in comments respondents say they are not blackowned) 35.00% 30.00% Some 62% of respondents have 10 or less VAS to potentially score procurement points from 31.42% 31.42% 25.00% 20.00% 15.00% 10.00% 22.85% Only 28% of respondents have 11 to 20 VAS suppliers from which BEE points could potentially be scored 8.50% 5.00% 5.71% 0.00% 0 1 to 5 6 to to to 20

18 The inclusion of imports into the procurement calculations will be devastating for all importers (multinational and local companies) with close to 75% of respondents stating that imported procurement constituted 61% or more of their total procurement 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 42.85% 15.00% 31.42% 10.00% 5.00% 0.00% 11.42% 8.57% 5.71% 0-20% 21-40% 41-60% 61-80% more than 80%

19 Ability to undertake supplier development 14.70% Yes, but with serious effort 29.41% 2.94% Yes, will be easy No, impossible 14.70% 38.23% No, there are not enough qualified suppliers No, most of our local suppliers supply services, not goods

20 How many black-owned suppliers do companies have? [indicating potential to do enterprise development with suppliers] 0% 11.76% 8.82% % 1 to 5 6 to to % more than 20 50% 50% of respondents have 1 to 5 black-owned suppliers, and 17.6% have no black-owned suppliers

21 Although almost 50% of respondents felt that it would be possible to spend all SED spend on black-only beneficiary entities / groups, the comments to this question included: Our beneficiaries are 75% black CSI initiatives are aimed at achieving positive social development in communities. Communities in need should not be determined by the colour of the skin. THIS WOULD HAVE A NEGATIVE IMPACT ON THE CURRENT BENEFICIARIES (BLACK) BETWEEN 75% AND 99% It's difficult to find a charity with only black beneficiaries (x 2); no guarantee that entity beneficiaries 100% black This would mean that other deserving entities would be unfairly prejudiced. This is racist (x2) The investment spent should be to the benefit of our country irrespective of race. Some CSI may fall within the ambit of the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act of 2010 This however would result in other deserving entities being adversely prejudiced. We struggle to get anything in this category as it is We donate to State facilities - does this count?

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