MANAGING B-BBEE MASTER TEMPLATE

Transcription

1 MANAGING B-BBEE MASTER TEMPLATE Quarter Author: Dr Robin Woolley C O N F I D E N T I A L A N D P R O P R I E T A R Y A n y u s e o f t h i s m a t e r i a l w i t h o u t s p e c i f i c p e r m i s s i o n o f T r a n s c e n d C o r p o r a t e A d v i s o r s i s s t r i c t l y p r o h i b i t e d

2 Chapter one Transformation is about: Inequality Jobs Life expectancy Education Race How do we transform? The role of state and private sector What is our national strategy? What is the role and objective of BBBEE? South Africa needs to need

3 TRANSFORMATION IS ABOUT. SOURCE: Wilkinson & Pickett, The Spirit Level (2009); South Africa s Economic Transformation:

4 SOUTH AFRICA HAS THE LARGEST GAP WORLDWIDE BETWEEN RICH AND POOR TRANSFORMATION IS ABOUT.. R E D U C I N G THE LEVEL OF INEQUALITY SOURCE: Moller, V. (2007). Quality of Life in South Africa, Social Indicators Research, 81(a)

5 The National Development plan lens. Copyright Transcend Corporate Advisors (Pty) Limited

6 NDP: DIAGNOSTIC REPORT DESCRIBES NINE CENTRAL CHALLENGES. Documentation Too few people work Poor education Infrastructure is under maintained & insufficient Spatial patterns drive inequality Economy is overly resource intensive Failing public health system Corruption Poor public services Divided society

7 WHAT IS THE OBJECTIVE OF B-BBEE? an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings about significant increases in the number of black people that manage, own and control the country s economy, as well as significant decreases in ethnic inequalities. South Africa s Economic Transformation: A strategy for Broad-Based Black Economic Empowerment ( Black Economic Empowerment - B-BBEE Plan

8 MALAYSIA S MODEL OF NEP AND ITS LESSONS Malay industry growth Local procurement Ownership Entrepreneur development Malay economic access Job creation / employment equity Education Skills development Malay ness National vision Culture building

9 WHAT IS THE OBJECTIVE & ROLE OF B-BBEE THROUGH THE LENS OF THE dti Black Economic Empowerment - B-BBEE Plan

10 HOW DOES B-BBEE AND GROWTH INTER-RELATE? ABILITY TO SUSTAIN SOCIAL EQUALITY (Change in the GINI coefficient LITHUANIA ROMANIA SLOVENIA POLAND HUNGRY CZECH REPUBLIC BULGARIA GRASSROOTS DELIVERY Growth stimulated by o Liberalisation o Privatisation on commercial basis o Aggressive FDI incentives Created fiscal capacity to offset social costs of transformation LIMITED DELIVERY Growth stunted by o Limited liberalisation o Limited restructuring through privatisation o Fall in productivity Created no fiscal capacity to offset social costs of transformation % RUSSIA UKRAINE -10.0% -5.0% Average GDP growth ( ) 0 5.0% 10.0% Black Economic Empowerment - B-BBEE Plan

11 HOW TO FIT THE B-BBEE PILLARS INTO YOUR ORGANISATION Ownership 25% 25% shareholding Company Management control 19% 75% - 2% Skills development 20% 6% - 2.5% payroll Supply chain Enterprise & supplier development 40% 80% TMPS 2% NPAT Environment Socio economic development 5% 1% NPAT Black Economic Empowerment - B-BBEE Plan

12 WHAT IS THE BREAKDOWN OF B-BBEE LEVELS AND SCORES? Level One Contributor Old codes 100 points on the Generic Scorecard 100 points on the Generic Scorecard New codes Level One Contributor 135% Level Two Contributor 85 but <100 points on the Generic Scorecard 95 but <100 points on the Generic Scorecard Level Two Contributor 125% Level Three Contributor 75 but <85 on the Generic Scorecard 90 but <95 on the Generic Scorecard Level Three Contributor 110% Level Four Contributor 65 but <75 on the Generic Scorecard 80 but <90 on the Generic Scorecard Level Four Contributor 100% Level Five Contributor 55 but <65 on the Generic Scorecard 75 but <80 on the Generic Scorecard Level Five Contributor 80% Level Six Contributor 45 but <55 on the Generic Scorecard 70 but <75 on the Generic Scorecard Level Six Contributor 60% Level Seven Contributor 40 but <45 on the Generic Scorecard 55 but <70 on the on Generic Scorecard Level Seven Contributor 50% Level Eight Contributor 30 but <40 on the Generic Scorecard 40 but <55 on the Generic Scorecard Level Eight Contributor 10% Non-Compliant Contributor <30 on the Generic Scorecard <40 on the Generic Scorecard Non-Compliant Contributor 0% Black Economic Empowerment - B-BBEE Plan

13 THE THREE LEVELS OF TRANSFORMATIONAL CHANGES Habits Physical Transactional Values & beliefs Intellectual Transitional Basic assumptions Emotional Transformational SOURCE: Wilkinson & Pickett, The Spirit Level (2009),

14 Chapter Two Legislative landscape Legislative updates Introduction to the pillars of B-BBEE Best practice in the process of managing transformation

15 DO YOU UNDERSTAND THE LEGISLATIVE LANDSCAPE? CONSTITUTION MINERAL & PETROLEUM RESOURCE DEVELOPMENT ACT PETROLEUM PRODUCT ACT B-BBEE ACT PREFERENTIAL PROCUREMENT FRAMEWORKS ACT SKILLS DEVEOPMENT ACT MINING CHARTER PETROLEUM CHARTER GENERIC CODES REGULATIONS EMPLOYMENT EQUITY ACT SECTOR CODES Legally binding B-BBEE ACT STRATEGY Indicate draft review status Persuasive Black Economic Empowerment - B-BBEE Plan

16 THE B-BBEE BILL 2013 Creates capacity to deal with fronting Brings public sector into the process Formally appoints IRBA as regulators (Independent Regulatory Body of Auditors) The regulation focus on process, with the amendments defining a BEE commission that would have the following role: BEE ombudsman BEE researcher and educator Investigate cases of fronting SOURCE: Draft B-BBEE Bill 2013

17 THE REVISED WORKPLACE SKILLS PLAN (EFFECTIVE MARCH 2013) Reallocates your contributions on the following basis: 10% maximum allowed for SETA admin 40% mandatory for following the process as before 20% discretionary for spend in areas aligned to The National Skills Framework 10% for spend in PIVOTAL areas (Professional, vocational, technical & academic) The balance is swept into a national fund to sponsor development of PIVOTAL skills What are the implications for your skills budgets? SOURCE: : draft Work place Skills Plan 1998: amendment

18 THE APPLICATION OF THE REVISED CODES OF GOOD PRACTICE (RCoGP) ARE. They will be applied for any audit done after 11 October We have one year to build a strategic response to these changes. Previous Codes Revised Codes Journey, organic, evolutionary Structural, step change, revolutionary SOURCE:103 B-BBEE Act (53/2003)

19 RE-WEIGHTING IN ORDER TO REFOCUS The current seven Scorecard elements will be reduced to five elements; Management Control is combined with Employment Equity, and Enterprise Development with Preferential Procurement. Ownership (black owned) Management control 11 9 Employment equity Skills development (unemployed) Preferential procurement (black owned) Enterprise development (black owned) Socio-economic development 5 5 Total

20 PRIORITY ELEMENTS.. Three of the Scorecard components are now Priority elements: Ownership, Skills Development, Enterprise and Supplier Development QSEs have to comply with Ownership and one other Priority element Generics have to comply with ALL Priority elements A 40% minimum requirement (threshold) applies to all Priority elements, in some measurement categories Companies not meeting the Priority elements threshold will drop ONE level

21 CALACUATING THE SUB-MINIMUM.. HENCE 10% OF BLACK OWNERSHIP MUST BE UN- ENCUMBERED EXCLUDING THE BONUS POINTS INCLUDING THE SUB- CATAGORIES FOR ESD

22 HIGH LEVEL OVERVIEW OF THE PROPOSED CHANGES.. QSES AND EMES Qualification limits have been increased EMEs (Exempt Micro Enterprises) businesses with annual turnover of less than R 10 Million (previously R 5 million) EMEs with more than 51% Black Ownership are automatically Level 2 and only need an affidavit EMEs with more than 100% Black Ownership are automatically Level 1 and only need an affidavit. Non black owned EMEs are automatically Level 4 and only need an affidavit. QSEs (Qualifying Small Enterprises) businesses with annual turnover of more than R 10 Million but less than R 50 Million (previously R 5 million and R 35 million QSEs with more than 51% Black Ownership are automatically Level 2 and only need an affidavit QSEs with more than 100% Black Ownership are automatically Level 1 and only need an affidavit. Non black owned QSEs are following the QSE scorecard (still to be released and must be audited

23 AND COMPANIES FOLLOWING SECTOR CODES.? If you fall under a valid sector Code which has been gazzetted against section 9 and 12 then that sector Code is what you should follow and be audited against. This however is unlikely to give a window for sector Codes to hide behind as all sector Codes will have to be revised in 2014 to take the changes in the General Codes of Good Practice into account. This is what was originally intended in the legislation and is currently playing itself out. Hence my advice to companies that are currently under a sector codes is that you might as well start adapting the principles described in the RCoGP into your strategy

24 Chapter Three Strategic alignment Building a transformation strategy, using socio economic development and enterprise and supplier development as examples

25 HOW ARE YOU GOING TO MANAGE STRUCTURAL TRANSFORMATION? Tactical & strategic analysis Brainstorming for strategic fit Process & project review Understanding transformation Surfacing ideas 30 day cycles EXCO BBBEE COMMITTEE Building a current state Assessing systems Querying suppliers Subject matter experts Project managers Project plan Black Economic Empowerment - B-BBEE Plan

26 INTEGRATING TRANSFORMATION INTO YOUR STRATEGY Purpose Driver Define your purpose Agree on 3 key value drivers Driver 1 Goals Actions x3 x3 x3 3. Goals Agree on maximum 3 goals for each value driver Driver 2 PURPOSE Driver 3 4. Actions x3 x3 Agree on maximum 3 actions for each goal x3 Goals Actions x3 x3 x3 Goals Actions x3 x3 x3 SOURCE; Tony Manning (2008)

27 BUILDING YOUR OWN TRANSFORMATION STRATEGY

28 SUSTAINABLE LIVELIHOODS APPROACH (SLA) Formal / Informal Policies Institutions Processes Meso Macro External environment Micro Vulnerability to stresses & shocks Capital assets of HH/Comm Social Natural Human Opportunities Impact on vulnerability Influence Physical Financial Livelihood outcomes desired Influence Livelihood strategies chosen Implementation Impact on livelihoods Increasing opportunities SOURCE: Khanya s SL Framework (redrawn from the original)

29 Chapter Four Enterprise and Supplier development

30 PRINCIPLES Strengthen & Increase local procurement Actively support procurement from black owned QSE s & EME s Monetary and Non-Monetary contributions for Enterprise & Supplier Development Focus on localisation and value-adding programmes Alignment of Preferential Procurement, Enterprise Development & Supplier Development Contributions are measured on an annual basis Contributions, programmes and/or initiatives span over multiple years e.g. 3 years Enterprise and Supplier Development Plans Clear Objectives Priority Interventions Key Performance Indicators Implementation Plan with clearly articulated milestones Cannot double dip on supplier and enterprise development

31 ENTERPRISE AND SUPPLIER DEVELOPMENT Must achieve subminimum of 40% of each of the targets Measurement on an Annual Basis EME < R10 million QSE >R10 million but <R50 million Increased focus on spend with black owned and black woman suppliers Specific target for QSE & EME s Specific targets for 51% Black Owned & 30% Black Women owned suppliers Procurement from Designated Group suppliers - Bonus points Unemployed black people, black youth, black people with disabilities, black people living in rural and underdeveloped areas, black military veterans Supplier Development & Enterprise Development Graduation of ED beneficiaries to suppliers Creation of Jobs

32 EMPOWERING SUPPLIERS Complies with all regulatory requirements EME s and start-up s: automatic recognition QSE s comply with 1 of the following Generic comply with 3 of the following 25% of cost of sales excluding labour and depreciation must be procured from local producers/suppliers in SA For Service industry labour costs are included but capped to 15% Job creation: 50% of jobs created are for Black people provided that the number of Black employees since the immediate prior verified B- BBEE measurement is maintained At least 25% transformation of raw materials/beneficiation which include local manufacturing, production and/or assembly, and/or packaging Skills transfer: at least spend 12 days per annum of productivity deployed in assisting Black EME s and QSE s beneficiaries to increase operational or financial capacity

33 IMPORTS & EXCLUSIONS Imported capital good or components for value-added production in SA provided that; there is no existing local production for such capital goods or components; and Importing those capital goods or components promotes further valueadded production within SA

34 IMPORTS & EXCLUSIONS Imported goods that carry a brand different to the locally produced goods or services or have different technical specification to the locally produced goods will be excluded subject to having developed and implemented an Enterprise Development and Supplier Development plan for imported good and services Plan will include Clear Objectives Priority Interventions Key performance indicators Concise implementation plan with clearly articulated milestones

35 Chapter Five Preferential Procurement

36 PREFERENTIAL PROCUREMENT ( POINTS) Criteria 2.1 Preferential Procurement (as a sub-set of enterprise and supplier development) B-BBEE Procurement Spend from all Empowering Suppliers based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend Weighting points 5 Compliance targets 80% (32%) B-BBEE Procurement Spend from Empowering Qualifying Small Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 3 15% (6%) B-BBEE Procurement Spend from Exempt Micro Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 4 15% (6%) B-BBEE Procurement Spend from Empowering suppliers that are at least 51% black owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 9 40% (16%) B-BBEE Procurement Spend from Empowering suppliers that are at least 30% black woman owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 4 12% (4.80%) Bonus points B-BBEE Procurement from designated Group suppliers that are at least 51% black owned 2 2%

37 ENHANCED RECOGNITION: PROCUREMENT SPEND Criteria Recognition Factor Supplier Development beneficiary who has a minimum 3 year contract with the Measured Entity 1.2 Black Owned QSE or EME who is not a suppliers development beneficiary but has a minimum 3 year contract with the Measure Entity 1.2 First time suppliers to the Measured Entity 1.2

38 Ring-fenced Ring-fenced Ring-fenced Ring-fenced PREFERENTIAL PROCUREMENT ANALYSIS Empowered Supplier 21% Yes Determine Empowered Suppliers 3% No Black owned Yes Extract black owned suppliers 8% 2% No QSE EME Yes Extract QSE & EME suppliers 8% No Left with large, non black-owned enterprises Non discretionary Yes Determine nondiscretionary suppliers DSA 8% No Core Yes Determine core suppliers Ring-fenced Industry specific

39 CALCULATING THE TOTAL MEASURED SPEND FOR PREFERENTIAL PROCUREMENT 1) Cost of sales 2) Operational expenditure Chapter four 3) Capital expenditure 4) Public Sector Procurement 5) Monopolistic Procurement 6) Third-party procurement Expense Items for Inclusion Rand Value (Please complete) 7) Labour Brokers and Independent Contractors 8) Pension and Medical Aid Contributions 9) Trade Commission s 10) Empowerment Related Expenditure 11) Imports 12) Intra-group Procurement TOTAL INCLUSIONS

40 CALCULATING THE TOTAL MEASURED SPEND FOR PREFERENTIAL PROCUREMENT Less: Expense Items for Exclusion Rand Value (Please complete) 1) Taxation Chapter four 2) Salaries, wages, remuneration and emoluments 3) Pass-through third-party procurement 4) Empowerment related procurement 5) Imports for value-added production in SA no existing local production importing goods will promote further value-added productions in SA different brand or specification are subject to localization TOTAL EXCLUSIONS TOTAL MEASURED SPEND Rand Value (Please complete) Total Inclusions Less: Total Exclusions

41 PP CHARACTERISTICS Good preferential procurement programmes have the following characteristics: There is commitment from top to bottom ensure that there is buy-in. Communication of goals, methods, progress etc Top management support should be unquestionable on an on-going basis There must be a written policy in place Training - Provide for training as preferential procurement is new and requires new knowledge and new skills to implement. Establish goals and targets, organisation-wide with on-going monitoring. Ensure the organisation culture is conductive to B-BBEE Responsibility for preferential procurement is not limited to B-BBEE Manager Dr Robin Woolley

42 Chapter Six Enterprise and Supplier development

43 SUPPLIER AND ENTERPRISE DEVELOPMENT ( POINTS) Criteria Weighting points Compliance targets 2.2 SUPPLIER DEVELOPMENT Annual value of all Supplier Development Contributions made by the Measured Entity as a percentage of target 10 2% of NPAT (0.80%) 2.3 ENTERPRISE DEVELOPMENT Annual value of Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target 5 1% of NPAT (0.40%) 2.4 Bonus Points Graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level Creating one or more jobs directly as a result of Supplier Development and Enterprise Development initiatives 1 1

44 ENTERPRISE AND SUPPLIER DEVELOPMENT BENEFICIARIES: EME & QSE s which are at least 51% black owned or at least 51% black women owned

45 ENTERPRISE & SUPPLIER DEVELOPMENT Enterprise Development and Supplier Development Plan Clear Objectives Priority Interventions Key performance indicators Concise implementation plan Clearly articulated milestones Minimum 3 year contract

46 THE COMPACT RELATIONSHIP CONTRIBUTOR BENEFICIARY WANTS Competitive supply base that efficiently supplies its needs Market access and support to eliminate barriers to efficiency OFFERS Market access and development support towards efficient supply Competitive Goods and Services efficiently supplying customer wants Dr Robin Woolley

47 SUPPLIER DEVELOPMENT BEST PRACTICE Dr Robin Woolley

48 BENEFIT FACTOR MATRIX Grant and related contributions Contribution amount Benefit factor Grant contribution Full grant amount 100% Direct cost incurred in supporting Enterprise & Supplier Development verifiable cost (including both monetary and non-monetary) 100% Discounts in addition to normal business practices supporting ED Overhead costs incurred in supporting Enterprise & Supplier Development (including people appointed in ESD) Discount amount (in addition to normal business discount) Verifiable costs (including both monetary and non-monetary) 100% 70% Loans and related contributions Contribution amount Benefit factor Interest-free loan with no security requirements supporting ED Outstanding loan amount 70% Standard loan with no security Outstanding loan amount 50% Guarantees provided on behalf of a beneficiary entity supporting ED Guarantee amount 3% Lower interest rate supporting ED Outstanding loan amount prime rate actual rate

49 BENEFIT FACTOR MATRIX Equity Investments and Related Contributions (Capital) Minority Investment in ESD Investment Amount 70% ESD Investment with lower dividend to financier Investment Amount Dividend Rate of Ordinary Shareholders Actual Dividend Rate of Contributor Contributions made in the form of human resource capacity (Skills) Professional Services rendered at no cost Commercial hourly rate of professional 60% Professional services rendered at a discount Time of employees of measured Entity productively deployed in assisting beneficiaries Value of discount based on commercial hourly rate of professional Monthly salary divides by 160 Percentage of invoiced amount 60% 60% Other contributions (Cashflow) Shorter payment periods for Supplier Development Beneficiaries (maximum points that can be earned is 15 of 10 points) Percentage of invoiced amount X 15% (being an approximation of the cost of short term funding) Percentage of 15% less the number of days invoiced from payment

50 HOW TO IMPLEMENT ENTERPRISE DEVELOPMENT Conceptualization Process/ Concept/ opportunity development Time Idea generation Idea graduation Idea implementation Incubation Next Understanding COGP technical compliance aspect of ED Business model development Deal structuring Virtual incubation: Mentorship, coaching, BDS Accelerated growth development Understanding a value based strategic approach to ED Market analysis. Customers & competition Financing Total incubation Brainstorming for best fit ideas Risk assessment: structuring tax, IFRS2, legal & empowerment Risk assessment: structuring tax, IFRS2, legal & empowerment Networking forums Idea filtering and selection Financial budgets Financial budgets Mapping certainties & uncertainties (scoping) Business plan Phase one Phase two Phase three Phase four Phase five Black Economic Empowerment - B-BBEE Plan

51 Human capital development

52 Chapter Seven Employment equity / management control

53 MANAGEMENT CONTROL - CURRENT SCORECARD 10 pts Category Management Control Indicator Weighting points Compliance Target 2.1 Board participation: Exercisable Voting Rights of Black Board Members using the Adjusted Recognition for Gender Black Executive Directors using the Adjusted Recognition for Gender 3 50% 2 50% 2.2. Top Management: Black Senior Top Management using the Adjusted Recognition for Gender Black Other Top Management using the Adjusted Recognition for Gender 3 40% 2 40% 2.3 Bonus points: Black Independent Non-Executive Board Members 1 40%

54 EMPLOYMENT EQUITY CURRENT SCORECARD 15 pts Measurable Weight Sub-Min Target Target (07-11) (12-17) Chapter four Black disabled staff Adjusted for Gender 2 40% 2% 3% Black senior management Adjusted for Gender 5 40% 43% 60% Black middle management Adjusted for Gender 4 40% 63% 75% Black junior management Adjusted for Gender 4 40% 68% 80% Bonus Points for EAP Compliance 3 None 90.27% Sub-minimum of 40% and EAP bonus of 3 points

55 MANAGEMENT CONTROL THE REVISED SCORECARD 1. Employment Equity and Management Control merged into one element worth 19 points 2. No more Adjusted for Gender calculation instead there are specific targets for Generic black persons as per the EAP 3. Disabled Employees have no female requirement, but this is contradicted by the calculation 4. Independent board members removed

56 MANAGEMENT CONTROL THE REVISED CODES 19 pts Measurement Category & Criteria Weighting points Compliance targets Board participation: Exercisable voting rights of black board members as a percentage of all board members Exercisable voting rights of black female board members as a percentage of all board members 2 50% 1 25% Black Executive directors as a percentage of all executive directors 2 50% Black female Executive directors as a percentage of all executive directors 1 25% Other Executive Management: Black top Management as a percentage of all executive directors 2 60% Black female top Management as a percentage of all executive directors 1 30%

57 MANAGEMENT CONTROL THE REVISED CODES cont. Senior Management Black employees in Senior Management as a percentage of all senior management Black female employees in Senior Management as a percentage of all senior management 2 60% 1 30% Middle Management Black employees in Middle Management as a percentage of all middle management Black female employees in Middle Management as a percentage of all middle management 2 75% 1 38% Junior Management Black employees in Junior Management as a percentage of all junior management Black female employees in Junior Management as a percentage of all junior management 1 88% 1 44% Employees with disabilities Black employees with disabilities as a percentage of all employees 2 2%

58 MANGEMENT CONTROL THE CALCULATION Targets are aligned to the Commission for employment equity report on a national basis ECONOMICALLY ACTIVE POPULATION (E.A.P) as of 2013 A.M = 40.7% C.M = 5.8% I.M = 1.9% A.F = 34.5% C.F = 5.5% I.F = 1.1%) This is difficult for those companies that have a regional footprint with a strong demographic bias (eg. Durban)

59 Chapter Eight Skills development

60 SKILLS DEVELOPMENT CURRENT SCORECARD 15 pts Skills Development Measurable Weight Sub-Min Target 1st 5 Yrs Target 2nd 5 Yrs Skills spend on black staff Adjusted for Gender 6 None 3% of TBP Skills spend on black disabled Adjusted for Gender 3 None 0,3% of TBP Black learners as % of total staff 6 None 5%

61 SKILLS DEVELOPMENT MEASURED IN THE REVISED CODES 25pts Criteria Weighting points Compliance Target Skills development expenditure on learning programmes specified in the Learning programme matrix for black people as a percentage of leviable amount Chapter four 8 6% Skills development expenditure on learning programmes specified in the learning programme matrix for black people with disabilities as a percentage of leviable amount 4 0.3% Number of learners participating in learnerships, apprenticeships or internships as percentage of total employees 4 2.5% Number of unemployed black people participating in a learnership, apprenticeship or internship as a percentage of total employees 4 2.5% Number of black people absorbed by the measured entity and industry at the end of the period 5 100%

62 HOW IS SKILLS DEVELOPMENT MEASURED IN THE RCOGP The skills cap of a maximum of 15% of total skills spend in category F & G remains, this relates to the informal training activity Chapter four A new addition is that the indirect training costs cannot exceed 15% of total skills spend The living stipend is retained as skills spend for category B, C or D learnerships. WSP/ATR and Pivotal report to be approved your SETA Sub-minimum of 40% to be achieved (8pts) Targets aligned to the commission for employment equity report on a national basis

63 HOW TO CLASSIFY LEARNERSHIPS AND THE LEARNING MATRIX Category Explanation Example Learning site A Learning institute Chapter four Degree with no workplace involvement University B Workplace experience and learning institute (mixed) Learnership Mixed C Workplace experience required after qualification Articles Workplace D Learning institution, or if workplace has accreditation to provide the apprenticeship Internship/ apprenticeship Mixed E Certified external training SETA or SAQA registered skills programs Institution F Certified internal and uncertified external training If workplace SET accredited otherwise external training Mixed G Uncertified internal training On the job Internal

64 WHAT QUALIFIES AS A LEARNERSHIP? Some comments on learnerships.. Any process that fits into category B,C,D described overleaf qualifies Learnerships count in any year that they were active, and hence could span to audit periods They must show work based learnings which are assessed by an external institute of learning, as evidenced by a contract.

65 HOW IS SOCIO ECONOMIC DEVELOPMENT MEASURED? Strategic socio-economic development Chapter three Informal community based training can fall in SED but formal certified training is under skills development (as informal training is capped in Inclusion of environmental conservation, awareness, education and waste management

66 AND NOW TO OWNERSHIP. Indicator Description Weighting Points Compliance Target Exercisable Voting Rights in the Entity in the hands of Black people 4 25%+ 1 Vote Voting Rights Exercisable Voting Rights in the Entity in the hands of Black women 2 10% Economic Interest in the Entity to which Black people are entitled 4 25% Economic Interest in the Entity to which Black women are entitled 2 10% Economic Interest of any of the following people in the Measured Entity Economic Interest Black designated groups; Black participants in Employee Share ownership programmes Black people in Broad-based ownership schemes 3 3% Black participants in Co-operatives New Entrants Net Value 2 2% Realisation Points 8

67 VOTING RIGHTS AND ECONOMIC INTEREST. Voting Rights Economic Interest What is the difference? Black people Black women What is the difference?

68 DESIGNATED GROUPS. Economic Interest Specified black groups : Natural black people Black designated groups Unemployed Disabled Youth Residents of rural or under-developed areas Participants in employee ownership schemes, broad-based ownership schemes, or co-operatives

69 NET VALUE POINTS. Net value POINTS : Actual value created to black owners Growth over time is expected Calculated as the lesser of: Proportion of economic interest achieved x 7 points Proportion of net value created x 7 points Proportion of economic interest achieved: = Actual Economic Interest % / Target % Proportion of net value created: = Actual Net Value % / Target %

70 NET VALUE POINTS. Net value % calculation: Value of black shareholding less value of related debt, as a proportion of 25% of the value of the total shareholding Net value % = ( B C ) / ( 25% x D ) B = Value of black shareholding C = Value of related black debt D = Value of entity Net value points = Net value % / Target % x 7

71 NET VALUE POINTS AN EXAMPLE. Example : At the end of year 1 of the scheme: Total value of measured entity = R100,000,000 Black % ownership held = 18% Black debt = R16,800,000 Net value % = (B-C) / (25% x D) = (18,000,000 16,800,000) / 25,000,000 = 4.8% Year 1 target % = 10% Points = (4.8% / 10%) x 7 = 3.36

72 FLOW THROUGH AND MODIFIED FLOW THROUGH. Other Ownership principles: Flow-through and Modified flow-through H Co 80% Black S1 70% owned by H Co 30% owned by Green Co (0% black) What is the % black ownership of S1?

73 FLOW THROUGH AND MODIFIED FLOW THROUGH. Flow-through and Modified flow-through H Co 80% Black S1 70% owned by H Co 30% owned by Green Co (0% black) True effective black ownership of S1: = (70% x H Co Black %) + (30% x Green Co Black %) = (70% x 80%) + (30% x 0%) = 56%

74 FLOW THROUGH AND MODIFIED FLOW THROUGH. Modified Flow-through principle H Co 80% Black H Co forms the ownership chain As it is more than 50% black owned, it is deemed to be 100% black owned S1 70% owned by H Co 30% owned by Green Co (0% black) Modified black ownership of S1 = (70% x H Co Black %) + (30% x Green Co Black %) = (70% x 100%) + (30% x 0%) = 70%

75 FLOW THROUGH AND MODIFIED FLOW THROUGH. Modified flow-through Limited application on Ownership scorecard: Voting rights of black people Economic interest of black people Can only be applied to ownership by juristic persons

76 MANDATED INVESTMENTS. Other Ownership principles: Mandated Investments Exclusion of the following types of entities when calculating black ownership: Government entities S21 Companies Mandated investments e.g. Unit trusts; Medical Schemes; Pension Funds; Long-Term Insurers Limit of 40% of ownership by mandated investments can be excluded Choice applies to all mandated investments

77 MANDATED INVESTMENTS. Exclusion of mandated investments E.g. 35% shareholding by Old Mutual pension fund, which is 20% black-owned. Remaining 65% is held equally between white and black shareholders. Current black ownership: (35% x 20%) + (65% x 50%) = 7% % = 39.5%

78 MANDATED INVESTMENTS. Exclusion of mandated investments E.g. 35% shareholding by Old Mutual pension fund, which is 20% black-owned. Remaining 65% is held equally between white and black shareholders. Modified black ownership: - Pension fund of 35% can now be excluded - Remaining 65% is considered as total equity - Therefore black ownership now 50%

79 Chapter 1 Chapter seven Implementation Stakeholder management Communication Change management You want people to show up, not just physically, but intellectually, emotionally, and spiritually. If they will show up and give you everything they ve got every day they come to work, you ll have one of the greatest organisations in the world: B.Gates (2006)

80 THE THREE LEVELS OF TRANSFORMATIONAL CHANGES Habits Physical Transactional Values & beliefs Intellectual Transitional Basic assumptions Emotional Transformational SOURCE: Wilkinson & Pickett, The Spirit Level (2009),

81 CHANGING THE INDIVIDUAL 2 An understanding of what should be done Must start with a personal and emotional engagement with the challenge 3 3 The actual implementation of the process can only come after 1 & 2 Black Economic Empowerment - B-BBEE Plan

82 HOW WILL YOU CREATE A NEW REALITY? Challenge Strategic response Old structure Old processes Re-acting Re-structuring Re-designing New structure New processes Old thinking Re-framing New thinking Uncovering current reality Creating a new reality Re-generating SOURCE: Scharmer (2008)

83 LEVELS OF B-BBEE UNDERSTANDING EXCO BBBEE champion Subject matter experts The management leading the process All employees. What does it mean for me? New employees SOURCE: Everyone's Guide to BEE, Woolley (2008)

84 WHO SHOULD WE COMMUNICATE TO? Optimist Naive Informed Pessimist Black Economic Empowerment - B-BBEE Plan

85 BUILDING A STRATEGIC NARRATIVE What happened? What is happening? Where are we going? Personal call to action Black Economic Empowerment - B-BBEE Plan

86 STRATEGY OF THE ROYAL BAFEKENG Chapter nine

87 ACTION LIST Action Responsibility By when Chapter four

88 CHANGE WHEEL 1. Shared Vision 2. Aligning Strategy, Structure, Processes and People 3. Symbols & Signals showing commitment 4. Education training and tools 5. Demonstration 6. Communicate best practice and experiences 7. Metrics and feedback 8. Reward & recognition Black Economic Empowerment - B-BBEE Plan

89 A TRANSFORMATION DIAGNOSTIC = Pressure Direction Capacity Actionable steps Sustainable transformation = Bottom of the in-tray???? Direction Capacity Actionable steps Pressure +???? + Capacity Actionable + steps = A start that fizzles Pressure + Direction +???? = + Actionable steps Anxiety plus frustration + + +???? = Haphazard efforts Pressure Direction Capacity Black Economic Empowerment - B-BBEE Plan

90 CO-OPTING INFLUENCERS AND THOSE THAT ARE INFLUENCE-ABLE 1. Create dissatisfaction with status quo 2. Debate possible futures 4. Review, reflect & revise 3. Act to learn Black Economic Empowerment - B-BBEE Plan

91 INTERNAL INVOLVEMENT Social involvement Improving climate Information interpretation Feedback on action and impact Audit of climate: toilet doors Black Economic Empowerment - B-BBEE Plan

92 Chapter 1 Conclusion

93 BUILDING A CULTURE THAT SUPPORTS TRANSFORMATION REAL Its all invented Living in the moment Igniting the spark Stepping into a universe of possibilities Giving away to passion Black Economic Empowerment - B-BBEE Plan

94 THE BLUE DRESS Black Economic Empowerment - B-BBEE Plan