Revised BEE Codes. Leila Moonda. 07 December ,BEE Institute, All Rights Reserved

Transcription

1 Revised BEE Codes Leila Moonda

2 Agenda Welcome Introduction Changes Discussion and comments Closure

3 Introduction

4 President Jacob Zuma says black economic empowerment should not last forever but, to move beyond the need for empowerment, South Africa needs to level the economic playing field and draw the black majority into all levels of the economy, including as owners and managers. "We can t talk about BEE forever. We will become prisoners of our past. We need to get over this (stage) and talk about small business," he said.

5 Changes to the BEE Act Establishment the B-BBEE Commission to act as a watchdog for BBBEE implementation and the introduction of the Verification Regulator - IRBA; Creation of a Monitoring, Evaluation and Reporting framework by all public and private institutions; Creation of statutory offence of Fronting and other related offences;

6 Changes to the BEE Act Introduction of penalties ranging from maximum sentence of 10 years to 10% of company's turnover and prohibition not to trade with organs of state for 10 years; Trumping provision to be applicable on conflicting provisions specific to B-BBEE only; and Strengthened application of the Codes to organs of state and sector codes to affected sectors.

7 Changes to the BEE Codes

8 Gazetting and Implementation Gazetted on the 11 th October Month Transition Period Sector Codes have 12 to become aligned and gazetted

9 General Principles The Generic scorecard adjusted in accordance with government key priorities 5 Scorecard elements = 105. Broad-based groups elevated into the main Ownership scorecard All companies except Exempted Micro Enterprises to comply with all elements Scorecard points & Qualification criteria for awarding of B-BBEE status levels adjusted Enhanced the recognition status of black owned EMEs and QSEs

10 General Principles Employment Equity and Management Control merged into one element: Management Control ( MC) Preferential Procurement and Enterprise Development merged into one element : Enterprise and Supplier Development (ESD) Introduced minimum requirements for priority elements: Ownership, Skills Development, and Enterprise and Supplier Development

11 General Principles All measured entities to comply with priority elements: QSEs to comply with at least two of the priority elements Ownership is compulsory and either ESD or Skills Development; Large entities to comply with all priority elements ; Entities who do not meet the thresholds in priority elements, the overall Score will be discounted by 1 level

12 General Principles An EME / QSE that is 100% owned by black people qualifies as a level 1 contributor; An EME / QSE that is more than 50% owned by black people qualifies as a level 2 contributor;

13 General Principles The thresholds for EME s and QSE s have been adjusted: EME increased from R5 million to R10 million QSE: increased to R10 million - R50 million Large entities: R50 million and above

14 General Principles EME s & QSE s only have to obtain a sworn affidavit every year confirming revenue and Ownership.

15 Revised Scorecard Element Code Revised Weighting Ownership Management Control Skills Development Enterprise and Supplier Development Socio-economic Development Total 105

16 Revised B-BBEE Recognition Levels Level Current Points New Points Recognition Level % % % % % % % % Non-compliant <30 <40 0%

17 Ownership 40% of the 8 sub- points allocated to NET VALUE, as the key driver of true ownership in the hands of black people and it is important to measure economic interest on an annual basis. Clarity for Family Trusts for recognition on the ownership element.

18 Ownership New entrants have been incorporated into the main points of the scorecard and increased to R50 million Consolidated ownership fulfilment and net value points

19 Ownership Scorecard Description Points Target Exercisable Voting Rights in the hands of black people Exercisable Voting Rights in the hands of black women Economic Interest to which black people are entitled Economic Interest to which black women are entitled Economic Interest in the hands the following Designated Groups Designated Groups, ESOPS, BBOS, Co-ops New Entrants Net Value 8 Total %+ 1 Vote 2 10% 4 25% 2 10% 3 2 3% 2%

20 Ownership Net Value Sub-minimum Year Net Value Target 40% sub-minimum 1 2.5% 1.0% % 2.0% % 4.0% % 6.0% % 8.0% % 10.0%

21 Modified Flow-through Previously applied to once in a chain of Ownership Changed to only once in the entire ownership structure

22 Family Trusts New rules applicable to Family Trusts have been included, allowing Trustees to have discretion on beneficiaries and percentage of benefit

23 Management Control Measures: Board Voting Rights Executive Directors Top Management Senior Management Middle Management Junior Management No ARG

24 Management Control Provided the measurement principle of EAP targets for enterprises operating at the Provincial and/ or National levels Aligned the Management Control element with the EAP targets as annually published by the Department of Labour / Commission for Employment Equity

25 Management Control Scorecard Description Points Target 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 Black Executive directors as a percentage of all executive directors Black female Executive directors as a percentage of all executive directors 2 50% 1 25% 2 50% 1 25%

26 Management Control Scorecard 2 Description Points Target Black Executive Management as a percentage of all executive directors Black female Executive Management as a percentage of all executive directors 2 60% 1 30% Black employees in Senior Management as a percentage of all such employees Black female employees in Senior Management as a percentage of all such employees 2 60% 1 30%

27 Management Control Scorecard 3 Description Points Target 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 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 Black employees with disabilities as a percentage of all employees Total 19 (?) 2 75% 1 38% 1 88% 1 44% 2 2%

28 MC: New Provisions The targets for Senior, Middle and Junior Management should be broken down into criteria for the different race groups as per the Employment Equity Act requirements and weighted accordingly. Targets for African, Indian, Coloured (Chinese) people and women

29 Formula for Management Control C = the compliance target as per the Regulations of Employment Equity Act and Commission on Employment Equity Report for that measurement subcategory.

30 Impact of Formula Category Percentage Representation in Measured Entity EAP Target* AM 15% 18.9% CM 3% 5.4% IM 1% 5.3% AF 10% 17.5% CF 6% 4.8% IF 1% 3.7% Total 36% 55.6% = 60.5%

31 MC: New Provisions A Measured Entity must use the current payroll data in calculating its score under the Management Control scorecard.

32 Skills Development Broadened the learnerships to include apprenticeships and internships Informal and work based training (Category F and G) is recognisable but capped at 15% of the total value of Skills Expenditure. Training initiatives broadened to encompass the unemployed The 6 % compliance target includes external training expenditure for unemployed black people.

33 Skills Development Introduced learners absorption target Introduced a 40% sub-minimum requirement for total weighting points for Skills Development. Introduces a 15% cap for non-core training costs such as accommodation, catering etc. Clarifies that international trainings are recognisable provided they meet the SAQA requirements for recognition. A trainee tracking tool has to be developed in order for the Measured Entity to score for Learnership Absorption. Mandatory sectoral training does not quality as skills development contribution i.e. health and safety in construction sector (non-exhaustive list).

34 Skills Development Description Points Target Skills Development Expenditure on Learning Programmes specified in the Learning Programme Matrix for black people* as a percentage of Leviable Amount Skills Development Expenditure on Learning Programmes specified in the Learning Programme Matrix for black employees with disabilities as a percentage of Leviable Amount Number of black people*participating in Learnerships, Apprenticeships and Internships as a percentage of total employees Number of unemployed black people participating in Learnerships, Apprenticeships and Internships as a percentage of total employees Number of black people absorbed by the ME / industry at the end of the learnership programme 8 6% 4 0.3% 4 2.5% 4 2.5% 5 100% * Not restricted to employees

35 SD: Pre-requisites Pre-requisites changed to: Developed WSP, ATR and Pivotal Report Implemented programmes for Priority Skills PIVOTAL = Professional, Vocational, Technical and Academic

36 Sub-targets The targets for each line item should be broken down into criteria for the different race groups as per the Employment Equity Act requirements and weighted accordingly. Targets for African, Indian, Coloured (Chinese) people and women

37 Sub-target Formula C = the compliance target as per the Regulations of Employment Equity Act and Commission on Employment Equity Report for that measurement subcategory.

38 Absorption Means a measure of the Measured Entity's ability to successfully secure formal permanent or long-term contract employment for the Learner or to assist the Learner's proceed with further education and training;

39 Learning Program Matrix Programme Narrative Description Delivery Mode Learning Achievement A Bursaries Institution-based theoretical instruction alone formally assessed by the institution B Internships Institution-based theoretical instruction as well as some practical learning with an employer or in a simulated work environment formally assessed through the institution C Learnerships Recognised or registered structured experiential learning in the workplace that is required after the achievement of a qualification formally assessed by a statutory occupational or professional body Institutional instruction - universities and colleges, schools, abet providers Institutional instruction or workplace environment - universities and colleges, schools, ABET providers and workplace Structured learning in the workplace with mentoring or coaching Degree, diploma or certificate issued by institution of learning Degree, diploma or certificate issued by an accredited or registered formal institution of learning Occupational or professional knowledge and experience formally recognised through registration or licensing

40 The Learning Program Matrix Programme Narrative Description Delivery Mode Learning Achievement D Learnerships or Apprenticeships Occupationally-directed instructional and workbased learning programme that requires a formal contract formally assessed by an accredited body Institutional instruction together with structured, supervised experiential learning in the workplace SAQA registered qualification, a certificate or other similar occupational or professional qualification issued by an accredited or registered formal institution of learning E Work-integrated learning Occupationally-directed instructional and workbased learning programme that does not require a formal contract formally assessed by an accredited body Structured, supervised experiential learning in the workplace which may include institutional instruction Credits awarded for registered unit standards, CPD, improved performance or skills

41 Enterprise and Supplier Development Preferential Procurement and Enterprise Development merged 40% minimum compliance target as a requirement for BEE spend from all suppliers and ED and SD spend Increased targets

42 ESD: General Principles Reduced the weighting for all suppliers based on the B- BBEE procurement recognition levels Expanded the scorecard to distinguish between enterprise development contributions and supplier development contributions

43 ESD: General Principles Redefined Supplier Development beneficiaries to only include black owned and black women owned QSEs and EMEs Entities can apply import exclusion principle but not applicable to designated sectors as pronounced by the Minister of Trade and Industry Replaced the Value Adding Supplier concept with Empowering Supplier

44 Empowering Supplier An Empowering Supplier within a context of B-BBEE is a B- BBEE compliant entity which can demonstrate that its production and/or value adding activities take place in the country. Is a good citizen South African entity that complies with all regulatory requirements of the country.

45 Empowering Supplier Criteria Large enterprise should comply with at least three whereas QSEs should comply with at least one criteria At least 25% of cost of sales (expenses) excluding labour cost and depreciation must be procured from local producers or local suppliers in SA, for service industry labour cost are included but capped to 15%. 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.

46 Empowering Supplier Criteria At least 25% transformation of raw material/beneficiation which includes local manufacturing, production and/or assembly, and/or packaging. Skills transfer at least spent 12 days per annum of which are productive, in assisting Black EMEs and QSEs beneficiaries to increase their operation or financial capacity. Exempted Micro Enterprises and Start-Ups are automatically recognised as Empowering Suppliers.

47 ESD: Scorecard Description Points Target B-BBEE Procurement Spend from all Empowering Suppliers based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend B-BBEE Procurement Spend from Empowering Suppliers who are QSE s based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend B-BBEE Procurement Spend from Empowering Suppliers who are EME s based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 5 80% 3 15% 4 15%

48 ESD: Scorecard Description Points Target 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 B-BBEE Procurement Spend from Empowering Suppliers that are at least 30% black women owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend Bonus Points B-BBEE Procurement Spend from Designated Group Suppliers that are at least 51% Black owned 9 40% 4 12% 2 2%

49 ESD: Scorecard Description Points Target Annual value of all Supplier Development Contributions made by the Measured Entity as a percentage of the target. Annual value of Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target. Bonus Points: Graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level. Bonus Points: For creating one or more jobs directly as a result of Supplier Development and Enterprise Development initiatives by the Measured Entity. 10 2% of NPAT 5 1% of NPAT 1 1

50 Enhanced Recognition A recipient of supplier development contributions from a Measured Entity who has a minimum 3 year contract, the recognisable B-BBEE Procurement Spend is multiplied by a factor of 1.2 ; A black owned QSE or EME which is not a supplier development beneficiary but that has a minimum 3 year contract with the Measured Entity, the B-BBEE Procurement Spend is multiplied by a factor of 1.2; A first time supplier to the Measured Entity, the recognisable B-BBEE Procurement Spend is multiplied by a factor of 1.2.

51 ED and SD Encouraged to have an Enterprise Development / Supplier Development plan for beneficiaries: Clear objectives Priority interventions Key performance indicators Implementation plan with milestones

52 Annual Contributions Contributions, programmes and/or initiatives that span over multiple years, the total contribution amount must be divided by the number of years, and the average per year is then to be utilised for the annual contribution.

53 Exclusion of Imports The exclusion of imports is subject to the Measured Entity having developed and implemented an Enterprise Development and Supplier Development plan for imported goods and services

54 Grant and Related Contributions Grant and Related Contributions Contribution amount Benefit factor Grant contribution Full grant amount 100% Direct Cost incurred in supporting approved projects Discounts in addition to normal business practices Overhead costs (including people appointed to manage projects) verifiable cost (including both monetary and non-monetary) Discount amount (in addition to normal business discount) Verifiable costs (including both monetary and non-monetary) 100% 100% 70%

55 Loans and Related Contributions Loans and Related Contributions Contribution Amount Benefit Factor Interest-free loan with no security requirements Outstanding Loan Amount 70% Standard loan provided to beneficiary enterprises Guarantees provided on behalf of a beneficiary entity Outstanding Loan Amount 50% Guarantee Amount 3% Lower interest rate Outstanding Loan Amount Prime Rate Actual Rate

56 Equity Investments and Early Payments Equity Investments and Related Contributions Contribution Amount Benefit Factor Minority investment Investment Amount 70% Investment with lower dividend to financier Early Payments Investment Amount Percentage of invoiced amount multiplied by 15% (being an approximation of the cost of short term funding) Dividend rate of ordinary shareholders actual dividend rate of contributor 15% - number of days from invoice to payment Maximum of 1.5 points

57 Human Resource Capacity Contributions Contributions made in the form of Human Resource Capacity Professional services rendered at no cost and supporting approved projects Professional services rendered at a discount and supporting approved projects Contribution Amount Commercial hourly rate of professional Value of discount based on commercial hourly rate of professional Benefit factor 60% 60% Time of employees of measured entity productively deployed in assisting beneficiaries Monthly salary divided by %

58 Socio Economic Development Indicator Weight (Points) Target Average annual value of all Socioeconomic Contributions made by the Measured Entity as a percentage of the target 5 1% of net profit after tax TOTAL 5

59 Socio-economic Development Initiatives that are generic and sector specific that facilitate income generating activities for targeted beneficiaries Programme that creates sustainable access to the economy for its beneficiaries. Improvement of capacity to work, including self employment, by provision of training and /or mentoring of beneficiaries to assist them to improve their employability.

60 Thank You Leila Moonda