An overview of the revised Generic BEE codes of good practice

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2 2 An overview of the revised Generic BEE codes of good practice Clarification statements application of revised & sector codes Revised Sector Charters i.e. MAC ( Media, Advertising and Communications, Tourism, Agri) Implications of poor performing suppliers on your scorecard Scenario Plan What to do going forward Enterprise & Supplier Development - Gezajozi

3 3 the secret of change is to focus all of your energy, Not on fighting the old but on building the new Socrates

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5 5 CURRENT REVISED Ownership Management Control Employment Equity Skills Development Procurement Enterprise Development Socio-Economic Development Ownership Management Control Skills Development Supplier & Enterprise Development Socio-Economic Development

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7 7 100% Black owned = Level 1 > 50,1% to 99% Black owned = Level 2 50% Black owned = Level 4 White owned = Level 4

8 8 Sworn affidavit confirming: Annual total revenue is less than R10 million Level of black ownership The above must be done on an annual basis

9 9 Turnover between R10m to R 50 million pa Measure all 5 elements Comply with at least 2 priority elements: Ownership (compulsory) and Ent & Supplier Dev or Skills Development Entities who do not meet priority element thresholds the overall score will with be discounted by 1 level Sub minimum s Enhanced recognition for black owned QSE s: 100% Black owned = Level 1 Greater than 51% black owned = Level 2

10 10 For >50% Black owned entities: Sworn affidavit confirming: Annual revenue is less than R50 million Level of black ownership The above must be done on an annual basis For <50% Black owned entities: BEE Certificate

11 11 Turnover > R50 m per annum Measure all 5 elements Comply with all 3 priority elements Ownership, Ent & Supplier Dev, Skills Dev Entities who do not meet priority element sub minimum targets the overall score will be discounted by 1 level

12 12 Priority element for both Generic and QSE s Sub minimum requirements: Minimum of 40% of Net Value targets, based on time graduation factor Non-compliance with Threshold targets: Result in the achieved B-BBEE status level being discounted by one level

13 13 Junior Managers now included Staff excluded for QSE s Targets broken down into different race sub groups ME can elect to apply national or provincial EAP targets EEA2 & EEA4 are pre-requisites to qualify as empowering suppliers. African Male Indian male Coloured Male

14 14 African 40.7 African 34.2 Coloured 5.8 Coloured 5.0 Indian 1.9 Indian 1.1 White 6.4 White Male Female Province A C I W A C I W Total Western Cape 17.8% 27.1% 0.2% 7.8% 16.1% 23.9% 0.1% 7.0% 100.0% Eastern Cape 39.9% 7.7% 0.4% 5.7% 35.5% 5.5% 0.4% 4.8% 100.0% Northern Cape 28.0% 20.7% 0.1% 4.9% 24.2% 19.0% 0.0% 3.0% 100.0% Free State 47.1% 1.7% 0.2% 5.3% 40.4% 1.2% 0.1% 4.1% 100.0% KwaZulu-Natal 42.3% 1.3% 7.3% 3.3% 38.3% 0.8% 4.4% 2.3% 100.0% North West 52.2% 0.8% 0.2% 5.7% 37.7% 0.4% 0.0% 3.1% 100.0% Gauteng 42.5% 1.9% 1.5% 9.8% 34.2% 1.9% 0.9% 7.2% 100.0% Mpumalanga 47.8% 0.3% 0.5% 4.7% 42.9% 0.1% 0.1% 3.6% 100.0% Limpopo 54.5% 0.2% 0.5% 1.8% 41.3% 0.1% 0.2% 1.5% 100.0%

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17 17 Targets based on overall demographic representation of black people as defined (African, Coloured, Indian) Require Workplace Skills Plan, Annual Training Report, SETA approved Pivotal report, Implementation of priority skills programme for black employees External training for unemployed black people included Mandatory training as prescribed by SETA has been excluded Trainee tracking tool developed for bonus points Sub minimum of 40% of targets to be achieved to avoid discounting principle

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19 19 Cat Narrative Description Delivery Mode Learning Site Learning Achievement A Institution-based theoretical instruction alone formally assessed by the institution Institutional instruction Institutions such as universities and colleges, schools, ABET providers Recognised theoretical knowledge resulting in the achievement of a degree, diploma or certificate issued by an accredited or registered formal institution of learning B Institution-based theoretical instruction as well as some practical learning with an employer or in a simulated work environment formally assessed through the institution Mixed mode delivery with institutional instruction as well as supervised learning in an appropriate workplace or simulated work environment Institutions such as universities and colleges, schools, ABET providers and workplace Theoretical knowledge and workplace experience with set requirements resulting in the achievement of a degree, diploma or certificate issued by an accredited or registered formal institution of learning C 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 Structured learning in the workplace with mentoring or coaching Workplace Occupational or professional knowledge and experience formally recognised through registration or licensing D Occupationally-directed instructional and work based learning programme that requires a formal contract formally assessed by an accredited body Institutional instruction together with structured, supervised experiential learning in the workplace Institution and workplace Theoretical knowledge and workplace learning, resulting in the achievement of a South African Qualifications Authority registered qualification, a certificate or other similar occupational or professional qualification issued by an accredited or registered formal institution of learning

20 20 Cat Narrative Description Delivery Mode Learning Site Learning Achievement E F Occupationally-directed instructional and work based learning programme that does not require a formal contract formally assessed by an accredited body Occupationally-directed informal instructional programmes Structured, supervised experiential learning in the workplace which may include some institutional instruction Structured information sharing or direct instruction involving workshops, seminars and conferences and short courses Workplace and some institutional as well as ABET providers Institutions, conferences and meetings Credits awarded for registered unit standards Continuing professional development,attendance certificates and credits against registered unit standards (in some instances) G Work-based informal programmes Informal training Workplace Increased understand of job or work context or improved performance or skills

21 21 Value adding suppliers replaced with Empowering Supplier Combine Procurement & Enterprise Development Procurement (25 points) Supplier Development (10 points) Enterprise Development (5 points) Bonus points (4 points)

22 22 WHO QUALIFIES AS AN EMPOWERING SUPPLIER? EME s and Start-Ups are automatically recognised as Empowering 100 % Black owned QSE with turnover below R 50 million

23 23 Meet at least 3 criteria if Generic and 1 if QSE: 25% of Cost of Sales (excl Labour & depreciation) procured locally 50% jobs created are for Black people in the last measured period 25% transformation of raw materials 12 days pa assisting Black EME & QSE s to increase operational and financial capacity Atleast 85% of labour costs should be paid to South African employees by services industry entities

24 24 Remains as 1% of NPAT Approved Socio-Economic Development contributions / Beneficiaries 75% of the Socio-Economic Development contributions must benefit Black persons directly Grants, Discounts, Overhead Costs = 100% benefit Services rendered, Employee time = 80%

25 25 AFFIDAVITS The wording of the affidavit must meet the guidelines provided for in the Dti s template (see attached) MANAGEMENT CONTROL ME can elect to be measured against either National or Provincial targets SKILLS DEVELOPMENT Mandatory training as prescribed by the SETA does not count towards skills development expenditure Absorption points will only be earnt after the completion of the learnership/apprenticeship/internship

26 26 Training has to be inline with Annual Training Report(ATR) Expenditure on unemployed learners will count towards skills development expenditure Training conducted outside of S.A. has to meet SAQA requirements for it to count as category B,C,D otherwise its recognised as E or F ENTERPRISE & SUPPLIER DEVELOPMENT ESD invoices raised but are not paid within the period cannot count towards ESD expenditure The distinction between an Enterprise development beneficiary and supplier development beneficiary is whether or not the beneficiary is an empowering supplier. An SD beneficiary can be an ED beneficiary but an ED beneficiary can NEVER be a SD beneficiary if they are not an empowering supplier

27 27 Procurement Imports based on technical specifications and brand can only be excluded if an ESD programme has been developed and implemented In order to obtain an additional 1.20% enhanced recognition for supplier development the ME must demonstrate the following:- - provide evidence that a signed, valid and acceptable contract of a minimum 3 years exists between the ME and the beneficiary - provide evidence that a first-time supplier has not supplied to the ME prior to the measurement period EMPOWERING SUPPLIER Skills Development Levies are a pre-requisite in order to qualify as an empowering supplier EEA2 & EEA4 are not pre-requisites for measuring MC but they are for determining empowering supplier status 50% of jobs created should be for black south african citizens and the number of black south african employees should have been maintained since the last verification

28 28 AGRI BEE (28/12/2012) Integrated Transport (21/08/2009) - Chartered Accountancy (10/05/2011) - Property (01/06/2012) - Information & Communication Technology (06/06/2012) Financial Services (29/11/12) Construction (05/06/2009) Forestry (12/06/2009)

29 29 INDUSTRY Sub-Sector Public Relations Industry Advertising Industry Marketing, Advertising and Communication Research Industry GENERIC/Large Entity > R 10 million > R 50 million > R 50 million INDUSTRY Sub-Sector Public Relations Industry Advertising Industry Marketing, Advertising and Communication Research Industry QSE R 1 million - R 10 million R 10 million - R 50 million R 10 million - R 50 million

30 30 ELEMENT WEIGHTING WEIGHTING Ownership Management Control Skills Development Enterprise and Supplier Development Socio-economic Development 5 5 Responsible Marketing and Communications Points 105 Points

31 31 Remains as 1% of NPAT Approved Socio-Economic Development contributions / sector specific programs of the entity to promote responsible behavioural changes in line with Government s strategic objectives. 75% of the Socio-Economic Development contributions must benefit Black persons directly Grants, Discounts, Overhead Costs = 100% benefit Services rendered, Employee time = 80%

32 32 Supplier M.E. M.E. Mining Retail M.E. Banks Government Tourism M.E. M.E. Insurers Telecoms M.E.

33 33 WHAT IS THE BENEFIT? Spend with suppliers with higher BEE Levels are advantageous. with levels above Level 4 will contribute more than the actual spend towards your procurement spend and suppliers below Level 4 will contribute less than actual spend. The way in which companies have approached Preferential Procurement in the past is simply no longer relevant. Innovative, strategic thinking is now required. IMPACT ON YOUR SCORECARD? 1. Reduced procurement recognition spend, thereby increasing your TMPS (total Measured Procurement spend) target. 2. Potential discounting due to not meeting the sub-minimum target for ESD(includes Preferential Procurement) 3. Create ESD programmes, which could be costly. 4. When used strategically suppliers with higher BEE levels will often reduce the effects of having suppliers with a level lower than 4 or no certificate or a Non-Compliant certificate because the enhanced spend with other suppliers can fill the gaps.

34 34 On the Codes of Good Practice five criteria are measured 1. Spend on BEE compliant suppliers 2. Spend on QSE and EME supplier 3. Spend on 50% Black Owned suppliers 4. Spend on 30% black female owned suppliers 5. Spend with designated group suppliers that are 51% black owned (Bonus Points)

35 35 WHAT IS THE SCENARIO PLAN? Based on an in-depth analysis of your current score, we identify initiatives that need to be undertaken in order to achieve your desired level of compliance during the current financial period. This allows the ME to make flexible long-term plans. A cost benefit analysis is compiled in the report, thereby giving the ME an actual cost estimate in order for to achieve the desired level of compliance.

36 36 ELEMENT Weighting BONUS POINTS Current Year to date Scenario: Revised Codes OWNERSHIP EQUITY Current Year to date Scenario MANAGEMENT CONTROL SKILLS DEVELOPMENT ENTERPRISE AND SUPPLIER DEVELOPMENT SOCIO- ECONOMIC DEVELOPMENT TOTAL SCORE ELEMENT Weighting BONUS POINTS Future Scenario: Revised Codes OWNERSHIP EQUITY MANAGEMENT CONTROL SKILLS DEVELOPMENT ENTERPRISE AND SUPPLIER DEVELOPMENT SOCIO- ECONOMIC DEVELOPMENT Proposed Future Scenario TOTAL SCORE Future Estimated Score NON - COMPLIANT Discounted by 1 level YES remains non-compliant Procurement recognition level 0% Empowering Supplier Status UNKNOWN Future Estimated Score LEVEL 7 Discounted by 1 level YES to level 8 Procurement recognition level 10% Empowering Supplier Status UNKNOWN

37 If you can t fly then run, if you can t run then walk, if you can t walk then crawl, but whatever you do you have to keep moving forward. ~ Martin Luther King Jr. 37 Start preparing your BEE Strategy NOW needs to be driven from the top down, systems in place to capture evidence, allocate a low level resource to do the ground work. Succession Planning - start identifying employees that you can upskill in order for them to move up the hierarchy into management roles. Start gearing up for the revised codes NOW. Consider engaging a reputable B-BBEE Consultant to help you formulate a sound strategy. Look to recruit black disabled female employees as they have higher recognition on the scorecard Look for more black owned EME s or QSE s or Female Owned entities to procure from Consider offering suppliers training on the revised Codes, offer them access to a workshop on the practical elements of how to assess the impact of the new scorecard, and how to engage in a strategic intervention to identify how to improve their B-BBEE scorecard over the next four years.

38 38 Engage a Skills Development Facilitator to ensure that the correct interventions have been implemented and that all learnerships meet the learnership requirements under the revised codes. Consider doing a Gap Analysis/Scenario Plan to understand your areas of weakness in order to prepare you for the revised codes. Don t engage your suppliers like you have previously it won t work. There will be many empty promises and limited buy-in and commitment. We recommend contractual obligations, committing suppliers to achieve four-year targets, and financial penalties for those who do not attain them Establish a supplier portal where prospective suppliers can register their interest in becoming a supplier to your company conduct an analysis into your spend and identify commodities that could offer opportunities for a change in supply.

39 39 Identify an Enterprise and Supplier Development Beneficiary that you can start to develop, as this involves setting out a detailed program which needs to have: Clear objectives Priority Interventions Key Performance Indicators Concise implementation plan with clearly articulated milestones

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