4. Legislative Framework
LEGISLATIVE PROCESS
Delegated Legislation
The Revised Codes of Good Practice is sub-ordinate or delegated legislation.
(i.e. legislation that is not made by the primary legislator but in terms of authority delegated to
the executive, the Minister of Trade and Industry in this case.)
The executive’s authority to legislate is limited by act that gives him such
authority.
Section 9(5) Public Commentary
+-500 pieces of commentary received
Only then publish final Revised Codes i.t.o.section 9(1)
5. Broad-Based Black Economic Empowerment Act 53 of 2003
6 Pages – gives wide powers to Minister to issue Codes and Regulations
Section 9(1) and 9(5) interaction, also section 14
Section 10 - mandatory application of any Codes
The Codes of Good Practice on Broad-Based Black Economic Empowerment, 9
February 2007 (Gazette nr.: 29617)
Code 000 to 800
Various Sector Codes – promotion from charter to Code
Statement 005 – Verification Professionals
Revised Codes of Good Practice on B-BBEE, 11 October 2013 (Gazette nr.: 36928)
From the Codes
Legislative Framework
6. Code 000 – General Principles and the
Generic Scorecard
7. Defining Black
“ Black people ” is as defined in the Broad-Based Black Economic
Empowerment Act no. 53 of 2003, (Africans, Coloured and Indians)
Please note that this is limited to natural persons who are South African
citizens by birth or descent or who acquired citizenship prior to 27th April
1994 by naturalization or thereafter but who would have qualified had it not
been for Apartheid legislation.
Population Registration Act 30 of 1950
8. Revised Codes 000
1. When do the Revised Codes become Effective?
2. What of Old Codes remains after they become effective?
3. Impact on Sector Codes
4. Concept of Empowering Supplier
5. Changes to EME, QSE and Generic Thresholds
6. We don’t expect wide use of merely affidavits
7. QSE Scorecard
8. Generic Scorecard
9. Priority Elements
10. Changes to the B-BBEE Status Levels
11. Broad-Based to Narrow Based Empowerment
12. Who can Verify
13. Mixed Acceptance of Certificates
14. What else does the Revised Codes focus on
9. When do the codes become effective?
Notice Page of Gazette 36928
I, Dr Rob Davies, Minister of Trade and Industry, hereby:
a) Issue the following Codes of Good Practice (the codes) under section 9 (1) of the Broad-Based
Black Economic Empowerment Act, 2003 (Act No. 53 of 2003); and
b) Determine that these Codes will come into operation within twelve (12) months from date of
this publication. With and added 6 months extension 1 May 2015
Statement 000, Section 10 – Transitional Period
10.1 For the first year after the gazette of this Statement, a Measured Entity may elect to
use:
10.2 The Amended Codes of Good Practice; or
10.3 The Generic Scorecard in Code series 000, Statement 000 issued on 9 February
2007, notwithstanding the repeal of that Statement.
10.4 Thereafter the first year, as per paragraph 10.1, all B-BBEE compliance measurement will be
in accordance with this Statement.
10. What of Old Codes remains after they become
effective?
What is clear is that the Existing Codes (Gazette 29617) is still active and has not been repealed.
Even after 1 May 2015 several of the old Statements or Codes will remain active as the revised
Codes does not purport to amend, substitute or repeal them:
All Sector Codes until they are aligned to revised Codes
Statement 003: Guidelines for developing and gazetting of transformation charters
and sector Codes
Statement 004: Scorecards for Specialised Enterprises
Statement 005: Requirements for Verification Agencies
Statement 102: Recognition of Sale of Assets
Statement 103: Recognition of Equity Equivalents for Multi Nationals
Code 800: QSE Scorecard?
11. Impact on Sector Codes
Statement 000, section 3.2.3
“A Measured Entity in a sector in respect of which a sector code has been issued in
terms of Section 9 of the B-BBEE Act as amended, may only be measured for compliance in
accordance with that code.”
All thresholds for distinction between EME’s, QSE’s and Generic Enterprises will therefore remain
in tact for those entities that falls within a particular sector Code.
EME’s
Construction Sector Code: BEP’s < R1.5 mil
Tourism Sector Code < R2.5 mil
Property Sector Code: Asset Based Businesses – Net Assets <R30 mil
QSE’s
Construction Sector Code: BEP’s R1.5 mil - R11.5 mil
Tourism Sector Code R2.5 mil - R35 mil
Property Sector Code: Asset Based Businesses – Net Assets R30 mil – R280 mil
Existing Codes Gazette 29617 will remain the basis for resolving ambiguity, uncertainty or gaps
within any particular Sector Code even after the effective date of the Revised Codes. That is until
the that Sector Codes itself is aligned to the revised Codes.
12. Concept of a Empowering Supplier
All 25 points for procurement require that the suppliers are Empowering Suppliers.
For B2B Procurement the B-BBEE Status level of the business will therefore mean nothing unless
it is also an Empowering Supplier.
Definition: Empowering Supplier
"B-BBEE compliant entity, which is a good citizen South African entity, comply with all regulatory requirements of the
country and should meet at least three if it is a large enterprise or one if it is a QSE of the following criteria:
(a) At least 25% of cost of sales 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 at 15%.
(b) 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.
(c) At least 25% transformation of raw material/beneficiation which include local manufacturing, production and/or
assembly, and/or packaging.
(d) Skills transfer – at least spend 12 days per annum of productivity deployed in assisting black EMEs and QSEs
beneficiaries to increase their operation or financial capacity.
All EME's automatically qualify as an Empowering Suppliers.
13. Changes to Thresholds
The Thresholds for EME’s, QSE’s and Generic Entities have been amended:
B-BBEE Status Level of EME’s & Black Owned QSE’s
EME’s = Level 4 BEE Status
EME’s = Empowering Supplier status
EME’s or QSE’s that are 51% Black Owned = Level 2 BEE Status
EME’s or QSE’s that are 100% Black Owned = Level 1 BEE Status
Black Owned QSE’s are not automatically Empowering Suppliers
Sworn Affidavits attesting to turnover and black ownership will be sufficient evidence for EME’s
and Black Owned QSE’s. Empowering Supplier status for Black owned QSE’s still needs to be
verified though.
The term 51% Black Owned is defined and requires:
that the economic interest and voting rights of the business is at least 51% owned by black
people as determined in Code 100. (modified flow through applicable)
All net value points are earned
14. Don’t expect wide use of the affidavit
Lacks professional appeal of a certificate;
Not independent confirmation like certificate;
Risk of Inadvertent misrepresentation in affidavit with could be met with fines
of up to 10% of rvenue and/or imprisonment of up to 10 years;
Tender Boards of Government may not rely on affidavits (2011 Preferential
Procurement Policy Framework Act Regulations);
Affidavit only used to attest to black ownership and turnover, but aspects which
have become relevant in terms of the new Codes, such as the EME’s ‘designated
group status’ and ‘enterprise and suppliers development beneficiary status’, can
only be attested to by means of a certificate.
15. QSE Scorecard
3.2.2 of Statement 000 refers to the Generic Scorecard and QSE scorecard
The Revised Codes contains no separate QSE scorecard
5.2 of Statement 000: QSE must comply with all the elements of B-BBEE for the
purposes of measurement.
Code 800: not expressly repealed, one has to infer that it was substituted by generic
scorecard.
Rumors abound that the Dti will shortly gazette a QSE scorecard.
At the moment therefore no distinction between QSE and Generic Scorecard.
Non-Black Owned QSE’s only have two priority elements in stead of 3 to comply with:
Ownership is compulsory priority element
They then have to choose between either Skills Development or Enterprise and
Supplier Development as priority elements.
17. Who can verify
Schedule to Statement 005, The Codes – (23 September 2011) has not been
repealed
Section 4.5, Statement 000, The Codes has not been repealed
“Sufficient proof of qualification as an EME is and auditor’s certificate or similar
certificate issued by an accounting officer or verification agency”
18. Mixed Acceptance – next 12 months
Vast majority of large businesses will not opt into Revised Codes. Whoever goes
first will not have any suppliers that are Empowering Suppliers;
Existing Codes only recognises measurement in terms of itself and its aligned
Sector Codes. Companies that opt out of the Revised Codes and those rated on
Sector Codes would therefore not be able to accept certificates in terms of the
Revised Codes;
PPPF Act and its 2011 regulations are not aligned to Revised Codes. Tender
boards would be opening themselves up to immense legal risk in accepting
affidavits or certificates in terms of the Revised Codes until such time as PPPFA
is aligned.
Even white owned EME’s between R5 mil and R10 mil turnover will have little
incentive to be rated in terms of Revised Codes as they now have to compete
with Level 2 and 1 black owned entities.
19. Ownership : 2007
Indicator Weight (Marks) Target
Black voting rights 3 25%+1
Voting rights of Black women 2 10%
Black economic interest 4 25%
Economic interest of Black women 2 10%
Economic interest of Black designated groups;
participants in Employee Ownership Schemes;
beneficiaries of Broad-based Ownership Schemes;
participants in co-operatives
1 2.5%
Ownership fulfillment 1 Complete
Net Value 7 Increasing
TOTAL 20
Black New Entrants 2 10%
Black participants in: Employee Ownership Schemes;
Broad-based Ownership Schemes or Co-operatives
1 10%
20. Ownership: 2013
Indicator Weight
(Marks)
Target
Black voting rights 4 25%+1
Voting rights of Black women 2 10%
Black economic interest 4 25%
Economic interest of Black women 2 10%
Economic interest of Black designated
groups; participants in Employee Ownership
Schemes; beneficiaries of Broad-based
Ownership Schemes; participants in co-
operatives
3 3%
Black New Entrants 2 2%
Net Value 8 Annexure
100 (E)
Total 25
22. Ownership Calculation
A = B/C
Where A = % black shareholding
B = Issued share in the hands of black participant (26 shares)
C = Total Issued Share Capital of ME (100 shares)
BEE
participant
Current
Shareholders
Measured Entity (Pty)
Ltd
74 shares 26 shares
100 issued shares
1000 authorised shares
A = B/C = 26/100 = 26%
23. Calculating Net Value
Deemed Net Value
A =
A = the deemed net value
B = the value of the shares
C = the carrying value of the acquisition debts of the black participants
D = the value of the SA operations of the measured entity on date of measurement
Net Value = higher of formula A or B
Formula A Formula B: normal formula
A = B x x 8
A = the score
B = the deemed net value
C = the time based graduation factor: 10% year 1; 20% year 2; 40% year 3&4 etc.
B C
D
25% x C
1
24. THE DEFINITION OF ‘CURRENT EQUITY INTEREST DATE
The term current equity interest as used in the graduation factors in Formula A of the Net Value
calculation in Annexe 100 (C), is not defined in the Codes. Revised Codes did not fix this omission.
ABVA’s technical committee interprets the term ‘current equity interest date’ in line with
the term “Net Value date” which is defined as meaning:
“..the later occurring of the date of commencement of statement 100 and the date upon which
the earliest of all still operative transactions undertaken by the Measured Entity in order to achieve black
rights of ownership, became effective and unconditional.”
Example:
Timeline
Deal 1 Deal 2
9 Feb 20073 Jan 2005 2 Apr 2009
Date of Commencement
statement 100
OTHER BEST PRACTICE NOTES
25. MAJOR DIFFERENCES
Increase of overall points from 23 to 25
Black new Entrants
Threshold increase from R20 mil to R50 mil
Target dropped from 10% to 2%
Points increased from 1 to 2
Realisation point moved to Net Value category
Modified Flow through principle
BEE controlled or owned company now ≥51%
Can only apply once in entire ownership structure
Cannot apply exclusion principle if you apply MFT
26. MODIFIED FLOW THROUGH PRINCIPLE
The Modified Flow-Through Principle applies to any a
juristic person in the chain of ownership of the ME, in
which black people have a flow-through level of
participation of at least 51%. Then, according to this
principle, only once in the entire ownership structure
(use to be chain) may such black participation be
treated as if it were 100% black.
Only applies to “Black People” indicators therefore not
to any other indicators including female, net value or
bonus points.
Example on left:
Old Codes
% BEE = (100% x 15%) + (100% x 10%)
= 15% + 10%
= 25%
Revised Codes
% BEE = (100% x 15%) + (60% x 10%)
= 15% + 6%
= 21%
Measured Entity
Co A Co B
BEE 1 BEE 2
MFT MFT
51% 60%
15% 10%
27. MAJOR DIFFERENCES
Mandated Investments – only South African
Continued recognition of Sale of Shares limited
Private Equity Fund treatment corrected
Definitions of BBOS’s; ESOS’s and Trusts amended to:
Defining of participants and their proportion of entitlement
Limitation of fiduciaries’ discretion with this (except family trusts)
Compulsory AGM’s (disclosure of financials)
Constitution must be available upon request to participants in
their language.
28. ANNEXURE 100 (B) VEHICLES
BROAD BASED OWNERSHIP SCHEMES
Substantive definitions removed in final draft e.g. > 50 people
Only objective factual criteria
- Management Fees not to exceed 15%
- Constitution must record rules for distribution of Econ. Interest
- At least 85% of value of scheme to accrue to black people
- 50% of fiduciaries must be independent
- 50% of fiduciaries must be black people and 25% black female
- Chairperson must be independent
- On winding up all accumulated econ. interest transferred to
beneficiaries or entity with similar objectives.
Now Added
- Defining Participants and entitlement
- Limitation of Fiduciaries discretion
- Compulsory AGM and disclosure of financials
29. EMPLOYEE SHARE OWNERSHIP SCHEMES
A Worker or Employee Scheme
Objective Rules paragraph 2 of Annexe 100 (B)
- Constitution must define Participants and the proportion of their
entitlement to receive distributions.
- Fiduciaries must have no discretion on the above.
- Participants must take part in
- appointing 50% of fiduciaries.
- managing the scheme at a level similar to shareholders in
company.
- The Constitution must be available in an official language of the
requester.
- Winding up all interest payable to participants
- Financial reports to be presented at annual general meeting of
scheme.
ANNEXURE 100 (B) VEHICLES
30. TRUSTS
Constitution must define Participants and the proportion of their
entitlement to receive distributions.
- Written record of beneficiaries or reference to defined
class of natural person satisfies the requirement for
identification.
- Written record of fixed % of entitlement or formula satisfies
the need for defining proportion of benefit.
Fiduciaries must have no discretion on the above (except in case of
family trust)
On winding up all interest to beneficiaries or similar entity
representing interests of beneficiaries.
Additional criteria for 100% recognition – certificate by competent
person.
ANNEXURE 100 (B) VEHICLES
31. MANAGEMENT CONTROL - 2013
Measurement category & Criteria Weighting
points
Compliance
Target
2.1.1 Exercisable Voting Rights of black board
members as a percentage of all board members
2 50%
2.1.2 Exercisable Voting Rights of black female board
members as a percentage of all board members
1 25%
2.1.3 Black Executive Directors as a percentage of all
executive Directors
2 50%
2.1.4 Black female Executive Directors as a
percentage of all executive Directors
1 25%
Board Participation
32. MANAGEMENT CONTROL
Measurement category & Criteria Weighting
points
Compliance
Target
2.2.1 Black executive Management as a percentage of all
executive directors
2 60%
2.2.2 Black female executive Management as a
percentage of all executive directors
1 30%
Senior management
Measurement category & Criteria Weighting
points
Compliance
Target
2.3.1 Black employees in Senior Management
as a percentage of all Senior Management
2 60%
2.3.2 Black female Senior Management as a
percentage of all Senior Management
1 30%
Other Executive management
33. MANAGEMENT CONTROL
Measurement category & Criteria Weighting
points
Compliance Target
2.4.1 Black Middle Management as a percentage of
all Middle Managers
2 75%
2.4.2 Black female Middle Management as a
percentage of all Middle Managers
1 38%
Junior management
Measurement category & Criteria Weighting
points
Compliance 7Target
2.5.1 Black employees in Junior Management as a
percentage of all Junior Management
1 88%
2.5.2 Black female Junior Management as a
percentage of all Junior Managers
1 44%
Employees with disabilities
Measurement category & Criteria Weighting
points
Compliance Target
2.6.1 Black employees with disabilities as a
percentage of all employees
2 2%
Middle management
34. MANAGEMENT CONTROL
.
Key Measurement Principles
The Measured Entity must use its current payroll data in calculating its score
Collapsing Rules:
- If no distinction between Other Executive Management and Senior Management,
then Executive Management is measurable as a single indicator with a Weighting of
6 points under paragraphs 2.2.1 and 2.2.2 split as 4 and 2 point respectively.
- No provision for collapsing in case of no distinction between other categories.
35. MANAGEMENT CONTROL
General Principles
Executive Management positions include:
CEO, COO, CFO and other Executive Managers that serve on the Board.
Other Executive Management positions include:
- all executive management that do not serve on the board, e.g.
human resource executive, transformation executive; and
- other people holding similar positions.
36. Normal Formula
A = x D
A = the score
B = the actual % contribution by the measured entity for that sub-category
C = the target
D = the weighting
B
C
HOW TO CALCULATE % MANAGEMENT CONTROL
37. MANAGEMENT CONTROL
.
Determining the sub-targets
2.1 The compliance targets for 2.3, 2.4 and 2.5 of the Management control scorecard are
based on the overall demographic representation of black people as defined in the
Regulations of Employment Equity Act and Commission on Employment Equity Report,
as amended from time to time
2.2 In determining a Measured Entity’s score, the target should be further broken down into
specific criteria according to the different race subgroups within the definition of black in
accordance with the Employment Equity Act on an equitable representation and weighted
accordingly.
Formula Annexure 200(A) further states that:
C is the compliance target as per the Regulations of Employment Equity Act and Commission on Employment
Equity Report for that measurement sub-category.
41. Measurement Category and Criteria Weighting
points
Compliance
Target
2.1.1. Skills Development Expenditure on any Program specified in the Learning Programme
Matrix for black people as a % of leviable amount:
2.1.1.1 Skills Development Expenditure on Learning Programmes
for black people as a percentage of Leviable Amount
8 (6) 6% (3%)
2.1.1.2 Skills Development Expenditure on Learning Programmes
for black employees with disabilities as a % of Leviable
Amount.
4 (3) 0.3%
2.1.2 Learnerships, apprenticeships and Internships:
2.1.2.1 Number of black people participating in Learnerships,
Apprenticeships and Internships as a % of total employees
4 (6) 2.5% (5%)
2.1.2.2 Number of unemployed black people participating in
Learnerships, Apprenticeships and Internships as a % of
total employees
4 2.5%
Bonus Points:
2.1.3 Number of black people absorbed by the Measured and
Industry Entity at the end of the Learnerships programme
(pre-requisite is a trainee tracking tool)
5 100%
SKILLS DEVELOPMENT CODE 300
42. Normal Formula
A = x D
A = the score
B = the actual % contribution by the measured entity for that sub-category
C = the target
D = the weighting
B
C
HOW TO CALCULATE % SKILLS DEVELOPMENT
43. Calculating Compliance (for 2.1.1.1 and 2.1.2)
AM + CM + IM + AF + CF + IF
C C C C C C
6
A =
SKILLS DEVELOPMENT CODE 300
For each indicator where:
A is the percentage spend on Black Employees (indicator 2.1.1.1) or percentage of Black People (indicator 2.1.2) for each indicator as
measured in the Skills Development Scorecard using the annual EAP targets as published in the Regulations of the Employment Equity
Act and Commission on Employment Equity Report
AM is the % of spend (indicator 2.1.1.1) or people (indicator 2.1.2) in the measurement category that are African Males
CM is the % of spend (2.1.1.1) or people (2.1.2) in the measurement category that are Coloured Males
IM is the % of spend (2.1.1.1) or people (2.1.2) in the measurement category that are Indian Males
AF is the % of spend (2.1.1.1) or people (2.1.2) in the measurement category that are African Females
CF is the % of spend (2.1.1.1) or people (2.1.2) in the measurement category that are Coloured
Females
IF is the % of spend (2.1.1.1) or people (2.1.2) in the measurement category that are Indian Females
C is the compliance target as per the Regulations of the Employment Equity Act and Commission on Employment Equity Report for that
measurement sub-category
44. SKILLS DEVELOPMENT CODE 300
Skills Development now a priority element (40% of targets vs. total weighting points?)
New pre-requisites:
SETA approved documents: Workplace Skills Plan, Annual Training Report and Pivotal Report
Implemented Priority Skills programmes for black people
No enhanced recognition for ABET programmes
Skills Spend target increased from 3% to 6%
Skills spend on unemployed black people now also recognised (double counting SED?)
Mandatory sectorial training does not qualify i.e.. health and safety
The following are limited to 15% of the total Skills Development Expenditure (i.e.. inclusive of spend on non-
black):
Category F & G learning Programmes
Legitimate training costs e.g.. accommodation, travelling (non-exhaustive list)
MAJOR DIFFERENCES
45. SKILLS DEVELOPMENT CODE 300
MAJOR DIFFERENCES
Legitimate Recognisable Training Expenses
Costs of training materials;
Costs of trainers;
Costs of training facilities including costs of catering;
Scholarships and bursaries;
Course fees;
Accommodation and travel; and
Administration costs such as the organization of training including, where appropriate, the cost to
the Measured Entity of employing a Skills Development facilitator or a training manager.
46. SKILLS DEVELOPMENT CODE 300
Bonus points for absorption of black people at end of learnerships
Absorption = “a 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”
Seems to be only available for people that were on Learnerships
Tracking tool must be developed to score these bonus points
If less than 100% absorbed then still earn proportionate recognition
Salaries or wages only recognised if the Learning Programme is a Learnership, Internship
and Apprenticeship (category B, C and D) of the Learning Programme Matrix.
New Learning Programme Matrix (Annexe 300A)
MAJOR DIFFERENCES
47. Learning Programme Matrix
Cat Programme Narrative Description Delivery Mode Learning Site Learning Achievement
A Bursaries 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 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
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,
ABE 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 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
Structured learning in the
workplace with mentoring or
coaching
Workplace Occupational or professional knowledge and
experience formally recognized through registration
or licensing
D Learnerships OR
Apprenticeships
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 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
E Work-Integrated
Learning
Occupationally-directed instructional
and work-based 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
some institutional instruction
Workplace and some
institutional as well as
ABET providers
Credits awarded for registered unit standards, CPD,
improved performance or skills (e.g.. evidence of
outputs based on Performance Development
Programme)
F Informal training
Limited to 15% of
total spend
Occupationally-directed informal
instructional programmes
Structured information
sharing or direct instruction
involving workshops,
seminars and conferences
and short courses
Institutions,
conferences and
meetings
Continuing professional development, attendance
certificates and credits against registered unit
standards (in some instances)
G Informal training
Limited to 15% of
total spend
Work-based informal programmes Informal training Workplace Increased understand of job or work context or
improved performance or skills
48. 2.1 PREFERENTIAL PROCUREMENT Weighting
points
Compliance targets
2.1.1 B-BBEE Procurement Spend from all Empowering Suppliers
based on the B-BBEE Procurement Recognition Levels as a %
of Total Measured Procurement Spend
5 (12) 80% (70%)
(subminimum 32% or
discounted one level)
2.1.2 B-BBEE Procurement Spend from Empowering Suppliers
that are Qualifying Small Enterprises based on the applicable
B-BBEE Procurement Recognition Levels as a percentage of
Total Measured Procurement Spend
3 15%
(subminimum 6% or
discounted one level)
2.1.3 B-BBEE Procurement Spend from Empowering Suppliers
that are Exempted Micro Enterprises based on the applicable
B-BBEE Procurement Recognition Levels as a percentage of
Total Measured Procurement Spend
4 15%
(subminimum 6% or
discounted one level)
2.1.4 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%
(subminimum 16% or
discounted one level)
2.1.5 B-BBEE Procurement Spend from Empowering Suppliers
that are at least 30% black women owned (defined >30.1%)
based on the applicable B-BBEE Procurement Recognition
Levels as a percentage of Total Measured Procurement Spend
4 12%
(subminimum 4.8% or
discounted one level)
Bonus Points
B-BBEE Procurement Spend from Designated Group Suppliers that are
at least 51% Black owned
2 2%
ENTERPRISE & SUPPLIER
DEVELOPMENT CODE 400
49. 2.2 SUPPLIER DEVELOPMENT Weighting points Compliance targets
2.2.1 Annual value of all Supplier Development Contributions
made by the Measured Entity as a percentage of the
target
10 2% of NPAT
(subminimum 0.8% or
discounted one level)
2.2(3) ENTERPRISE DEVELOPMENT
2.3.1 Annual value of all Enterprise Development and Sector
Specific Contributions made by the Measured Entity as
a percentage of the target
5 (15) 1% (3%) of NPAT
(subminimum 0.4% or
discounted one level)
2.4 BONUS POINTS
2.4.1 Bonus point for graduation of one or more Enterprise
Development Beneficiaries to graduate to the Supplier
Development Level
1
2.4.2 Bonus point for creating one or more jobs directly as a
result of Supplier and Enterprise Development
initiatives by the Measured Entity.
1
ENTERPRISE & SUPPLIER
DEVELOPMENT CODE 400
Cannot get recognition for same activities undertaken in 2.2 and 2.3
50. One combined scorecard with PP, Supplier Development (SD) and ED. 40
points on the scorecard 4 bonus points.
All indicators (except bonus points) are subject to 40% sub-minimum
priority downgrade
Procurement is now based on Procurement Status level and Empowering
Supplier status
Removal of enhanced recognition for Black Owned Professional Service
Providers and Entrepreneurs
Adjustments made to Total Measured Procurement Spend (i.e. pre-
requisite set for allowing permissible exclusions in respect of Imports)
MAJOR DIFFERENCES
51. ED and SD Measured Annually as a % of NPAT (removal of Industry
Norms) (allows for averaging over multiple years)
Encouraged to develop and implement an ED & SD Plan including clear
objectives, priority interventions, KPI’s, implementation plan.
No double counting between any of the 3 broad categories of the
scorecard.
Double counting allowed amongst sub-indicators of PP scorecard.
MAJOR DIFFERENCES
52. Formula for calculating the Preferential Procurement
Normal Formula
A = x D
A = the score for preferential procurement
B = the weighted B-BBEE spend
C = the total measured procurement spend
D = the weighting
Weighted B-BBEE Spend
A = B x C
B = Value of included procurement spend with supplier not excluded
C = B-BBEE Procurement Recognition of each such supplier
B
C
53. •Contribution Level •Qualification •BEE Recognition Level
•Level One Contributor •≥ 100 points on the Generic Scorecard •135%
•Level Two Contributor •≥ 95 but < 100 points on the Generic
Scorecard
•125%
•Level Three Contributor •≥ 95 but < 95 points on the Generic
Scorecard
•110%
•Level Four Contributor •≥ 80 but < 90 points on the Generic
Scorecard
•100%
•Level Five Contributor •≥ 75 but < 80 points on the Generic
Scorecard
•80%
•Level Six Contributor •≥ 70 but < 75 points on the Generic
Scorecard
•60%
•Level Seven Contributor •≥ 55 but < 70 points on the Generic
Scorecard
•50%
•Level Eight Contributor •≥ 40 but < 55 points on the Generic
Scorecard
•10%
•Non Compliant Contributor •< 40 on the Generic Scorecard •0%
WEIGHTED BEE SPEND
SCORE RANGES AND CORRESPONDING B-BBEE STATUS & RECOGNITION
54. Procurement recognition from own Supplier Development Beneficiary with
min 3 year contract with ME = BEE spend multiplied by 1.2
Procurement recognition from black owned QSE or EME which is not a
supplier development beneficiary with min 3 year contract with ME = BEE
spend multiplied by 1.2
Procurement recognition from 1st time suppliers is multiplied by 1.2
PREFERENTIAL PROCUREMENT
WEIGHTED BEE SPEND: Key Measurement principles
55. Concept of Empowering Supplier
All 25 points for procurement require that the suppliers are Empowering Suppliers.
For B2B Procurement the B-BBEE Status level of the business will therefore mean nothing unless
it is also an Empowering Supplier.
Definition: Empowering Supplier
"B-BBEE compliant entity, which is a good citizen South African entity, comply with all regulatory requirements of the
country and should meet at least three if it is a large enterprise or one if it is a QSE of the following criteria:
(a) At least 25% of cost of sales 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 at 15%.
(b) 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.
(c) At least 25% transformation of raw material/beneficiation which include local manufacturing, production and/or
assembly, and/or packaging.
(d) Skills transfer – at least spend 12 days per annum of productivity deployed in assisting black EMEs and QSEs
beneficiaries to increase their operation or financial capacity.”
All EME's automatically qualify as an Empowering Suppliers.
56. Formula for calculating the Preferential Procurement
Normal Formula
A = x D
A = the score for preferential procurement
B = the percentage weighted BEE Spend
C = the target for preferential procurement
D = the weighting
How do we calculate the % weighted BEE spend?
B =
B
C
Weighted BEE Spend
Total Measured Procurement Spend
57. PREFERENTIAL PROCUREMENT SPEND
Operational Expenditure
Cost of Sales
Capital Expenditure
Total
Spend
TOTAL MEASURED PROCUREMENT SPEND
Allowable Exclusions:
•Salaries
•Loans and Donations
•Certain imports
•Rates & Taxes, levy and
• post retirement funding and
•Investments loans, etc.
•Imports (Specific Exclusions as
• detailed in Statement 500)
BEE Spend Non-BEE spend
58. TOTAL MEASURED PROCUREMENT SPEND : INCLUSIONS
Cost of sales
Operational expenditure
Capital expenditure
Procurement from organs of state and public entities (Only when statutory monopoly is
it excluded. When reseller of service required to look through to primary supplier)
Procurement from monopolistic suppliers
Third Party Procurement: where the cost of that procurement is included as a
expense in the annual financial statements of the ME
Outsourced Labour Expenditure: Independent contractors & Labour brokers;
Pension & Medical Aid Contributions (excluding contribution to capital investment)
Trade commissions
Empowerment Related expenditure (excluding ESD & SED but incl. its facilitation cost);
Imports
Intra-group procurement (no exclusion for consolidated verification)
59. Taxation: e.g.. rates, levies, taxes;
Salaries, wages, remunerations, and emoluments;
Third Party Procurement: where the cost of that procurement is included as a
expense in the third party’s or client’s annual financial statements and not ME’s
Empowerment Related procurement
Investments in or Loans to Associated Enterprise,
Investments, loans or donations for ESD or SED
Imports
TOTAL MEASURED PROCUREMENT SPEND :PERMISSABLE
EXCLUSIONS
60. The following imports may be excluded:
PERMISSABLE EXCLUSIONS: IMPORTS
Imported capital goods/components for value-added production in South Africa
provided that:
No existing local production of such capital goods or components; and
The importation thereof facilitates further value-added production within South Africa
Imported goods or services other than as contemplated above if there is no local
production of such goods or services including imported goods or services that:
Carry a brand different to locally produced goods or services;
Have different technical specifications to locally produced goods or services.
ONLY IF
ME Developed and Implemented an ESD Plan for imported goods and services with:
•Clear objectives
•Priority Interventions
•Key Performance Indicators
•Concise implementation plan with clearly articulated milestones
61. BEE Spend = 65% or 85% if enhanced
Target is 80%
BEE Spend – and Enterprise Development
Supplier Contribution
Level
Recognition
Level
Total
Procurement
Pure BEE
Procurement
Score
Sup. Dev.
Ben. 3yr ct
( x 1.2)
1st time
Suppliers
(x 1.2)
Black-
owned
QSE EME
3yr ct
(x 1.2)
Total BEE
Score
enhanced
IPS Co. 2 R1.25 R1 000.00 R1 250.00 R1 500.00 R1 800.00 NO R1 800.00
EME Co. 2 R1.25 R1 000.00 R1 250.00 NO NO R1500.00 R1 500.00
NO BEE
Co.
Non
Compliant
Zero R1 000.00 ZERO ZERO
JUST BEE
Co.
8 R0.10 R1 000.00 R 100.00 NO R120.00 NO R 120.00
TOTAL R4 000.00 R2 600.00 R 3 420.00
62. Beneficiaries = EME’s or QSE’s that are at least 51% black owned or 51%
black women owned (error in definition in Schedule 1 refers to 30% black women owned)
“Supplier Development Ben.” vs. “Enterprise Development Ben.”
“Value-adding Supplier” Non-Supplier?
(term not defined)
Objective in both cases must be to contribute to development, sustainability
and financial and operational independence of those beneficiaries.
SUPPLIER AND ENTERPRISE DEVELOPMENT BENEFICIARIES
63. ENTERPRISE DEVELOPMENT AND SUPPLIER DEVELOPMENT : Benefit Factor Matrix (400B)
Qualifying Contribution type Contribution Amount Benefit Factor
1
Grant and Related Contributions
1.1
Grant Contribution Full Grant Amount 100%
1.2
Direct Cost incurred in supporting approved projects or enterprise
development
Verifiable Cost (including both monetary and non-monetary)
100%
1.3
Discounts in addition to normal business practices supporting
approved projects or enterprise development
Discount Amount (in addition to normal business discount)
100%
1.4
Overhead Costs incurred in supporting enterprise development
(including people appointed in enterprise development)
Verifiable Costs (including both monetary and non-monetary)
70% (80%)
2
Loans and Related Contributions
2.1
Interest-Free Loan with no security requirements supporting
enterprise and supplier development
Outstanding Loan Amount
70% (100%)
2.2
Standard Loan to enterprise and supplier development
beneficiaries
Outstanding Loan Amount
50% (70%)
2.4
Guarantees provided on behalf of a Beneficiary entity Guarantee Amount 3%
2.5
Lower Interest Rate Outstanding Loan Amount Prime Rate – Actual Rate
3
Equity Investments and Related Contributions
3.1
Minority Investment in enterprise and supplier development
beneficiaries
Investment Amount
70% (100%)
3.3
Enterprise and Supplier Development Investment with lower
dividend to financier
Investment Amount Dividend Rate of Ordinary Shareholders – actual
Dividend Rate of Contributor
4
Contributions made in the form of human resource capacity
4.1
Professional services rendered at no cost and supporting
approved projects or enterprise and supplier development
Commercial hourly rate of professional
60% (80%)
4.2
Professional services rendered at a discount and supporting
enterprise and supplier development
Value of discount based on commercial hourly rate of
professional 60% (80%)
4.3
Time of employees of Measured Entity productively deployed in
assisting beneficiaries
Monthly salary divided by 160
60% (80%)
5
Other Contributions
5.1
Shorter payment periods Percentage of invoiced amount x 15% (approx cost of short
term funding)
Percentage being 15 days less the number of days
from invoice to payment (max points is 15% of 10
points) (max 1.5 points)
ENTERPRISE DEVELOPMENT MATRIX
64. SOCIO-ECONOMIC DEVELOPMENT: 2007 & 2013
Socio Economic Development Weighting
Points
Compliance
Target
Annual value of all Socio Economic Development
Contributions made by the Measured Entity as a
percentage of the target
5 1% of NPAT
DEFINITION
Par 3.2.1 Code 500
“Socio-Economic Development contributions consist if monetary or non-monetary contributions actually initiated
and implemented in favor of beneficiaries by a measured entity with the specific objective of facilitating income
generating activities for targeted beneficiaries.”
Schedule 1
Contradiction with definition in Schedule 1 which refers to “promotion of sustainable access to the economy”
65. Schedule 1:
Development programmes for women, youth, people with disabilities, people living
in rural areas
Support of healthcare and HIV/AIDS programmes
Support for education programmes, resources and materials at primary, secondary
and tertiary education level, as well as bursaries and scholarships;
Community training skills development for unemployed people and adult basic
education and training; or
Support of arts, cultural or sporting development programmes;
Socio Economic Development Examples
66. Full Value: Communities, natural persons and groups of natural
persons where at least 75% of the value of the benefits accrue to
natural persons who are black people.
If less than 75% of contribution directly benefits black people, then the
value of the contribution multiplied by the percentage that benefits black people
is recognisable.
Annual Measurement only. No more Cumulative Measurement.
Industry Norm Calculation remains if company made a loss.
Socio Economic Development Recognition
67. Qualifying Contribution type Contribution Amount Benefit Factor
Grant and Related Contributions
Grant Contribution Full Grant Amount 100%
Direct Cost incurred in supporting
social development or sector
specific initiatives
Verifiable Cost (including both
monetary and non-monetary)
100%
Discounts in addition to normal
business practices supporting
social development or sector
specific initiatives
Discount Amount (in addition to
normal business discount)
100%
Overhead Costs incurred in
supporting social development or
sector specific initiatives
Verifiable Costs (including both
monetary and non-monetary)
80%
Contributions made in the form of human resource capacity
Professional services rendered at
no cost and supporting social
development or sector specific
initiatives
Commercial hourly rate of
professional
80%
Professional services rendered at
a discount and supporting social
development or sector specific
initiatives
Value of discount based on
commercial hourly rate of
professional
80%
Time of employees of Measured
Entity productively deployed in
assisting beneficiaries and
supporting social development or
sector specific initiatives
Total annual cost to company of
the employee divided by 160
80%
SOCIO-ECONOMIC DEVELOPMENT
BENEFIT FACTOR MATRIX ANNEX 700(A)
68. Concluding Remarks
Some Positives:
1. Some technical issues addressed
2. Emphasis on skills and supplier development
3. Local production and procurement
4. ARG done away with
Some Negatives:
1. Several more technical flaws
2. Exclusionary approach
3. Over emphasis of black ownership 51% of total scorecard vs. 28% in previous version – contradicts NDP
direction
4. Government procurement practice section 217 of Constitution
5. Contradictions, inconsistencies and drafting errors abound
Individuals affected by sub-ordinate legislation must know with a reasonable amount
of certainty what is expected of them. In cases where a particular provision of sub-ordinate
legislation is certain, that provision is valid. Where it is uncertain that provision should be invalid
by reason of uncertainty or vagueness. [Arnold v Race Classification Appeal Board and
Another [1967] II All SA 182 (C).]
69. We thank you for your time.
Gavin Fletcher
Email: gavin.fletcher@amathuba-hub.co.za
Tel: 011 783 7190
Cell: 084 587 9990
Thank You
70. Comparison to F & C Sub Sector Charter
No Priority Elements in F&C
Ownership is the same
Management control is the same
New codes have a slight higher Black Junior Manager ( 88% -
F&C 80%) and Black female Managers ( 44% - F&C 40%)
Skills - increase in skills spend from 3% to 6%
ED - F&C has an extra 1.5% spend for Female black owned
business
There is no SD in F&C
Procurement – 10% increase in Black Spend
SED – extra recognition for HIV / Bursaries / Poverty Alleviation
F&C industry awareness
