BROAD BASED BLACK ECONOMIC EMPOWERMENTNEW CODES INTRODUCED ON 1 MAY 2015TIAAN HERBST

INTRODUCTION

Not compulsory to comply with Act. They merely set out the methodology when

measuring an entities BEE status Fundamental principal for measuring BEE – substance

take precedent over legal form. Unfortunately a requirement when conducting

business especially with government. (It becomes an important factor in business)

Acceptance. Regulated by a commission and any irregularity

(“knowingly”, “knowing” or “knows”) is a criminal offence. To avoid “fronting practices”.

NEW STRUCTURE

2007 Codes of Good Practice Amended Codes of Good Practice October 2014

Elements Points Bonus Elements Points Bonus

Ownership 25 3 Ownership 25 0

Management Control

25 2 Management Control

15 0

Employment Equity 25 3

Skills Development 25 0 Skills Development 25 0

Preferential Procurement

25 0 Enterprise and Supplier Development

30 0

Enterprise Development

25 0

Socio-Economic Development

25 0 Socio-Economic Development

5 0

Total (after selecting any 4 of the above elements)

100 8 Total 100 0

AMENDED THRESHOLDS AND QUALIFICATION CRITERIA WHICH WILL HAVE A MARKED IMPACT ON FUTURE BEE LEVELS

Category 2007 Codes of Good Practice Amended Codes of Good Practice 2013

EME Turnover ≤ R5 million Turnover ≤ R10 million

QSE Turnover of R5-35 Million Turnover of R10-50 Million

GENERIC Turnover > R 35 Million Turnover > 50 Million

CHANGES TO BEE RECOGNITION LEVELS

BBBEE Status 2007 Qualification Amended Qualification 2013

BBBEE Recognition Level

Level 1 ≥100 points ≥100 points 135%

Level 2 ≥85 points <100 ≥95 points <100 125%

Level 3 ≥75 points <85 ≥90 points <95 110%

Level 4 ≥65 points <75 ≥80 points <90 100%

Level 5 ≥55 points <65 ≥75 points <80 80%

Level 6 ≥45 points <55 ≥70 points <75 60%

Level 7 ≥40 points <45 ≥55 points <70 50%

Level 8 ≥30 points <40 ≥40 points <55 10%

Non-compliant <30 <40 0%

PRIORITY ELEMENTS

Ownership Skills Development Enterprise and Supplier Development

QSE must achieve 40% of the points for two of the three priority elements.

OWNERSHIP Minimum requirement: An enterprise must achieve at

least 40% of the net value targets in order to comply. This equates to a minimum of 10% shareholding status.

How is it calculated?

OWNERSHIP

INDICATOR WEIGHT TARGETBlack Voting 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

3 3%

Black New Entrants 2 2%Net Value 8TOTAL 25

MANAGEMENT CONTROL

Incorporates the measurement of senior, middle and junior management.

Specific indicators introduced for the measurement of female participation in management positions.

The demographic targets as per the large enterprise scorecard do not apply to QSEs.

Major change: Adjustment Calculation (ARG) is no longer applied. The black percentage is calculated as a percentage of total population.

How is it calculated?

MANAGEMENT CONTROL: BOARD PARTICIPATION

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%

MANAGEMENT CONTROL: OTHER EXECUTIVE MANAGEMENT

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%

MANAGEMENT CONTROL: 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%

MANAGEMENT CONTROL: JUNIOR MANAGEMENT

Measurement category & Criteria Weighting points

Compliance Target

2.5.1 Black employees in Junior Management as a percentage of all Junior Management

2 88%

2.5.2 Black female Junior Management as a percentage of all Junior Management

1 44%

MANAGEMENT CONTROL: 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%

MANAGEMENT CONTROL : MIDDLE MANAGEMENT

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%

SKILLS DEVLOPMENT

Is an optional priority element.  40% of the points must be achieved or the company drops 1 BEE level.

Compliance with the SETA requirements (Workplace Skills Plan, Annual Training Report, Pivotal Report and Priority Skills Programme) are pre-requisites for an entity to receive any points in this element.

Training is not limited to employees – it can apply to any black person.

The demographic targets as per the Large Enterprise scorecard do not apply to QSEs.

Adjustment for Gender calculation (ARG) is no longer applied. The black percentage is calculated as a percentage of total training spent.

Category F and G learning programmes (informal on-the-job training) is limited to a maximum of 15% of total training spend.

See Annexure A

SKILLS DEVELOPMENT

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.

ENTEPRISE AND SUPPLIER DEVELOPMENT

Is an optional priority element.  40% of the points must be achieved or the company drops 1 BEE level.

Measures Procurement as well as Supplier and Enterprise Development together in 1 element.

In order for suppliers to qualify for BEE spend, they must be an “Empowering supplier”.

Targeting specific enterprise development to suppliers.

No cumulative contributions are allowed, only annual contributions.

How is it Calculated?

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 PointsB-BBEE Procurement Spend from Designated Group Suppliers that are at least 51% black owned

2 2%

2.2 SUPPLIER DEVELOPMENT Weighting points

Compliance Targets

2.1.1 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

ENTEPRISE AND SUPPLIER DEVELOPMENT

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 enterprise

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)

SOCIO-ECONOMIC DEVELOPMENTS

Minimal change, however emphasis is placed on job creation and giving sustainable access to the economy.

No cumulative contributions allowed, only annual contributions.

Carries 5 points in the scorecard, compared to 25 points in the 2007 Codes.

How is it calculated? 1% of NPAT

SOCIO- ECONOMIC DEVELOPMENT

EXAMPLES OF SED: 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

THANK YOUPRESENTER: TIAAN HERBSTEmail: tiaan@eripio.co.za // Cell: 082 787 9298