Transcript SA Economic Goals

Black Management
Forum BEE Conference
BEE Codes of Good
Practice – A
perspective on their
effectiveness
14 April 2005
LIONEL OCTOBER
DEPUTY DIRECTOR-GENERAL
ENTERPRISE AND INDUSTRY
DEVELOPMENT DIVISION, DTI
Outline

Economic context

Context of the Sectors

Rationale for BBBEE

BBBEE Transformation and Growth Imperative

BBBEE Act

Balanced Generic Scorecard

Transformation Charters

Code of Good Practice

Preferential Procurement

B-BBEE support i.e. Funding for B-BBEE
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Economic context
 Non-racial democratic society consolidated
 Education successfully de-racialised
 Modest growth 2 –3 percent growth since 1994
 Improvement of negative growth rate of 1980’s, but
insufficient to address social challenges
 Income inequality amongst highest in the world
 Massive disparity in white and black incomes, ownership
and access to employment opportunities
 Economy has undergone major transformation – macro
economic stability, global integration
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Context of the sectors
1.
Very low levels of black participation
Black senior management accounts for less than
10%
Diminished black ownership in Sectors
2.
Low levels of investments in areas of national priority
Infrastructure, Low income Housing, Black
SMEs,Black farmers, BEE Transactions
3.
Low levels of provision of effective access to services
and products for low income groups
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Rational for empowerment
1.
2.
3.
4.
5.
Rationale essentially economic.
Higher growth path not possible without broad based
empowerment.
Skills, low levels of entrepreneurship and low incomes
are major constraints to growth.
Human and social dimension important given historical
legacy.
High levels of inequality poses social,political and
investment risk.
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Black Economic Empowerment
Transformation/growth Imperative









Rationale essentially “economic”
Double bind of low growth , slow transformation
Not possible to raise growth rate without expanding
entrepreneurial and skills base
Growth/redistribution trade-off not relevant
5% Growth with significant empowerment possible in short
/medium term
Equal societies grow faster because of effective
demand/consumption patterns
Growth effects to be broadly distributed
Equity base/shareholding to be broadened
Balance operational control & passive investment
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Brief Background to BEE Act
1.
The State President assented to the BEE Act No 53 on 9
January 2004.
 BBBEE Act sets clear objectives for broad based empowerment
 Enabling framework for Codes of Good Practise
 Creation of a BEE Advisory Council
 Legislative endorsement for sector charters
 Enabling framework for the establishment of the BBBEE
Strategy
2. Publication of Charters:
3.

Mining

Finance

ICT
 Petroleum
Minister may make Regulations to promote BBBEE
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Policy Instruments
 Legislation and regulation
 Preferential Procurement
 Use of the balanced scorecard in
• Granting of licences;
• Concessions to private enterprises;
• Sale of state assets;
• Public private partnerships;
• Any economic activity
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Definition of BBBEE
 DTI encourages a broad based B-BBEE definition that is a
process that:
– Directly contributes to the economic transformation of South
Africa;
– Brings about significant increases in the numbers of black
people who manage, own and control the country’s economy;
and
– Results in significant decrease in income inequalities
– B-BBEE process will include elements of human resource
development, employment equity, enterprise development,
preferential procurement, as well as investment, ownership and
control of enterprises and economic assets
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BBBEE Strategy
 BBBEE is a process that directly contributes to the economic
transformation of South Africa
 Draft B-BBEE strategy has been issued for public comments
 Update B-BBEE strategy
 B-BBEE Strategy Objectives
 Substantial increase of ownership and control of existing and
new wealth;
 Substantial increase ownership and control of existing and new
enterprises in the priority sectors of the economy
 A significant increase in the number of new black enterprises,
black empowered enterprises and black engendered enterprises
 A significant increase in executive and senior management of
enterprises
 An increase proportion of ownership and management of
economic activities vested in community enterprises
 Increased ownership of land and other productive assets,
improved access to infrastructure,acquisition of skills and
increased participation in areas identified in the Urban Renewal
Programme
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Key Principles Underpinning
BBBEE




Black Economic Empowerment is Broad-Based
Black Economic Empowerment is an inclusive process
Black Economic Empowerment is associated with good governance
Black Economic Empowerment is part of our growth strategy
– B-BBEE strategy stresses a process associated with growth,
development and enterprise development and not merely the
redistribution of existing wealth
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Balanced Scorecard

A basic and objective framework against which Transformation
and Empowerment Achievements can be measured

Provides a balance between imperatives for sectoral
transformation and black economic empowerment

Equal weighting to equity, management/ control, & enterprise
development

Application of scorecard

License in regulated sectors – e.g. gambling or mining

Concession to operate an asset on behalf of state

Sale of state assets or SOE

Enter into a PPP
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“The dti scorecard … will allow for a measure of flexibility…”
Core Component of BEE
Indicators
Weighting score
Targets
Direct Empowerment Score
Equity Ownership
% share of economic benefits
20%
25.1%
Management
% black persons in executive
management and/or executive board and
board committees
10%
40%
Human Resource development and employment equity score
Skills Development
Skills development expenditure as a
proportion of total payroll
20%
3%
Employment Equity
Weighted employment equity analysis
10%
50%
Preferential procurement
Procurement from black owned and
empowered enterprises as a proportion of
total procurement
20%
50%
Enterprise Development
Investment in black owned and
empowered enterprises as a proportion of
total assets
10%
5% (monetary investment)
10% (non-monetary
investment)
To be determined by sector/enterprise
10%
3% facilitate inclusion of
black people
3% to promote black
economic empowerment
3% social investment,
health, education and
poverty alleviation
Indirect empowerment score
Residual 10%
To be defined
Total Score out of 100%
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Transformation Charters
[section 12]
 9. (1) In order to promote the purposes of the Act, the
Minister may by notice in the Gazette, issue codes of good
practice on BEE that may include—(e) guidelines for
stakeholders in the relevant sectors of the economy to draw
up transformation charters for their sector; and
 12.The Minister must publish in the Gazette for general
information and promote a transformation charter for a
particular sector of the economy, if the Minister is satisfied
that the charter—

(a) has been developed by major stakeholders in
that sector; and

(b) advances the objectives of this Act.
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Transformation Charters
 The BEE Charter should incorporate the following:
 The BEE challenges in that sector;
 The sectors’ vision for achieving BEE targets and timetables;
 The specific mechanism to achieve BEE targets including
financing instruments, skills development and employment equity,
preferential procurement, enterprise development, as well as any
additional mechanisms appropriate to specific sector;
 An assessment of the financing required to fund BEE transactions;
 The institutional and management mechanisms that will coordinate, facilitate, monitor and evaluate in the implementation of
the charter; and
 Any other relevant issues and commitments relevant to the sector,
in order to enable its participants to advance the objectives of
BBBEE
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Transformation Charters
 BBBEE is legally binding on government institutions
 BBBEE is a voluntary process and is not legally binding on
private sector, but it is business savvy to formulate one.
 It is not expected that every sector will develop empowerment
charters.
 The charter is binding to the sector with which it was adopted.
 Government strongly encourages sectors that interacts and/or
transacts with any organ of the state to develop sector charter
that set specific BEE targets and outline concrete plans to
achieve these targets.
 The sector that interacts and/or transacts with any organ of the
state shall be strongly encouraged, subject to certain
qualification criteria, to formulate a sector transformation charter
in order to accelerate the fulfillment of the objectives of the
Broad-Based BEE Act.
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Codes of Good Practice
 (1) In order to promote the purposes of the Act, the Minister may by
notice in the Gazette issue codes of good practice on black economic
empowerment that may include—
 (a) the further interpretation and definition of broad-based BEE and the
interpretation and definition of different categories of black
empowerment entities;
 (b) qualification criteria for preferential purposes for procurement and
other economic activities;
 (c) indicators to measure broad-based BEE ;
 (d) the weighting to be attached to broad-based BEE indicators
referred to in paragraph (c);
 (e) guidelines for stakeholders in the relevant sectors of the economy
to draw up transformation charters for their sector; and
 (f) any other matter necessary to achieve the objectives of this Act.
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Codes of Good Practice
 10. Every organ of state and public entity must take into account and,
as far as reasonably possible, apply any relevant code of good
practice issued in terms of this Act in:
 (a) determining qualification criteria for the issuing of licences,
concessions or other authorizations in terms of any law;
 (b) developing and implementing a preferential procurement policy;
 (c) determining qualification criteria for the sale of state-owned
enterprises; and
 (d) developing criteria for entering into partnerships with the private
sector.
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Preferential Procurement Framework
 Changes made to the PPPFA regulations in order to align
them with the B-BBEE strategy
 Use of balanced scorecard in determining preference
points (broad-based approach)
 Minimum B-BBEE points required for preference points to
be given
 Move from narrow-based to broad-based B-BBEE in
determining preference points
 Next to review the PPPF Act to align it with the B-BBEE Act
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BBBEE Support

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Relaunch of the NEF on 31 May 2004
Products with focus on addressing market failures
R2bn capitalisation from National Treasury
Khula Enterprise Finance
Industrial Development Corporation
Small and Medium Enterprise Development Programme
Black Business Supplier Development Programme
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