Transformation process What is BEE about? History Media/Articles Questionnaires What do I do about BEE? Ignore it Embrace it How will it affect my business? Introduction to BEE
Transformation process There will be a cost Will safeguard existing business Opportunity to grow business Will participate in a growing economy Will have better skilled labour Reduced tax Will contribute directly in transformation process How will it affect my business if I embrace the process?
Legislation Broad-Based Black Economic Empowerment Act 53 of 2003 The Codes of Good Practice The Sector Charters >Sector Specific Charters The Scorecard >The DTI Generic Scorecard >Sector Specific Scorecards >SMME Scorecard
The Scorecard: Option 1 Ownership The following categories of black shareholding will give an organisation the BEE status of a: Black Influenced Company 5,0% - 25,0%; Black Empowered Company 25,1% - 50,0%; Black Owned Company 50,1% or more. An organisation will generally qualify as a BEE supplier where it has the status of being a: Black Empowered entity (25,1% to 50% shareholding), or a Black Owned entity (50,1%+ shareholding).
1. Black Ownership and Control20% 2. Black Executive Management10% 3. Employment Equity10% 4. Skills Development20% 5. Affirmative Procurement20% 6. Enterprise Development10% 7. Residual (Corporate Social Investment)10% TOTAL100% Weighting The various charters include a scorecard as a measurement process Example: The Department of Trade and Industry Generic Scorecard (DTI Scorecard) - The scorecard consists of seven core components (indicators). - Each of the components has a weighting attached (i.e. a maximum possible score out of 100 is applied to each element). - The exact method of scoring within each of the core elements has not been determined by DTI and is therefore open to interpretation. The Scorecard: Option 2 The Broad-based Scorecard The Scorecard
An organisation can be rated in one of three possible categories: -A score of up to 39.9% on the scorecard = a Limited Contributor to BEE. -A score of 40% to 64.9% on the scorecard = a Satisfactory Contributor to BEE. -A score of 65% or more on the scorecard = a Good Contributor to BEE. An organisation will generally qualify as a BEE supplier where it is classified as a : Satisfactory Contributor to BEE, or a, Good Contributor to BEE The Scorecard: Option 2 continued
Notes Measurement The Score Shares owned directly or indirectly by Black People. 'Black People’ means all Africans, Coloureds and Indians who are South African citizens. Includes beneficial ownership and control over all voting rights attached to shareholding The following categories of black shareholding will give an organisation the BEE status of a: Black Influenced Company 5,0% - 25,0%; Black Empowered Company, 25,1% - 50,0%; Black Owned Company 50,1% or more. Points are scored in proportion to the level of shareholding. In terms of the new Codes of Good Practice, it is likely that points will be allocated in terms of various aspects such as voting rights, economic benefits (dividends), gender, and restrictions placed on shareholding. Black Ownership and Control 20% Core element # 1:
Notes Measurement The Score Must include Management and/or Control by Black People at Board and/or Executive Management levels and who have the power and authority to manage assets, determine policies, and direct business operations. Example: Black executive management measured as a % of the total management of a company. Black Executive Management 10% Core element # 2: Scored as a percentage of the set target.
Notes Measurement The Score Black Skilled Management at Senior, Middle and Junior levels as a % of total management. This EXCLUDES executive black management scored under the section Black Executive Management above, except in the case of small enterprises where executive management are also involved at operational level. Example: Measured as a % of black management to the total management of a company. Employment Equity 10% Core element # 3: Scored as a percentage of the set target.
Notes Measurement The Score Skills development is the investment made by an enterprise to develop a broad- based pool of skills that will increase participation of Black People in business, particularly in skilled and management roles. It can be undertaken in the form of Training Programs, Learnership Programs, and Mentorship Programs. The 1% levy payable in terms of the Skills Development Act 1998, is not included in this spend. Points will be scored here based on the skills spend as a % of the total basic payroll per annum. Skills Development 20% Core element # 4: Scored as a percentage of the set target.
Notes Measurement The Score Determine the level of BEE of your suppliers in terms of their own Charter Scorecard, if available, or apply the DTI generic scorecard. Suppliers qualify as BEE suppliers where they have black ownership and control exceeding 25%, or where they have an acceptable BEE score in terms of the DTI scorecard, or such acceptable score or rating as determined by any other recognized ratings agency. Ascertain the total procurement spend for a period, including goods and services from trade suppliers, as well as from suppliers of other services purchased during the normal course of business. Exclude purchases that from a BEE perspective are uncontrollable. The procurement of goods and services from BEE rated suppliers as a % of total controllable procurement Affirmative Procurement 20% Core element # 5: Scored as a percentage of the set target.
Affirmative Procurement Value Chain Raw Material Supplier Manufacturer e.g. Cement Build it Scorecard 1 Ownership 2 Exec Man 3 Employ Equit 4 Skills Dev 5 Procurement 20% 6 Enterprise 7 Residual NOYES - 40%+ 40% NOYES Scorecard 1 Ownership 2 Exec Man 3 Employ Equit 4 Skills Dev 5 Procurement 20% 6 Enterprise 7 Residual NOYES Scorecard 1 Ownership 2 Exec Man 3 Employ Equit 4 Skills Dev 5 Procurement 20% 6 Enterprise 7 Residual Customer
Notes Measurement The Score The investment made by a company in enterprises that are deemed to be 'Black- Owned' or 'Black- Empowered'. The key elements of investing in Black enterprises is that it must offer real economic benefit flowing to the recipient to enable it to be self-sustainable, and that it must result in increased operational capacity and skills transfer. There must be active participation by black people in the enterprise. Example: Scored as a % of after tax profits. Enterprise Development 10% Core element # 6: Scored as a proportion of the set target percentage.
Notes Measurement The Score Corporate Social Investment (CSI) is the investment financially or otherwise aimed primarily at black groups, communities and individuals, which has a strong developmental approach and contributes towards transformation. Example: Scored as a % of after tax profit. Residual (Corporate Social Investment)10% Core element # 7: Scored as a proportion of the set target percentage.
Ratings In order to eradicate fronting (window-dressing), government is establishing a ratings system whereby accredited verification agencies will perform annual ratings on all business enterprises. Certificates will be issued reflecting enterprises’ BEE status.
Practical Application How do I measure my business? How do I get a scorecard? How do I verify my scorecard? How do I communicate my current score? How do I measure my suppliers? Now and on-going? Verification of BEE status? What do I do with BEE questionnaires?