1. UNVEILING THE SALIENT FEATURES & AREA
OF THE AMENDED CONSTRUCTION SECTOR CODE
Presented by
Thabo Masombuka (Mr)
Chief Executive Officer
Presented to
PROPERTY DEVELOPERS AND CONSTRUCTION CONTRACTORS FORUM
08 MARCH 2018

2. THE CURRENT STATUS QUO Immediately introduce reporting OBLIGATIONS
EFFECTIVE FROM THE 01 DECEMBER 2017, ito Gazette no 41287
Minister of Trade and Industry published the ACSC, immediately giving effect to ints application and implementation.
The gazette meant that the ACSC are IMMEDIATELY valid and binding
All Measured Entities, irrespective of their state of measurement, had to be verified in terms of the ACSC
Immediately introduce reporting OBLIGATIONS

3. THE ROLE OF THE CSCC
The CSCC is the EXECUTIVE AUTHORITY responsible for :
Entrusted with OVERSEEING and MONITORING the IMPLEMENTATION of the Construction Sector Codes (CSC) of Good Practice by the Industry.
Through industry programmes, FACILITATE the achievements of sector empowerment TARGETS. Sharing information with members of the Construction Industry, relevant State Ministries and SOEs, Verification Agencies, CIDB, NHBRC etc
Provide necessary GUIDANCE & BEST PRACTICE NOTES on the interpretation of the principles of the Construction Sector Code.
LIAISON with and reporting to the regulatory stakeholders on the annual measurement of the construction sector code - BBBEE Advisory, DPW and the DTI .
Creation of RELIABLE and ACCURATE industry specific empowerment data

4. THE CHRONOLOGICAL ARRANGEMENT OF THE AMMENDED CONSTRUCTION SECTOR CODE
INDEX AND CONTENT
Preamble (1)
Legacy & Industry Commitment (1.1)
Premise of departure (1.2)
Strategic Objectives (1.4)
Monitoring & Compliance (1.5)
Objectives Of the Statement (1.6)
Key Measurement Principles (2)
Scope Of Application (3)
Priority Elements, Sub-Minimums & Discounting (4)
EME & QSE Eligibilities (5)
Start-Up Enterprises (6)
Measurement of Large Enterprises (7)
Large & QSE Scorecards (8)
Enhanced Recognitions (9)
Effective Date & Transition (10)
Verification Of CE (11)
Adjustment Of Thresholds (12)
Duration Of Sect Codes (13)
STATEMENT CSC 100 – Ownership
STATEMENT CSC 200 – Management Control
STATEMENT CSC 300 – SKILLS DEVELOPMENT
STATEMENT CSC 400 – ESD
STATEMENT CSC 500 – SED
CSCC - CBE Presentation (August 2017)

5. THE OLD COMPARED TO THE NEW : A COMPARATIVE ANAYSIS
The Old Sector Code – Gazette (Vol 528) 5 June pages long Seven Elements of the Scorecard Differentiates between BEPs and Contractors only Sets out objectives & monitoring Contractor EMEs up to R 5million BEP EMEs up to R1.5 million
Notable Changes
Now over 82 pages long
5 Elements of the Scorecard
Expands the Scope of Application – Include Manufacturers
Important principles & policy emphasis
Elaborative and detailed in the measurement principles & weighting points
Places and emphasis on Monitoring & Compliance

6. OVERVIEW & BRIEF BACKGROUND
WHY CONSTRUCTION SECTOR TRANSFORMATION
PREAMBLE - Recognizes the historical Legacy
Despite significant progress since the establishment of a demographic government in 1994, South African society is characterized by racially based income and social service inequalities. Consequently, the vast majority of South Africans remain excluded from ownership, control and management of productive assets and from access to training in strategic critical skills.
The Broad-Based Black Economic Empowerment Act (No. 53 of 2003) establishes a legislative framework for the promotion of B-BBEE, provides for the gazetting of transformation charters and empowers the Minister of Trade and Industry to issue codes of good practice;
The National Development Plan aims to eliminate poverty and reduce inequality by According to the plan, South Africa can realize these goals by drawing on the energies of all its people, growing an inclusive economy, building capabilities, enhancing the capacity of the state, and promoting leadership and partnerships throughout society;
CSCC - CBE Presentation (August 2017)

7. OVERVIEW & BRIEF BACKGROUND
The ACSC seeks to support the objectives of the Act as amended from time to time and the objectives of the National Development Plan.
Believes that positive and proactive response through the implementation of the Construction Sector Code would address inequalities in the Construction Sector, unlock the sector’s potential and enhance its growth. As such the Construction Sector Code supports:
The introduction of Economically Active Population (EAP) targets which aims to address the unequal representation of race sub-groups participating in the industry;
The continued research by the CSCC on how to create a Construction Sector that benefits the economy at large through supporting and building capacity in small enterprises including black professional service providers;
The set aside of minimum levels of procurement spend from Suppliers that are at least 51% Black Owned or 35% Black Women Owned or 51% Black Designated Groups owned and standardize industry-wide preferential procurement methodologies;
CSCC - CBE Presentation (August 2017)

8. THE SALIENT FEATURES
MONITORING AND COMPLIANCE
PAR will be compulsory for all Verification Agencies issuing certificates for companies governed by the Construction Sector Code to annually provide the independently verified scorecard and associated details of the Measured Entity in a prescribed format to the Construction Sector Charter Council. The Construction Sector Charter Council will use this information to assess the performance of the sector and to provide accurate and reliable state of the industry reports to the line Minister and the DTI. Verification agencies must ensure that the confidentiality obligations with their clients do not prohibit them from providing such informain
Para The CSCC shall, within 12 months of gazette, issue PRACTICE NOTES approved by the Minister of Trade and Industry on the measurement of LOCALIZATION, LOCAL CONTENT & EQUITY EQUIVALENTS
CSCC – Property & Construction Development Seminar – March 2018

9. THE SALIENT FEATURES
SCOPE OF APPLICATION
PAR Where a Measured Entity operates in more than one sector or sub-sector (e.g. Contractor or BEP), whether it requires a single entity verification or a consolidated verification for it as a group; it will be required to report in terms of :
a) The scorecard for the sector or sub-sector in which the majority of its core activities (measured in terms of annual Revenue) are located, and,
b) Should the majority of its core activities be in the construction field, the measured Entity may be evaluated in terms of the Revised Construction Sector scorecard should these activities conform to those described in the definitions of a Contractor or BEP in these codes.
CSCC – Property & Construction Development Seminar – March 2018

10. THE SALIENT & UNIQUE FEATURES
SPECIAL DISPENSATION FOR CONSTRUCTION EMES
EME STATUS LEVEL
THRESHOLD
Contractors
R0 – R 10 million AR
BEPs
R 0 – R 6 million AR
EMEs with BLACK OWNERSHIP using MFTP
Black Ownership
BBBEE level Contribution
< 30%
Level 5
> 30% but less than 51%
Level 4
> 50% but less than 100%
Level 2
If 100%
Level 1
Enhancement Levels
In accordance with 4.3
CSCC – Property & Construction Development Seminar – March 2018

11. THE 25 % OUTSOURCING REQUIREMENT WITH PUBLIC PROCUREMENT
New Provisions & Insertions
Implications / Rational
This is to avoid another form of FRONTING in terms of which, a Measured Entity with BBBEE credentials sources out work to another that has less BBBEE credentials.
Public Sector Procurement - Entities may not sub-contract more than 25% of the value of a contract to another entity that does not have an equal or better B-BBEE status level than the entity awarded the contract unless the work is sub-contracted to an EME that has the capability to execute the work and the work is below the EME threshold. In such cases in respect of public sector procurement where more than 25% of the project costs flow to the other entity that does not have an equal or better B-BBEE status level, joint ventures or consortia should be formed with a combined scorecard for all entities in the joint venture or consortium, in line with applicable regulations
CSCC - CBE Presentation (August 2017)

12. COMPLIANCE WITH PRIORITY ELEMENTS
New Provisions & Insertions
Implications / Rational
This is meant to ensure that, amongst other things :
Fraud and circumvention is prevented and mitigated pro-actively,
To provide end user ( procurement practitioners) comfort about the compliance in respect of the enhancement and/or discounting.
The construction sector code does not promote the use of an AFFIDAVIT as a suitable evidence of the black owned EME and QSEs.
However, an exception is made only in respect of ;
EMEs with a total revenue of R1.8 million for BEPs and R 3 million for Contractors.
Otherwise all other categories of EMEs and QSEs may present an AFFIDAVIT and/or certificates issued by the CIPC in respect of their ownership and annual turnover.
CSCC - CBE Presentation (August 2017)

13. EFFECTIVE DATE AND TRANSITIONAL ARRANGEMENTS
New Provisions & Insertions
Implications / Rational
When the Amended Construction Sector Codes are published, Measured Entities may elect to re-do the audit carried out for their current valid scorecard that was done under the provisions of Amended Generic Codes of Good Practice; under the provisions and principles of the Amended Construction Sector Codes. This audit will be done for the same financial period as their current scorecard, but under the measurement principles of the Amended Construction Sector Codes.
Old 2009 Construction Sector Code provided for a twelve (12) months transitional period for phasing in and implementation. The revised construction sector code will make NO provisions for a transitional period. This means that once gazetted, then the Newly revised Construction sector Code will apply and be effective immediately. However, CSME that have valid B-BBEE certificates issued in terms of the Amended Generic Codes of Good Practice may elect to retain their measurement under the Amended Generic Codes until the current scorecard expires, thereafter the Amended Construction Sector Codes must be used, irrespective of the financial period used in the previous audit.
CSCC - CBE Presentation (August 2017)

14. ENHANCED RECOGNITION FOR CERTAIN CATEGORIES OF BLACK PEOPLE
Throughout the codes, various criteria appear which advance the interests of certain categories of Black People.
These include:
9.2 Black women should form between 10% and 40% of the beneficiaries of the relevant Elements of the scorecard;
This means that throughout all their spend, construction measured entities should prioritise the advancement and promotion of women in their business activities.
9.3 Black People with disabilities, Black youth, Black People living in rural areas and Black unemployed people form part of the beneficiaries of the relevant Elements of the Scorecard.
Previously in the OLD CODES, recognition would only be given where the spend is linked to the recognition of disabled employees ONLY. Now the scope is extended.

15. Implications / Rational
VERIFICATION OF CONSTRUCTION ENTERPRISES AND THE SUPPORT OF SMALL ENTERPRISES
New Provisions & Insertions
Implications / Rational
The CSCC in consultation with and as approved by the dti will post such nominal fees on the website. Agencies that are prepared to perform this service, will post their contact details on the Construction Sector Charter Council web-site. In addition, Large Enterprises will be encouraged to fund this nominal fee for small businesses as part of their Supplier Development programmes. This has already been included in the Supplier Development Contribution clause
Verification shall be performed by B-BBEE verification professionals or rating agencies accredited by SANAS or when applicable a B-BBEE Verification Professional Regulator appointed by the Minister of Trade and Industry for the accreditation of verification agencies or the authorization of B-BBEE verification professionals. In view of the fact that EME’s and QSE’s are expected to be verified for compliance with the 40% Skills Development element in order to maintain their levels as provided for under paragraph above, small black-owned emerging companies have access to B-BBEE verification agencies that will limit their fee for this service at a nominal value.
CSCC - CBE Presentation (August 2017)

16. Implications / Rational
OWNERSHIP AND CONTROL
New Provisions & Insertions
Implications / Rational
The Generic Codes of Good Practice sets the Ownership target at 25.1% - The sector specific needs for ownership is increased from 30% to 35% as a way of radical economic transformation. Emphasis has been placed on the enhancement of BLACK WOMEN and BLAK YOUTH – Including Employees through the Broad Based Ownership Employee Schemes.
Compared to the Old Codes – the new targets for black ownership are at :
Measurement
Target
Voting Rights / Economic Interests
32.5 % Immediately
35.00 % (After 4 years)
Black Women
10.00%
Employees
10.00% ring Fenced
CSCC - CBE Presentation (August 2017)

17. Implications / Rational
OWNERSHIP AND CONTROL
New Provisions & Insertions
Implications / Rational
Therefore when measuring the black ownership of any BEP, where the measured entity does not meet the requirements of above, only 50% of the black ownership of those owners who do not meet the requirement of may be included in the total measurement of black ownership in the measured entity. For the avoidance of doubt, Executive Management in this context is defined as “Top Management” in terms of the Employment Equity Regulations and include the ‘Executive Directors’ and ‘Other Executive Management’ of the Measured Entity.
Measurement of BEPs
Only if More than 50% of the total ownership held in a Measured Entity as a BEP must be held by individuals who are both :
Professionally registered with any of the statutory professional councils in the BEP environment in South Africa; and at the same time,
A member of the Executive Management of the Measured Entity;
CSCC - CBE Presentation (August 2017)

18. ONCE EMPOWERED – ALWAYS EMPOWERED ??
New Provisions & Insertions
Implications / Rational
Black participation arising from continued recognition of Black Ownership cannot contribute more than 40% of the score on the Ownership scorecard.
NO ONCE EMPOWERED – ALWAYS EMPOWERED PRINCIPLE RECOGNIZED
Ownership in a Measured Entity held by Organs of State or Public Entities must be excluded.
A portion of Black Ownership after a Black Participant has exited through the sale or loss of shares subject to the following criteria:
The Black Participant has held shares for a minimum period of 3 years;
Net value based on the Time Based Graduation Factor as per annexe 100 (E) must have been created in the hands of Black People and;
Transformation has taken place within the Measured Entity using the B-BBEE Recognition Level from the period of entry of black Participants to the exiting period. The minimum transformation required is a BBBEE status level 6 and that the score must have improved since the last verification.
CSCC - CBE Presentation (August 2017)

19. MANAGEMENT CONTROL ELEMENT Measurement Category & Criteria
Contractors
BEPs W T
2.1 Board Participation:
2.1.1 Exercisable Voting Rights of black board members as a percentage of all board members 3
50%
2.5
2.1.2 Exercisable Voting Rights of black female board members as a percentage of all board members 1
20%
2.1.3 Black Executive Directors as a percentage of all Executive Directors 2
2.1.4 Black female Executive Directors as a percentage of all Executive Directors
2.3 Senior Management
2.3.1 Black Employees in Senior Management as a percentage of all Senior Management 2
60%
2.3.2 Black female Employees in Senior Management as a percentage of all Senior Management
0.5
30% 1

20. %Contribution of African People to EAP
SKILLS DEVELOPMENT
Category
Skills Development Element
Contractors
BEPs W T
2.1.1 Skills Development Expenditure on any programme specified in the Learning Programme Matrix for Black People as a percentage of the Leviable Amount
Skills Development Expenditure on Black People as a percentage of the Leviable Amount. 4 2% 7
2.5% (year 3)
2.5%
(year 3) 3%
(year 5)
2.1.2 The proportion of Skills Development Expenditure on Black People by the Measured Entity using the Adjusted Recognition for Gender expended on the following categories of Black People:
African People ( as defined in the Stats SA EAP) 2
%Contribution of African People to EAP
Black Management (Executive, Senior and Middle management categories)
15% 3
Black Management (Junior management category) 1
10%
Bursaries or Scholarships for Black People.
2.1.3 Learnerships, Apprenticeships, Internships and Professional Registration

21. SKILLS DEVELOPMENT 3 2.5% 4 60% 1 5% Yes 2 15%
Number of Black People participating in Category A, B, C or D learning programmes as per the Learning Programme Matrix, as a percentage of the total number of Employees. 3
2.5% 4
Number of Black Employees registered as candidates with industry professional registration bodies as a % of the total number of such registered Employees.
60%
Number of Black People with Disabilities on Category A, B, C, or D learning programmes as per the Learning Programme Matrix, as a percentage of black office based learners on those learning programmes. 1 5%
2.1.4 Mentorship
Implementation of an Approved and Verified Mentorship Programme (as per Annexe CSC300 C).
Yes
2.1.5 Bonus points
Percentage of Black People Absorbed by the Measured Entity at the end of a Category A, B, C or D learning programme.
100%
The number of black employees that completed a Mentorship Programme during the last 3 years (including the measurement period) that were promoted during the Measurement Period expressed as a percentage of all such employees during those 3 years. 2
15%
The number of Black Employees who registered as a Professional with industry Professional Bodies as a percentage of all Employees who registered as such in the Measurement Period
TOTAL 26 34

22. SKILLS DEVELOPMENT MEASUREMENT CRITERIA
New Provisions & Insertions
Implications / Rational
Trainee Tracking Tools (TTT) have to be developed. This is to ensure that proper records of the training are kept for verification purpose. If less than 100% of the trainees are absorbed under paragraph , ONLY the percentage achieved or Absorbed will be recognised. Where a ME does not have employees at JML or where it does not distinguish between JM & Middle and/or Senior Man, the JM Category’s weighting point (paragraph ) must be allocated to the Black Management indicator (paragraph ).
In order for the Measured Entity to receive points on the Skills Development scorecard, following criteria
Workplace Skills Plan, an Annual Training Report and Pivotal Report which have been submitted to the SETA; and
Implementation of Priority Skills programme generally, and more specifically for Black People; and
The compliance target under paragraph 2.1.1, 2.1.2, 2.1.3, and includes external training expenditure for Black People that are not employed by the Measured Entity.
CSCC - CBE Presentation (August 2017)

23. SKILLS DEVELOPMENT RATIONAL
Skills Development must ;
Contribute to the achievement of the country’s economic growth and social development goals that will enrich the creation of decent work and sustainable livelihoods.
Promote the development of an industrial skills base in critical sectors of production and value-added manufacturing, which are largely labour-intensive industries.
Support Professional, Vocational, Technical and Academic Learning programmes, achieved by means of professional placements, work-integrated learning, Apprenticeships, Learnerships and Internships, that meet the criteria needs for economic growth and development.
Strengthen the skills and human resource base by encouraging the support of skills development initiatives with an emphasis on skills development and career pathing for all working people in order to support employment creation.
Recognisable Skills Development Expenditure includes any Legitimate Training Expenses incurred for any Learning Programme offered by a Measured Entity to Black People.
Skills Development Expenditure arising from Informal training or Category F and G Learning Programmes under the Learning Programmes Matrix cannot in aggregate represent more than 35% of the total value of Skills Development Expenditure.
CSCC - CBE Presentation (August 2017)

24. SKILLS DEVELOPMENT RATIONAL
Salaries or wages paid to an Employee of the Measured Entity participating as a learner in any Learning Programme only constitute Skills Development Expenditure if the Learning Programme is a Category B, C or D learning programme as per the Learning Programme Matrix. Salaries or wages so paid to the Employee are only claimable for the period over which that Employee was participating in the particular learning programme, during the measurement period. The maximum period for an Employee to be eligible for a Catgory C programme (excluding CPD) is 5 (five) years. Salaries for these Employees are not claimable after the 5 (five) years from the date of registration on the candidate acceptance letter or certificate.
Expenses on scholarships and bursaries for Employees do not constitute Skills Development Expenditure if the Measured Entity can recover any portion of those expenses from the Employee or if the grant of the scholarship or bursary is conditional. Despite the afore ongoing, if the right of recovery or the condition involves either of the following obligations of the Employee, the expenses are recognisable:
The obligation of successful completion in their studies within the time period allocated; or
The obligation of continued employment by the Measured Entity for a period following successful completion of their studies is not more than the period of their studies.
CSCC - CBE Presentation (August 2017)

25. SKILLS DEVELOPMENT MEASUREMENT CRITERIA
New Provisions & Insertions
Implications / Rational
DO NOT REWARD A FISH FOR SWIMMING
Mandatory sectoral training does not qualify as Skills Development contribution. For the avoidance of doubt Mandatory sectoral training is limited to the following:
Site , project or safety inductions;
Toolbox talks;
Operators re-certification.
CSCC - CBE Presentation (August 2017)

26. LEGITIMATE SD TRAINING EXPENSES
New Provisions & Insertions
Implications / Rational
DO NOT REWARD A FISH FOR SWIMMING
Legitimate Training Expenses include but is not necessarily limited to:
6.1.1 Costs of training materials;
6.1.2 Costs of trainers;
6.1.3 Costs of training facilities including costs of catering;
6.1.4 Scholarships and bursaries;
6.1.5 Course fees;
6.1.6 Accommodation and travel; and
6.1.7 Administration costs such as the organization of training including, where appropriate, the cost of the Measured Entity of employing a Skills Development facilitator or a training manager.
6.1.8 Funding and support of research at tertiary institutions aimed at improving performance of the Construction Sector.
CSCC - CBE Presentation (August 2017)

27. PROJECT THE TRAINING MATRIX
CSCC - CBE Presentation (August 2017)

28. TRULLY BROAD-BASED