1. KEY NOTE ON THE PROGRESS OF THE MASTER BUILDERS ANNUAL
ICSC
MASTER BUILDERS ANNUAL
GENERAL MEETING
Presented by
Thabo Masombuka (Mr)
Chief Executive
(CSCC)
27 JUNE 2017

2. ALIGNMENT PROCESS PROGRESS
PROGRESS SINCE THE REPEAL OF THE OLD CONSTRUCTION SECTOR CODE
The CURRENT STATUS QUO
In FEBRUARY 2016 – Minister of Trade & Industry REPEALED the OCSC
Meant that the CS Measured Entities measurable in terms of the Revised Generic CoGP.
The Industry Commitments
This ALLOWED industry to finalize framework for the measurement & the promotion of B-BBEE in the Sector.
Submitted for publishing & gazette on 28 October 2016 for 60 Days Commentary.
The period closed on the 27 December 2017
Since then, back and forth meetings of the TRC

3. PUBLIC COMMENTARY PERIOD
During the period - No more than 35 submissions were received.
Other Comments & submissions were sent to the DTI through the
Out of all submissions, only a few raised substantial & procedural issues, namely:
Received From
Nature
Action Required
SAFCEC
Errors & Corrections
Noted & Confirmed
Individual Consultants
Technical Queries & Calculations
Clarity Provided & Others ignored
ABP
Questions, Clarity & Inputs
Confirmed, Response & Clarity
SEESA
Ivor Blumenthal (OBO IWH, IOPSA, SAPMA, FITA etc)
Consultation & Representativity
Clarity & Response
Shepston & Wylie Attorneys (OBO ASPASA & SAMRA)
Scope of Application
Clarify, Confirm & Response

4. TECHNICAL REVIEW PROCESS
By & Large, most of the inputs & submissions were very useful technical queries. Many related to corrections, calculations and formulas.
The CSCC EXCO had earlier approved a Technical Review Team (TRC) – which would process the inputs and submissions.
The CSCC TRC had 2 (two) internal meetings.
Also had 2 (two) Meetings with the DTI over the process.
These were held in February – May 2017
Common approach was adopted and agreed in resolving queries.
As of fist week of JUNE 2017 – the Final version has been submitted.

5. 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;

6. OVERVIEW & BRIEF BACKGROUND
This Construction Sector Code 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;

7. SECTOR CODE STRATEGIC OBJECTIVES
The Code in general seeks to support all the objectives of Transformation and in particular aims to:
Achieve a substantial, meaningful and accelerated change in the racial and gender composition of ownership, control and management in the sector;
Promote the effective advancement of employment equity in the sector and adherence to principles of non-racialism and non-sexism and also addresses the underrepresentation of certain race groups relative to the Economic Active Population targets with specific focus on all levels of management;
Address Skills Development in a manner that accelerates the advancement of Black People, black women and Designated Groups with particular emphasis on learnerships, technical and management training;
Increase the procurement of goods and service by the private sector and public sector from entities that are at least 51% Black Owned, 35% Black Women sector.  

8. SECTOR CODE STRATEGIC OBJECTIVES
Enhance Supplier and Contractor Development in the core value chain of the construction industry that leads to sustainable empowerment for Qualifying Supplier Development Beneficiaries;
Contribute to the creation of substantial black owned entities and black industrialists in the Construction Sector through industry wide Supplier and Contractor Development initiatives;
Increasing Preferential Procurement spend on local companies thereby increasing local job creation aligned to the objectives of the National Development Plan;
Provide the Construction Sector on-going qualitative and quantitative method for monitoring and evaluating the progress of enterprises toward B-BBEE and thereby contribute to ending the malpractice of fronting; and
Introduce compulsory reporting and engagement with the BEE Commissioner to monitor progress of enterprises toward B-BBEE.

9. THE ROLE OF THE CSCC
The CSCC is the EXECUTIVE AUTHORITY charged with :
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, appropriate Ministries and SOEs, Verification Agencies, CIDB, 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

10. WHY THE CONSTRUCTION SECTOR CODE
As a General Principle - Draft Sector remains an INTENTION to gazette as a final sector code subject to process of public comments, objections and inputs – have been dully processed and considered, AFTERWHICH the Draft Sector Code becomes a FINAL Sector code once all the comments have been considered, processed incorporated.
THE SCOPE OF APPLICATION IS DEFINED IN NO UNCERTAIN TERMS within the construction sector, that ensures that Built Environmental Professional (BEPs), Contractors (General Build) and the Material Suppliers / retailers are clearly defined in the construction sector value chain.
For the avoidance of doubt, Construction Material Suppliers are measureable against the thresholds, targets, weightings and methodology applicable to Contractors as per the Construction Sector Code scorecards.
TO THE EXTENT THAT THEY ARE NOT EXPECTED TO COMPLY WITH OTHER LEGISLATIVE REQUIREMENTS

11. RESPONSIBILITY FOR MONITORING AND COMPLIANCE
THE CONSTRUCTION SECTOR CHARTER COUNCIL (CSCC) - An industry executive authority made up of government and the industry bodies/associations representing over commercially active construction entities ;
Oversees and monitor the implementation of the Construction Sector Code. It will act with executive capacity and provide the necessary links to relevant government institutions;
Will perform an annual baseline study as a way to review quantitative and qualitative progress towards transformation in the Construction Sector;
Will make it 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.

12. CERTAIN PRIORITY AREAS OF THE CONSTRUCTION SECTOR CODES
ACCELERATED LEVELS OF BLACK OWNERSHIP
Achieving accelerated, substantial & meaningful racial and gender changes in the ownership patterns
Specify the specific measurement principles applicable to various types of Equity Instruments;
Specify the formula for measuring Voting Rights, Economic Interest, and Realisation points.
EQUITY IN EMPLOYMENT PRACTICES
Strive to promote effective employment equity in the under-represented sections of management in measurement entities. As such improving prospects of gaining Management control by black people within Measured Entities.
ACCELERATED SKILLS DEVELOPMENT
Advancing black participation in learnerships, mentorship & technical management roles for designated beneficiaries and target groups

13. VERIFICATION OF CONSTRUCTION MEASURED ENTITIES
As a general rule, the B-BBEE verification of Construction Sector enterprises shall be performed by B-BBEE verification professionals or rating agencies that are accredited by a B-BBEE Verification Professional Regulator YET TO BE SET UP by the Minister of Trade & Industry.
For the avoidance of doubt, this rule also applies to all EME’s and QSE’s.
However, Affidavits (Sworn Statements) – will be used only on the following categories of EMEs
All BEPs with R 1.8 million turnover and LESS
All CONTRACTORS with R 3 million and LESS
All others seeking ENHANCEMENT of BBBEE Level contributions will use certain VA s in return for a nominal fee
The cost of such verification (the nominal fee) is being discussed between the CSCC – SANAS and ABP

14. TARGETS FOR BLACK OWNERSHIP
Compared to the target of 25.1% provided for in the Amended Generic BBBEE codes, which is reviewable over a period of 10 years, the targets for black ownership in the construction industry is immediately set at 32.5 % and 35% after 4 years f
The target of 32.5% in 1 – 4 year & 35.% after 4 years with great emphasis being placed on the economic interests of black designated groups, namely :
o Black women, youth and the disabled,
o Black participants in Employee Share Ownership Schemes (ESOPs),
o Black people in broad based ownership schemes,
o Black people in co-operatives.
Consequently, a total of 31 weighting points have been allocated on this element with higher weighting bonus (4), also allocated for exercisable voting rights for black people and black women.

15. OWNERSHIP MEASUREMENT PRINCIPLES …..
The Rights of Ownership held by black people in South African Multinationals are measureable against the value of their South African operations only. The Exclusion Principle must be applied with reference to the value of the Measured Entity’s foreign operations when calculating its ownership score.
More than 50% of the investors in Measured Entities in the BEP space must be owned by investors that are both:
Professionally registered; and at the same time
A member of the Executive Management of the Measured Entity;
Therefore when measuring the black ownership of any BEP (whether the above general rule applies or not), where the percentage of Rights of Ownership held by investors, which are not professionally registered and part of Executive Management (as per above), exceed 50% of the total of such Rights of Ownership, the portion above 50% shall not be recognised as Rights of Ownership held by Black People. For the avoidance of doubt, this principle also applies to the determination of BEP’s qualification as 51% Black Owned or 100% Black Owned.

16. BLACK OWNERSHIP – EXCLUSIONS PRINCIPLES
EXCLUSION OF SPECIFIED ENTITIES WHEN DETERMINING OWNERSHIP
When determining Ownership in a Measured Entity, Ownership held by Organs of State or Public Entities must be excluded.
The exclusion of Ownership held by Organs of State or Public Entities is to be effected before any other Ownership discounting methods are to be applied.
In calculating their Ownership score, Measured Entities must apply the Exclusion Principle to any portion of their Ownership held by Organs of State or Public Entities.
MANDATED INVESTMENTS
When determining Ownership in a Measured Entity, rights of Ownership of Mandated Investments may be excluded.
The maximum percentage of the Ownership of any Measured Entity that may be so excluded is 40%.

17. BLACK OWNERSHIP – EXCLUSIONS PRINCIPLES
EXCLUSION OF EQUITY EQUIVALENT PROGRAMMES IN THE CONSTRUCTION SECTOR
Initially, the EEPs were excluded in the Draft Construction Sector Code – After the Public Commentary period in December 2016.
However, following some OBJECTIONS and LOBBYING, a compromise provision was made.
Although Equity Equivalent Programmes (EEPs) are recognised in line with the provisions of statement 103 of the Generic CoGP,  the CSCC will, together with the DTI, in consultation with the relevant forums representing multi-national enterprises, investigate the acceptability and effectiveness of these in the construction sector. Read with the provisions of clause 1.5.6, the CSCC and the DTI will, within 12 months of the Amended Construction Sector code being gazetted, issue a PRACTICE NOTE to clarify the application of the EEP.
Confirmation that multinationals were consulted on this one since it is only introduced after the Section 9 (5) gazette.

18. BLACK OWNERSHIP – ONCE EMPOWERED ALWAYS EMPOWERED
RECOGNITION OF OWNERSHIP AFTER THE SALE OR LOSS OF SHARES BY BLACK PARTICIPANTS
A Measured Entity is allowed to recognise 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;
The 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.
Meaningful & Sustainable Transformation

19. MANAGEMENT CONTROL
The draft construction code makes an important distinction between targets for contractors and BEPs. Weighting points are allocated for the recognition of black people in the junior, senior, top and executive management of construction sector measured entities with the highest target being 60% and 75%.
• A total of 22 weighting points are allocated for this.
More importantly, some bonus weighting points (2.0 for Contractors and 1.5 for BEPs) are allocated for the Black Youth as a percentage of the total number of employees in a certain construction company.
Recognition is made for difference in the measurement of management layers between the CONTRACTORS and BEPs.

20. TRULLY BROAD-BASED

21. END