New BEE Codes 2014 How will the new codes impact your business?

Programme 01Overview> Structure of The New Codes 02Discussion> Framework used to understand the Business Impact of the New Codes 03Dialogue> Business Impact of the New Codes 04Presentation> Understanding the New Codes through Decision Trees 05Demo> BEE Calculators, based on the New Codes 06 Facilitated Process > Articulating the Challenges presented by the New Codes Developing a Work Plan to deal with identified Challenges

Structure of the New Codes

Statement 000: General Principles And The Generic Scorecard Statement 100: The General Principles For Measuring Ownership Statement 200: The General Principles For Measuring Management Control Statement 300: The General Principles For Measuring Skills Development Statement 400: The General Principles For Measuring Enterprise And Supplier Development Statement 500: The General Principles For Measuring Socio- Economic Development

Framework used to understand the Business Impact of the New Codes

Cascading to all tiers and sectors of the economyPrivate Sector suppliers to first-tier Enterprises ConcessionsAuthorisationsLicenses Public- Private Partnership TendersIncentives Sale of a state asset or SOE First-tier Enterprises Economic Impact of BBBEE Figure adapted from CRACKING BROAD-BASED BEE, by Tony Balshaw & Jonathan Goldberg Government and Public Sector Entities

TECHNOLOGY TRENDS REGULATORY TRENDS - FORESIGHT - - MACROECONOMICS - - COMPETITIVE ANALYSIS - - MARKET ANAYSIS - KEY TRENDS MARKET FORCES MACRO- ECONOMIC FORCES INDUSTRY FORCES SOCIETAL AND CULTURAL TRENDS SOCIOECONOMIC TRENDS CAPITAL MARKETS GLOBAL MARKET CONDITIONS ECONOMIC INFRASTRUCTURE COMMODITIES AND OTHER RESOURCES SUPPLIERS AND OTHER VALUE CHAIN ACTORS STAKEHOLDERS COMPETITORS (INCUMBENTS) NEW ENTRANTS (INSURGENTS) SUBSTITUTE PRODUCTS AND SERVICES MARKET SEGMENTS NEEDS AND DEMANDS MARKET ISSUES SWITCHING COSTS REVENUE ATTRACTIVENESS Business Model Environment (Source: Business Model Generation; 2010;Alexander Osterwalder, Yves Pigneur; John Wiley & Sons Inc)

Business Model Canvas

Business Impact of the New Codes

TECHNOLOGY TRENDS REGULATORY TRENDS - FORESIGHT - - MACROECONOMICS - - COMPETITIVE ANALYSIS - - MARKET ANAYSIS - KEY TRENDS MARKET FORCES MACRO- ECONOMIC FORCES INDUSTRY FORCES SOCIETAL AND CULTURAL TRENDS SOCIOECONOMIC TRENDS CAPITAL MARKETS GLOBAL MARKET CONDITIONS ECONOMIC INFRASTRUCTURE COMMODITIES AND OTHER RESOURCES SUPPLIERS AND OTHER VALUE CHAIN ACTORS STAKEHOLDERS COMPETITORS (INCUMBENTS) NEW ENTRANTS (INSURGENTS) SUBSTITUTE PRODUCTS AND SERVICES MARKET SEGMENTS NEEDS AND DEMANDS MARKET ISSUES SWITCHING COSTS REVENUE ATTRACTIVENESS Business Model Environment (Source: Business Model Generation; 2010;Alexander Osterwalder, Yves Pigneur; John Wiley & Sons Inc)

Regulatory Trends The following entities are measurable under the Codes: a)All Organs of State and Public Entities b)All Measured Entities that undertake economic activity with all Organs of State and Public Entities c)Any other Measured Entity that undertakes any economic activity, whether direct or indirect, with any other Measured Entity that is subject to measurement under (a) to (b) and which is seeking to establish its own B- BBEE compliance NB: Measured Entities in sectors where there are Sector Codes are excluded (i.e. they can only be measured in accordance with their respective Sector Codes)

Licenses Concessions Other authorisations in terms of any law National Government Provincial Government Local Government Parastatals Business Models of Companies using the Generic Codes Suppliers governed by the Generic Codes Public Private Partnerships (PPPs)

Business Models of Companies using Sector Codes Suppliers governed by the Generic Codes

Private Sector Sales to companies that undertake economic activity with Organs of State and Public Entities Business Models of Companies doing business with entities that undertake economic activity with Organs of State and Public Entities

Given this, what should we be doing during the Transitional Period? Business Strategy/BEE Strategy Policies Business Processes Monitoring & Evaluation Systems Review

Understanding the New Codes through Decision Trees

Structure of the New Codes Statement 000: General Principles And The Generic Scorecard Statement 100: The General Principles For Measuring Ownership Statement 200: The General Principles For Measuring Management Control Statement 300: The General Principles For Measuring Skills Development Statement 400: The General Principles For Measuring Enterprise And Supplier Development Statement 500: The General Principles For Measuring Socio- Economic Development

Statement 000 General Principles And The Generic Scorecard

Do the Codes apply to my Organisation? Is my Organisation an Organ of State or Public Entity? The Codes do apply to your Organisation Yes Does my Organisation undertake any economic activity with an Organ of State or Public Entity? No Does my Organisation undertake any economic activity (direct or indirect) with an Organisation that undertakes any economic activity with an Organ of State or Public Entity? The Codes do apply to your Organisation Yes No The Codes do apply to your Organisation The Codes do not apply to your Organisation Yes No

Types of Enterprises The Codes specify the following types of Enterprises: Large Enterprises Qualifying Small Enterprises Exempted Micro Enterprises and Start-up Enterprises

To which category of ‘Enterprises’ does my Organisation belong? What is my Organisation’s Annual Total Revenue? Large Enterprise Start-up Enterprise Exempted Micro Enterprise Qualifying Small Enterprise >= R 50 million > R 10 million < R50 million <= R 10 million Unknown (Start-up) NB: Revenue Thresholds used to determine enterprise categories have been increased

The B-BBEE Generic Scorecard ElementWeightingCode Series Reference Ownership25 points100 Management Control19 points200 Skills Development20 points300 Enterprise and Supplier Development40 points400 Socio-Economic Development5 points500 Maximum Possible Standard Points = 109

How do I know what my Organisation’s B-BBEE Status is? What is my Organisation’s B-BBEE Recognition Level? How many points did my Organisation obtain? >= 100 >= 95 < 100 >= 90 < 95 >= 80 < 90 >= 75 < 80 >= 70 < 75 >= 55 < 70 >= 40 < 55 < 40 Your Organisation’s B-BBEE Status is “Level One Contributor” Your Organisation’s B-BBEE Status is “Level Two Contributor” Your Organisation’s B-BBEE Status is “Level Three Contributor” Your Organisation’s B-BBEE Status is “Level Four Contributor” Your Organisation’s B-BBEE Status is “Level Five Contributor” Your Organisation’s B-BBEE Status is “Level Six Contributor” Your Organisation’s B-BBEE Status is “Level Seven Contributor” Your Organisation’s B-BBEE Status is “Level Eight Contributor” Your Organisation’s B-BBEE Status is “Non-Compliant Contributor” Your Organisation’s B-BBEE Recognition Level is “135%” Your Organisation’s B-BBEE Recognition Level is “125%” Your Organisation’s B-BBEE Recognition Level is “110%” Your Organisation’s B-BBEE Recognition Level is “100%” Your Organisation’s B-BBEE Recognition Level is “80%” Your Organisation’s B-BBEE Recognition Level is “60%” Your Organisation’s B-BBEE Recognition Level is “50%” Your Organisation’s B-BBEE Recognition Level is “10%” Your Organisation’s B-BBEE Recognition Level is “0%” NB: B-BBEE Status range limits have been increased for each Level

Under what circumstances can an Organisation’s B-BBEE Status be Enhanced? Is the Organisation an EME? Verified B-BBEE Status Yes Is the EME 100% Black owned? No Deemed B-BBEE Status of “Level Four Contributor” Yes No Enhanced B-BBEE Status of “Level One Contributor” Yes No Is the EME at least 51% Black owned? No Enhanced B-BBEE Status of “Level Two Contributor” Yes Is the Organisation a QSE? Is the QSE 100% Black owned? Yes Enhanced B-BBEE Status of “Level One Contributor” No Is the QSE at least 51% Black owned? Enhanced B-BBEE Status of “Level Two Contributor” Yes No NB: B-BBEE Status enhancement basis has changed for EMEs & QSEs

Sub-minimum requirements for Priority Elements Priority ElementSub-minimum Ownership40% of Net Value (40% of the 8 points) based on the Time Based Graduation Factor Skills Development40% of the total weighting points for Skills Development Enterprise and Supplier Development 40% for each of the three categories, within the Enterprise and Supplier Development element, namely Preferential Procurement, Supplier Development & Enterprise Development NB: Inability to achieve the sub-minimums for priority elements may result in an Organisation’s B-BBEE Status dropping one level down (Discounting Principle)

Under what circumstances can an Organisation’s B-BBEE Status be Discounted (Large Enterprises & QSEs)? Scenario No. Ownership sub- minimum achieved? Skills Development sub-minimum achieved? Enterprise and Supplier Development sub-minimum achieved? Verdict: Large EnterprisesVerdict: QSEs 1Yes Discounting principle does not apply 2Yes NoDiscounting principle applies Discounting principle does not apply 3YesNo Discounting principle applies 4No Discounting principle applies 5No YesDiscounting principle applies 6NoYes Discounting principle applies

Statement 100 The General Principles For Measuring Ownership

The Ownership Scorecard IndicatorDescriptionWeighting PointsCompliance Target Voting RightsExercisable Voting Rights in the Entity in the hands of Black people 425% + 1 Vote Exercisable Voting Rights in the Entity in the hands of Black women 210% Economic InterestEconomic Interest in the Entity to which Black people are entitled 425% Economic Interest in the Entity to which Black women are entitled 210% Economic Interest of any of the following Black natural people in the Measured Entity: Black designated groups; Black participants in Employee Share Ownership Programmes; Black people in Broad-based Ownership Schemes; Black participants in Co- operatives 33% New Entrants22% Realisation PointsNet Value8Anchored on Time-Based Graduation Factor of the Economic Interest Compliance Target

Statement 200 The General Principles For Measuring Management Control

Management Control Scorecard Measurement Category CriteriaWeighting Points Compliance Targets Board ParticipationExercisable voting rights of black board members as a percentage of all board members250% Exercisable voting rights of black female board members as a percentage of all board members125% Black Executive directors as a percentage of all executive directors250% Black female Executive directors as a percentage of all executive directors125% Other Executive Management Black Executive Management as a percentage of all executive management260% Black female Executive Management as a percentage of all executive management130% Senior Management Black employees in Senior Management as a percentage of all Senior Management260% Black female employees in Senior Management as a percentage of all Senior Management130% Middle Management Black employees in Middle Management as a percentage of all middle management275% Black female employees in Middle Management as a percentage of all middle management138% Junior Management Black employees in Junior Management as a percentage of all junior management188% Black female employees in Junior Management as a percentage of all junior management144% Employees with disabilities Black employees with disabilities as a percentage of all employees22%

Statement 300 The General Principles For Measuring Skills Development

The Skills Development Scorecard CategorySkills Development Element Weighting PointsCompliance Target 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 Learning Programmes specified in the Learning Programme Matrix for black people as a percentage of Leviable Amount 86% Skills Development Expenditure on Learning Programmes specified in the Learning Programme Matrix for black employees with disabilities as a percentage of Leviable Amount 40.3% Learnerships, Apprenticeships, and Internships Number of black people participating in Leanerships, Apprenticeships and Internships as a percentage of total employees 42.5% Number of black unemployed people participating in training specified in the Learning Programme Matrix as a percentage of number of employees 42.5% Bonus pointsNumber of black people absorbed by the Measured and Industry Entity at the end of the Learnership programme 5100%

Statement 400 The General Principles For Measuring Enterprise And Supplier Development

Enterprise and Supplier Development Scorecard CategoryCriteriaWeighting PointsCompliance Targets Preferential Procurement B-BBEE Procurement Spend from all Empowering Suppliers based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 580% B-BBEE Procurement Spend from all Empowering Suppliers that are Qualifying Small Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 315% B-BBEE Procurement Spend from all Exempted Micro-Enterprises based on the applicable B- BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 415% 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 940% B-BBEE Procurement Spend from Empowering Suppliers that are at least 30% black women owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 412% Bonus points: B-BBEE Procurement Spend from Designated Group Suppliers that are at least 51% Black owned 22% Supplier Development Annual value of all Supplier Development Contributions made by the Measured Entity as a percentage of the target 102 % of NPAT Enterprise Development Annual value of Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target 51% of NPAT Bonus PointsBonus point for graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level 1 Bonus point for creating one or more jobs directly as a result of Supplier Development and Enterprise Development initiatives by the Measured Entity 1

Definition Empowering Supplier should meet at least 3 if it a large enterprise or 1 if it a QSE of the following criteria: a)At least 25% of the cost of sales excluding labour cost and depreciation must be procured from local producers or local supplier in SA, for service industry labour cost are included but capped to 15% b)Job creation - 50% of jobs created are for Black people provided that the number of Black employees since the immediate prior verified B-BBEE Measurement is maintained c)At least 25% transformation of raw material/beneficiation which include local manufacturing, production and /or assembly, and/or packaging d)Skills transfer – at least spend 12 days per annum of productivity deployed in assisting Black EMEs and QSEs beneficiaries to increase their operation or financial capacity

Statement 500 The General Principles for Measuring Socio-Economic Development

The Socio-Economic Development Scorecard CriteriaWeighting Points Compliance Target Annual value of all Socio-Economic Development Contributions by the Measured Entity as a percentage of the target 51% of NPAT

Summary Measured Entities in sectors where there are Sector Codes are excluded (i.e. they can only be measured in accordance with their respective Sector Codes) Revenue Thresholds used to determine enterprise categories (Large enterprise, QSE, EME, etc) have been increased B-BBEE Status range limits have been increased for each Level B-BBEE Status enhancement basis has changed for EMEs & QSEs. These enterprises can now be promoted to a Level 1 or 2 depending on whether they are 100% black owned or 51% black owned Inability to achieve the sub-minimums for priority elements (Ownership, Skills Development & Enterprise and Supplier Development) may result in an Organisation’s B-BBEE Status dropping one level down (Discounting Principle) The requirement for an Empowering Supplier has been introduced in the Preferential Procurement component of the Enterprise and Supplier Development Scorecard Companies must understand which aspects of their Business Model are impacted by the New Codes

Challenges in implementing the New Codes Accelerators – what is already being done or can be done to support the implementation of the New Codes? Brakes – what stands in the way of the implementation of the New Codes?

Work Plan to deal with Challenges What needs to be done, to work towards the successful implementation of the New Codes?

Q & A with the Panel

Thank You