Broad-Based Black Economic Empowerment, and Enterprise and Supplier Development Framework, Codes and Scorecard Workshop Presented by : Janeez Hafizulla Director of Operations, J AZ Strategic Investments (Pty) Limited Broad-Based Black Economic Empowerment Specialist Consulting Service Provider Former Deputy Director, the dti, B-BBEE Unit Verification, Procurement and Transformation Adv. Shuaib Rahim Senior Lecturer, Rhodes University: The Law of Property; Banking and Payment Instruments; Ethics and Professional Responsibility and International Trade Senate Representative of the Rhodes University Institutional Forum Elected Board Member of the NTEU Rhodes University Branch

“It always seems impossible, until it’s done” B-BBEE Overview “It always seems impossible, until it’s done” Nelson Mandela

“while poverty persists, there can be no true freedom” Nelson Mandela B-BBEE Preamble WHEREAS, under apartheid, race was used to control access to South Africa’s productive resources and access to skills; WHEREAS, South Africa’s economy still excludes the vast majority of its people from ownership of productive assets and possession of advanced skills; WHEREAS, South Africa’s economy performs below its potential because of the low level of income earned and generated by the majority of its people; AND WHEREAS, unless further step are taken to increase the effective participation of the majority of South Africans in the economy, the stability and prosperity of the economy in the future may be undermined to the detriment of all South Africans, irrespective of race; B-BBEE Codes of Good Conduct Dr. Rob Davies MP the dti “the Economic Empowerment of a Previously Prejudiced People is not a CODE, but rather an OBLIGATION on ALL, especially those who benefitted from the system that created the inequity” Anonymous “while poverty persists, there can be no true freedom” Nelson Mandela

B-BBEE Stakeholders Minister of Trade & Industry Presidential Commission Professional Verification Regulator South African National Accreditation Systems (SANAS) Consulting Service Providers Measured Entities Presidential B-BBEE Advisory Council Association for B-BBEE Professionals Accredited Verification Agencies

Legislated Changes to the B-BBEE Codes A number of changes, amendments and additions were made to the to the 2012 Bill and 2013 Act. The most significant were: 7 Elements were reduced to 5 with No bonus points for Ownership element Skills Development made a Priority Element Changes to Weightings Points and Compliance Targets More Stringent Recognition Levels B-BBEE Commission established Eradication of “Loopholes” Trumping Provision Fronting – “knowing, knowingly or knows” B-BBEE Verification Professional Regulator appointed “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change” Charles Darwin

B-BBEE Recognition Level State of Transformation at SA Universities University Date of B-BBEE Audit *B-BBEE Score B-BBEE Recognition Level **ESD Score Uni of the Witwatersrand 04 Aug 2017 57.75 Level 8 21.79 Uni of The Western Cape 25 July 2017 69.21 24.74 Uni of Pretoria 02 Oct 2017 65.80 Level 7 34.4 Nelson Mandela Metro Uni 02 Aug 2016 64.8 19.94 North West Uni 30 May 2017 48.03 Non-compliant 31.15 Stellenbosch Uni 64.62 22.14 * Total B-BBEE Weighting = 109 points ** Total ESD Weighting = 54 points

B-BBEE Recognition Level State of Transformation at SA Universities University` Date of B-BBEE Audit B-BBEE Score B-BBEE Recognition Level ESD Score Uni of Johannesburg 31 Aug 2016 70.66 Level 7 27.99 Uni of The Free States 01 June 2016 59.5 Level 8 19.83 Uni of KZN 11 May 2016 ***79.24 Level 3 16.47 UNISA 11 Dec 2015 ***69.5 Level 4 20 Rhodes Uni 04 March 2015 ***72.97 25.31 Cape Peninsula University 30 June 2016 ***65.65 20.23 * Total B-BBEE Weighting = 109 points ** Total ESD Weighting = 54 points *** Based on Old Codes

Specialised Enterprise B-BBEE Generic and Specialised Enterprise Scorecards Elements Generic Compliance Targets Specialised Enterprise Weighting Bonus Points Old Codes New Codes Bonus Points Ownership 25 25% + 1 vote na Management Control 19 (50% to 88%) 30 4 20 Skills Development 5 6% of payroll Enterprise & Supplier 40 PP = 80% SD = 2% (NPAT) * ED = 1% (NPAT) * 35 50 Socio Economic 1% (NPAT) * 15 Sub Totals 109 9 100 104 Totals 118 * Net Profit after Tax OR Annual Revenue / Allocated Budget / Gross Receipts / Discretional Spend

B-BBEE recognition level B-BBEE Recognition Levels B-BBEE Status 2007 Codes of Good Practice 2013 Amended B-BBEE recognition level Level One Contributor ≥100 points on the Generic Scorecard 135% Level Two Contributor ≥85 but <100 on the Generic Scorecard ≥95 but <100 on the Generic Scorecard 125% Level Three Contributor ≥75 but <85 on the Generic Scorecard ≥90 but <95 on the Generic Scorecard 110% Level Four Contributor ≥65 but <75 on the Generic Scorecard ≥80 but <90 on the Generic Scorecard 100% Level Five Contributor ≥55 but <65 on the Generic Scorecard ≥75 but <80 on the Generic Scorecard 80% Level Six Contributor ≥45 but <55 on the Generic Scorecard ≥70 but <75 on the Generic Scorecard 60% Level Seven Contributor ≥40 but <45 on the Generic Scorecard ≥55 but <70 on the Generic Scorecard 50% Level Eight Contributor ≥30 but <40 on the Generic Scorecard ≥40 but <55 on the Generic Scorecard 10% Non-Compliant <30 on the Generic Scorecard <40 on the Generic Scorecard 0%

Improving your B-BBEE Score General Appoint a Dedicated Transformation Officer Define the Characteristics of a Transformation Officer Make Transformation a Board Reporting and Discussion Matter Regularly calculate your B-BBEE Score Don’t be a naysayer Stop making excuses Management Control Track Black Talent Retain Black Graduating Academics “Good timber does not grow with ease. The stronger the wind, the stronger the trees” J Willard Marriot

“Hire character. Train Skill” Improving your B-BBEE Score Skills Development Understand the Element. Develop Skills outside of your industry / sector Plan you Skills Development Spend Allocation in line with The National EAP B-BBEE Regular Competency Level reviews and Training Gap Analysis Promote Employment of Persons with Disabilities Familiarise yourself with SD Grants, Tax Breaks and Allowances Enterprise and Supplier Development Covered later Socio-Economic Development “Goodwill” begins at home Involve yourself with Development Programmes in your Community “Hire character. Train Skill” Peter Schultz

Enterprise and Supplier Development “Our success has really been based on partnerships from the very beginning” Bill Gates

“People create growth, companies report it” Enterprise and Supplier Development Overview Objectives Increase and strengthen local procurement Support procurement from Black owned EME’s and QSE’s Promote the use of Black Professional Service Providers Encourages the development of EME’s and QSE – suppliers and non-suppliers Recognises the graduation of developed enterprises into the supply chain Recognises job-creation resulting from enterprise development Enterprise and Supplier Development essentially comprises 3 sub-elements: Preferential Procurement Enterprise Development Supplier Development * 40% sub-minimum applies * Imports provisions do not apply to the designated sectors and products for local production “People create growth, companies report it” Brain Joffe

“The secret of success is to do the common things uncommonly well” Enterprise and Supplier Development Overview Preferential Procurement What is Preferential Procurement? Measured Entity Spend (excluding taxations, salaries, wages, remunerations, procurement on behalf of a third party) that is directed at a specific type of supplier status. Who should benefit from Preferential Procurement? Empowering Suppliers, Exempted Micro-Enterprises or Qualifying Small Enterprises which are at least 51% Black Owned or at least 30% Black Women Owned, Designated Groups that are at least 51% Black Owned “The secret of success is to do the common things uncommonly well” John D Rockefeller

“Great opportunities come to those who make the most of small ones” Enterprise and Supplier Development Overview Enterprise Development What is Enterprise Development? Monetary or Non-Monetary contributions carried out with the objective of contributing to the development, sustainability, financial and operational independence of the Enterprise Development recipient. Who should benefit from Enterprise Development Spend? Exempted Micro-Enterprises or Qualifying Small Enterprises which are at least 51% Black Owned or at least 51% Black Women Owned “Great opportunities come to those who make the most of small ones” Anonymous

Enterprise and Supplier Development Overview What is Supplier Development? Monetary or Non-Monetary contributions carried out for the benefit of Value-Adding suppliers to the Measured Entity, with the objective of contributing to the development, sustainability, financial and operational independence of the Supplier Development recipient Who should benefit from Supplier Development Spend? ` Exempted Micro-Enterprises or Qualifying Small Enterprises which are at least 51% Black Owned or at least 51% Black Women Owned “A good leader inspires men to have confidence in him. A great leader inspires men to have confidence in themselves” Anonymous

Specialised Scorecard Weighting Points ESD – Preferential Procurement Scorecard Criteria Generic Scorecard Weighting Points Specialised Scorecard Weighting Points Compliance Target Preferential Procurement Empowering Suppliers  5 5  80% Qualifying Small Enterprises    3 4 15% Exempted Micro-Enterprises At least 51% Black Owned   9 11 40% At least 30% Black Women Owned 12% Bonus Points Designated Group Suppliers that are at least 51% Black owned. 2 2%

Specialised Scorecard Weighting Points ESD – Enterprise and Supplier Scorecard Criteria Generic Scorecard Weighting Points Specialised Scorecard Weighting Points Compliance Targets Supplier Development Annual value of all Supplier Development Contributions as a percentage of the target. 10 15 2% of NPAT or 0.2% of Annual Revenue / Allocated Budget/Gross Receipts / Discretional Spend Enterprise Development Annual value of Enterprise Development Contributions and Sector Specific Programmes as a percentage of the target. 5 1% of NPAT or 0.1% of Annual Revenue / Allocated Budget/Gross Receipts / Discretional Spend Bonus Points Bonus point for graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier. 1  1 Bonus point for creating one or more jobs directly as a result of Supplier Development and Enterprise Development

Improving Your ESD Score Preferential Procurement audit supplier base - redirect / migrate spend support EME’s, QSE’s, Black Owned, Black Women Owned, Empowered Entities Encourage improved B-BBEE recognition levels from existing suppliers procure from at least 51% Black Owned Designated Groups (bonus point) Enterprise Development develop an ED Strategy implement ED Programme graduate a ED beneficiary to supplier (bonus point) Supplier Development develop an SD Strategy implement SD Programme Create 1 or more jobs “Opportunity is missed by most people because it is dressed in overalls and looks like work” Thomas Edison

Enterprise and Supplier Development Strategy 5. Forecast Desired Outcomes 1. Set out Preamble 2. Determine Objectives 3. Design ESD Programme Framework 4. Implement ESD Programme

ESD – Strategy Guidelines The monetary value for Enterprise & Supplier Development contribution is based against the Net Profit after Tax OR Annual Revenue / Allocated Budget / Gross Receipts / Discretional Spend Recognition of ED/SD spend – projects that run over multiple years Initiatives can only be recognised annually Programmes / initiatives must be documented Programmes/ initiatives must be sustainable Contracts must be signed between the measured entity and the recipient Clear and Concise Programme Plan detailing objectives, priority interventions and performance indicators “An organizations ability to learn and translate that learning into action rapidly, is the ultimate competitive edge” Jack Welch

JAZ Strategic Investments (Pty) Limited 11 Sunnyway, Kelvin, Sandton, South Africa +27 11 802 8116 www.jazinv.co.za Ayoob Ballim Chief Executive Officer 082 280 4565 ayoob@jazinv.co.za Janeez Hafizulla Director of Operations 072 031 2859 janeez@jazinv.co.za