Broad-Based Black Economic Empowerment Keith Levenstein Presented by EconoBEE November 2009

The essence of B-BBEE is –creating opportunities for the whole population –skills development (including management) –job creation –development of entrepreneurship

BEE the Long Journey The Poverty Barrier Black unemployed & rural poor The Skills Barrier Black workers and job-seekers The Business Barrier Black Entrepreneurs The Opportunity Barrier Black Entrepreneurs Equitable Economic Opportunities Emerging black middle class & investors Employment Equity/Job Creation Socio-Economic Development Skills Development & Employment Equity Affirmative Procurement & Enterprise Development Ownership & Management

Codes of Good Practice Mandated by the BBBEE Act –Act calls for industry charters as well. Some have been finalized, e.g. Construction, but not the FSC Gazetted on 9 th February 2007 –Gazette no Provides a comprehensive scorecard to measure and implement B-BBEE Three types of entities in South Africa –Exempt Micro Enterprises (EME) (Turnover < R5million) –Qualifying Small Enterprises (QSE) (Turnover R5million – R35 million) –Generic scorecard entities (Turnover > R35 million)

The FSC The Financial Sector Charter pre-dated the codes and currently does not conform to the requirements of the B-BBEE act or the codes. The FSC CANNOT be used to produce a scorecard for your customer (it will not help him earn his own BEE points) The FSC in its current form seems to be quite far from being complete – until that happens you need to follow the codes.

B-BBEE Scorecard – Generic and QSE BEE ElementsIndicatorsGenericQSE Direct Empowerment Equity Ownership% share of economic benefits2328 Management % black persons in executive management and/ or executive board and board committees1127 Human resource development and employment equity score Employment equityWeighted employment equity analysis1827 Skills development Skills development expenditure as a proportion of total payroll1525 Indirect Empowerment score Preferential Procurement Procurement from B-BBEE enterprises as a proportion of total procurement2025 Enterprise Development Rand value of contributions to beneficiaries for Enterprise Development purposes1525 Residual Socio-economic Development Rand value of contributions to beneficiaries for SED purposes525 Total Score NB QSE chooses only 4 elements

Why have a Scorecard? Your customers are asking for it –It is regarded as good service to give customers what they want! The FSB needs it (section 10 of the B-BBEE act) Government tenders will soon be based on the B-BBEE scorecard. Why do customers want your scorecard? Your good score will increase your customers’ own BEE scorecard: –Procurement is worth 20/25 points on the scorecard This is why some customers may be prepared to move to a supplier with a better score

Preferential Procurement - the Competitive Edge

BBBEE score Measured as a contributor Contribution LevelQualificationBEE Recognition Level Level 1 Contributor≥ 100 pointsR1.35 for every R1 spent Level 2 Contributor≥ 85 points but < 100 pointsR1.25 for every R1 spent Level 3 Contributor≥ 75 points but < 85 pointsR1.10 for every R1 spent Level 4 Contributor≥ 65 points but < 75 pointsR1.00 for every R1 spent Level 5 Contributor≥ 55 points but < 65 pointsR0.80 for every R1 spent Level 6 Contributor≥ 45 points but < 55 pointsR0.60 for every R1 spent Level 7 Contributor≥ 40 points but < 45 pointsR0.50 for every R1 spent Level 8 Contributor≥ 30 points but < 40 pointsR0.10 for every R1 spent Non-Compliant Contributor< 30 pointsR0 for every R1 spent

B-BBEE – the competitive Edge The sole measurement of B-BBEE is about points. You need to produce a B-BBEE Scorecard because your customers want it and various licensing authorities need it. Business sense and BEE sense – Make decisions that benefit your company The higher your score, the better it will be for your customer!

Rating your company Always produce your own rating before approaching a verification agency. The use of verification agencies –As from 1 st February 2010 only certificates verified by accredited agencies or those with pre-assessment letters will be valid. Until then non-accredited agencies can be used. –Prepare for a rating by getting BEE knowledge and using EconoBEE Scorecard A verification agency verifies your data – can produces a certificate from your data. Without data, your score will be zero! Explain your rating in terms of the B-BBEE Codes of Good Practice Advertise your rating to customers

Thank you Keith Levenstein EconoBEE