1. The Impact of BEE on Turnaround Management Presentation to the TMA 1 st March 2007 Presentation to the TMA 1 st March 2007

2. Lessons from The Dot Com Bubble Unstoppable force for change: a.Dot Com - catalysed by industry restructure & new technologies b.BEE – catalysed by societal changes The Dot Com phenomenon took root in a highly corporatised business context Senior business leaders did not recognise the depth of the change influences involved The changes were often addressed on a tactical, rather than a strategic level Strategic decisions were made according to uninformed or outmoded parameters Unstoppable force for change: a.Dot Com - catalysed by industry restructure & new technologies b.BEE – catalysed by societal changes The Dot Com phenomenon took root in a highly corporatised business context Senior business leaders did not recognise the depth of the change influences involved The changes were often addressed on a tactical, rather than a strategic level Strategic decisions were made according to uninformed or outmoded parameters

3. The Interface Between BEE & TM Imperative to Address BEE Internal Change Influence External TM Issue Incorporate BEE in TA strategy development Incorporate BEE in TA strategy development TM Issue Lack of BEE profile will be the underlying TA issue Lack of BEE profile will be the underlying TA issue

4. Incorporating BEE in TA Strategy Development Now? BEE impacts finance, marketing, HR & operations very, very fundamentally: a.BEE will increasingly affect market access b.BEE compliance affects profitability & cash flows on an ongoing basis c.BEE is impacting almost every aspect of HR d.BEE is influencing operational decisions both directly & indirectly BEE impacts finance, marketing, HR & operations very, very fundamentally: a.BEE will increasingly affect market access b.BEE compliance affects profitability & cash flows on an ongoing basis c.BEE is impacting almost every aspect of HR d.BEE is influencing operational decisions both directly & indirectly

5. Why Will BEE Become a TA Catalyst in the Future? 1. Business is currently paying very little attention to BEE 2. Understanding of the nature and content of BEE at Board level in companies is very poor 3. Strategic decisions are being made without due consideration of the impact of BEE 4. Changes in supplier preferences will occur much more quickly than companies will be able to change their BEE ratings 5. Drastic shifts in market preferences, based on BEE, will necessitate TA interventions 1. Business is currently paying very little attention to BEE 2. Understanding of the nature and content of BEE at Board level in companies is very poor 3. Strategic decisions are being made without due consideration of the impact of BEE 4. Changes in supplier preferences will occur much more quickly than companies will be able to change their BEE ratings 5. Drastic shifts in market preferences, based on BEE, will necessitate TA interventions

6. Key BEE-Related Issues to Consider in TA Strategy Planning Establish what BEE ‘Level Rating’ is required for the business Market Access is the Key Driver of BEE which Positions it Primarily as a Marketing Issue Ownership Finance HR Operations SCC

7. Key BEE-Related Issues to Consider in TA Strategy Planning Time Cost of BEE Compliance Establish when it is required by

8. Merging TA & BEE Strategies 1. Establish the requisite BEE rating: a.Ask customers what their requirements are, now & in the future b.Explore what the competition is currently doing c.Establish the cost of compliance d.Consider alternative markets 2. Establish where points are to be earned on the BEE Scorecard 3. Integrate BEE targets into existing corporate objectives 1. Establish the requisite BEE rating: a.Ask customers what their requirements are, now & in the future b.Explore what the competition is currently doing c.Establish the cost of compliance d.Consider alternative markets 2. Establish where points are to be earned on the BEE Scorecard 3. Integrate BEE targets into existing corporate objectives

9. Potential Problems Generated by BEE - Ownership The cost of BEE deals can impact heavily on the financial position of the company BEE partners rarely have the ability to boost performance in the S/Term Changing shareholders on a large scale is very disruptive in any organisation It will become increasingly difficult to source good BEE partners and prices paid will decrease The cost of BEE deals can impact heavily on the financial position of the company BEE partners rarely have the ability to boost performance in the S/Term Changing shareholders on a large scale is very disruptive in any organisation It will become increasingly difficult to source good BEE partners and prices paid will decrease

10. Potential Problems Generated by BEE – HR Elements Changes in management just for BEE-rating purposes will usually impact negatively on performance Skills are in short supply in South Africa and so the cost of sourcing & retaining BEE employees will increase The requirements for spending on training can impact negatively on performance and will do so increasingly Changes in management just for BEE-rating purposes will usually impact negatively on performance Skills are in short supply in South Africa and so the cost of sourcing & retaining BEE employees will increase The requirements for spending on training can impact negatively on performance and will do so increasingly

11. Potential Problems Generated by BEE – Procurement Companies will come under increasing pressure to become compliant Supplier selection decisions will increasingly include consideration of BEE status Supply chain problems will likely increase as the procurement imperative strengthens Customer requirements frequently differ from the Scorecards Companies will come under increasing pressure to become compliant Supplier selection decisions will increasingly include consideration of BEE status Supply chain problems will likely increase as the procurement imperative strengthens Customer requirements frequently differ from the Scorecards

12. Potential Problems Generated by BEE – ED & CSI ED & CSI absorb cash from businesses Most companies OK with CSI but ED is a challenge Considerable first-mover advantage in establishing ED in sectors ED contributions best invested in company’s own suppliers/distributors ED & CSI absorb cash from businesses Most companies OK with CSI but ED is a challenge Considerable first-mover advantage in establishing ED in sectors ED contributions best invested in company’s own suppliers/distributors

13. Thank You Any Questions? Don Lindsay 011 480 4945 082 817 1971 donl@katlego.co.za www.katlego.co.za Don Lindsay 011 480 4945 082 817 1971 donl@katlego.co.za www.katlego.co.za

14. Levels of Compliance BEE Status Score on the Generic Scorecard BEE Procurement Recognition Level Level 1 Contributor≥100135% Level 2 Contributor≥85 but <100125% Level 3 Contributor≥75 but <85110% Level 4 Contributor≥65 but <75100% Level 5 Contributor≥55 but <6580% Level 6 Contributor≥45 but <5560% Level 7 Contributor≥40 but <4550% Level 8 Contributor≥30 but <4010% Non-Compliant Contributor<300%

15. The Generic Scorecard ElementWeighting Ownership20 Management Control10 Employment Equity15 Skills Development15 Preferential Procurement20 Enterprise Development15 Residual Element5 100