1. Banking Council
18/11/2018
The Codes of Good Practice for Broad-based Black Economic Empowerment and AgriBEE Transformation Charter AGRIBEE INDABA, GALLAGHER ESTATE 6 December JEFFREY NDUMO DIRECTOR: BEE PARTNERSHIPS, ENTERPRISE AND INDUSTRY DEVELOPMENT DIVISION, DTI

2. Agenda Transformative Imperative Page 3-4
18/11/2018
Agenda
Transformative Imperative Page 3-4
Economic implication of Broad Based Black Economic
Empowerment Page 5
Broad Based Beneficiary Base Page 6
Broad Based BEE Balanced Scorecard Page 7
Broad Based BEE Recognition Levels Page 8
Applications of the Codes Page 9
Implementation Multiplier Effect Page 10
Key Principles Page 11-12
BEE Verification Page 13 – 15
Status of Transformation Charters Page
BEE Process to date Page 18
Progress on Phase II Page 19
AGRIBEE: Clarity seeking issues and concerns Page 20

3. THE TRANSFORMATION IMPERATIVE
18/11/2018
Where we came from?
Colonisation and Apartheid systematically dispossessed and disempowered black people
Resulted in significant imbalances in the South African Economy:
90% of population owns less than 5% percent of Stock Exchange
40% black SA’s unemployed compared to 10% of white SA’s
Majority of the South African population excluded from the Mainstream Economy

4. Transformation Imperative
18/11/2018
Transformation Imperative
To develop a transformation process with political, social and economic dimensions
To create a more equitable economy to support the drive for economic growth
Political
Commitment
Broad-based
BEE Strategy
Social
Upliftment
Economic
Development

5. Economic Implications of Broad-based BEE
18/11/2018
Economic Implications of Broad-based BEE
Increase the level of participation by black people in mainstream economy
Increase income through resultant economic growth
Increase the real market in the SA economy
Mainstream Economy
Mainstream Economy
Upliftment
BEE
Second Economy
Second Economy
More economic participants
Higher Economic Growth
A Bigger Market for All

6. Broad-Based Beneficiary Base
18/11/2018
Broad-Based Beneficiary Base
Equitable Economic Opportunities
Broad-based
Beneficiaries
Base
Emerging black middle class &
Investors
Ownership
And Management
The Opportunity Barrier
Black entrepreneurs
Affirmative
Procurement
Enterprise
Development
The Business Barrier
Skills Development & Employment Equity
Black workers and job-seekers
The Skills Barrier
Employment
Equity/Job creation
Corporate
Social Investment
Black unemployed & rural poor
The Poverty Barrier

7. BEE Scorecard (Codes of Good Practice)
18/11/2018
BEE Scorecard (Codes of Good Practice)
Generic Scorecard
Weightings:
Ownership %
Management 10%
EE 10%
Skills 20%
Procurement 20%
ED 10%
CSI 10%
Total %
Detailed Code Statements (100~700) to explain the type of initiatives qualifying for BEE recognition
Weightings determines the relative importance of each BEE element
(the higher the weighting, the more score focus by enterprises)
Indicators and target provide the description of the standard scoring mechanism for companies
Using these mechanisms, a Company can determine its BEE score out of 100

8. 18/11/2018
BEE RECOGNITION
The higher the BEE Score of a company, the higher the recognition to anybody interacting with the company
Customers (public and private sector) will prefer to interact and procure from companies with higher BEE status (for its own recognition)
Pressure on all enterprises to continuously improve on BEE status

9. Government and State Organs
18/11/2018
APPLICATION OF THE CODES OF GOOD PRACTICE Procurement, Licensing and Other Implementation Levers
Other
Economic
Participants
Procurement
Licensing
Procurement
Financing
Partnership
Economic
Economic Partnership
First Tier Economic Beneficiaries
Government and State Organs
Financing
Procurement
Financing
Partnership
Economic
Monitoring
Other Economic Participants

10. IMPLEMENTATION MULTIPLIER EFFECT
18/11/2018
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
Supplier
Suppliers
Suppliers
Suppliers
Retail
Mining
Suppliers
Suppliers
Suppliers
Government
Suppliers
Banks
Tourism
Suppliers
Suppliers
Suppliers
Suppliers
Chemical
Telecoms
Suppliers
Broad-Based Scorecard converts all enterprises into drivers of BEE
through Procurement and Enterprise Development.
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers

11. OTHER CONSIDERATIONS AND KEY PRINCIPLES
18/11/2018
OTHER CONSIDERATIONS AND KEY PRINCIPLES
Transitional Period
12 Months transitional period to allow for conversion from narrow-based to scorecard approach
Limitation on multiplier effect during transitional period
Provide mechanism to facilitate the adoption of scorecard in reporting and decision-making
Non Circumvention
Stresses substance over form, to avoid circumvention of the Code
Allows for rating agency to report fronting
Measures compliance level at date of measurement (snapshot).
Measures ‘What is done?’ rather than ‘What is promised or intended?’

12. 18/11/2018
Key Principles
Organs of State and section 21 companies: Government ownership and s21 Companies which are not broad-based schemes are excluded from the calculation of ownership. Treating government and s21 Companies as neither white nor black ensures that the enterprises are not rewarded or penalized for having Government or s21 ownership.
Pension Funds: The BEE ownership by pension funds are specifically included from the calculation of ownership. Government nonetheless is seeking the achievement of direct ownership (25% + 1 vote) which must include exercisable voting rights and economic interest.
The Code also aims to reduce ‘fronting’ and misrepresentation of black ownership by companies through the stipulation of a standard set of principles and guidelines for its measurement and reporting.

13. Accreditation of Verification Agencies
18/11/2018
Accreditation of Verification Agencies
Outline the detailed requirements for Verification Agencies
Development
Key Principles
Description
Implication
Reporting on BEE and prevention of Fronting
Verification Agency to verify BEE claims of enterprises to ensure that BEE reporting is not false or misleading
Prevent fronting and misleading BEE information to circumvent the objectives of BEE
Independent verification enhances transparency of BEE process
Centralize BEE reporting by verification agencies within the dti
Industry Body for Verification Agencies
Establish an industry body to set standards, enforce a code of conduct and facilitate continuous training and complaint resolution
Uphold quality of verification process and the resulting information
Facilitate good professional conduct among industry participants
Accreditation of verification agencies
Dti to accredit verification agencies if they meet accreditation requirements through SANAS
Accredit robust verification agencies to verify info and report on BEE
Standardize interpretation and measurement of BEE

14. The Economic Impact of Fronting (Frontier Barrier)
The Black Economic Empowerment Growth Model
18/11/2018
More
Transformation
Growth in
Local
Economy
Enlarged South
African Economy
Transformation in
Existing
Enterprises
Government/
Industry
More BEE
suppliers
BEE
Initiatives
More local
Jobs
New BEE
Enterprises
More
competitiveness
The Economic Impact of Fronting (Frontier Barrier)
Fronting
Entities
Government/
Industry
BEE
Initiatives
Dwindling
Local
Economy
Smaller
Economy
Disillusioned
Market
Exit
Traditional
Enterprises
New BEE
Enterprises
Fronting
Barrier

15. Current Concerns around Transformation Charters
18/11/2018
Current Concerns around Transformation Charters
More than 30 transformation charters currently being negotiated or completed
Charters adopt different weightings, targets and measurement principles
(e.g. FSC includes all non-South African Africans in calculation of EE and Management)
Lead to confusion around how to implement BEE
Using the same sample company (see right) the scores differ significantly across charters
Risks that some companies circumvent BEE by aligning to “easier” charters

16. Status of Transformation Charters
18/11/2018
Status of Transformation Charters
Meet s12 requirements?
Sufficiently consultative
Advances BEE objectives
Not binding, can be expressed as a document of intent
(Government and verification agencies to use the Codes of Good Practice when interacting with the sector) No
Charter processes indicating the intention to align to the Code include Health, Tourism and ICT
Yes
Apply to be Gazetted under s 12:
Binding on signatories to the charter, but not on government or other sectors
(Government and verification agencies to use the Codes of Good Practice when interacting with the sector)
Meet requirements for gazetting as sector code?
-No deviation from definitions and principles
Sufficiently comparable to the codes, ito
Elements
Targets
Weightings
Justify any differences
Independent Third Party Review of compliance No
Apply to be Gazetted under s 9
Government and verification agencies to use the gazetted Sector Codes of Good Practice when interacting with the sector.
Yes

17. Proposed Verification and Monitoring System
18/11/2018
Proposed Verification and Monitoring System
DTI
Verified BEE Information + Fronting Reports
Accreditation Body
(SANAS)
Industry Body
Complaint Resolution
Process Assessment
Code of Conduct
Verification Agencies/Process
Verify and Confirm BEE Status of Enterprises
Measured Entities

18. Promulgation of all the Codes (April/May 2006)
18/11/2018
Broad Based BEE
Strategy released
(April 2003)
BEE Process to date
Promulgation of
Broad-based BEE
Act (Jan 2004)
Draft Codes of Good
Practice – Phase 1
(Dec 2004)
Commentary Process
(Closed March 2005)
COGP Phase 1
Adopted by
Cabinet (12 Oct. 05)
Draft Codes of Good
Practice – Phase 2
(Dec 2005)
Commentary Process
(Closes Feb 2006)
Ministerial
Consultation
Promulgation of all the Codes (April/May 2006)

19. Formulation of other key statements to cover broad-based elements
18/11/2018
Progress on Phase 2
Formulation of other key statements to cover broad-based elements
Linkage to
Framework
(7 Statements)
Solicitation of
Public Input
Statements affecting phase 1
Multinationals
Groups of Companies
Warehousing
Organs of State
Development
Of Initial Positions
Code 300: Employment Equity
Draft Statements
Code 400: Skills Development
Code 500: Preferential Procurement
Code 600: Enterprise Development
Discussion of
Draft Statements
Code 700: Residual Element
Adoption by the Cabinet
The final Document
Code 900: Practice Note on Fronting
Code 1000 Statements 1001~1007: Small
And Micro enterprises

20. AGRI BEE: CLARITY SEEKING ISSUES AND CONCERNS
18/11/2018
AGRI BEE: CLARITY SEEKING ISSUES AND CONCERNS
Groups of Companies: Codes dealing with this aspect will be released in due course as part of second phase. Subsidiaries and divisions and business operating in multiple sectors.
Sub-sector Charters: sub-sectors can have their own charters, but should aligned and form part of the agriculture value chain (e.g. Transport sector and advertising and marketing sector). The dti aims to gazette the sector charter (agriculture is a strategic sector recognised by government)
Primary and secondary agriculture: separating the two sectors must be decided by the based on objective reasons rather than subjective ones. But the benefits of the value chain must be emphasised within that separation. One sector charter linking the two while acknowledging the distinct nature of the two if it is objectively sound must preferably be pursued.
Codes of Small and Micro enterprise: definition of the small and micro will be provided. It will use annual turnover and/or number of employees. Small enterprises will be provided dispensation in line with their strength. Micro enterprises will be given dispensation fitting of the economic level. Medium enterprises will form part of the larger companies and will be expected to adhere to the main body of the codes.
Alignment of legislation with BEE Act: the minister of trade and industry and cabinet have emphasised the need to align the BEE Act with other pieces of legislations.

21. 18/11/2018
S I Y A B O N G A !