1. The Code of Good Practice on Black Economic Empowerment1 1

2. STRUCTURE OF THE CODE OF GOOD PRACTICE
AN IMPLEMENTATION FRAMEWORK FOR BROAD-BASED BLACK ECONOMIC EMPOWERMENT
STRUCTURE OF THE CODE OF GOOD PRACTICE
CODE 000: IMPLEMENTATION FRAMEWORK
CODE 100: EQUITY OWNERSHIP
CODE 200: MANAGEMENT 2 1

3. Progress on the B-BBEE Process
Current Achievements:
BBBEE Act provides an enabling framework
The BBBEE Strategy stipulates the BEE intents and principles of Government
Massive increase in BEE across all sectors of the economy
BEE is recognized as a business imperative and deals are more broad-based than previously
BEE Charters in strategic sectors (Mining, FSC, ICT, Tourism, Liquor, Agriculture, Transport, Health) 3

4. Concerns and Risks around the B-BBEE Process
Lack of full understanding and appreciation of the principles of broad-based BEE
Inconsistent application of BEE
Extensive debates could result in delays – biggest risk is slow or no progress on BEE
Disparity in Charter Definitions and Targets
Lack of Implementation Guidelines can result in ‘Fronting’ or ‘Sham’ transactions promoted 4

5. Implementation Framework
Code of Good Practice as the BEE Implementation Framework
Broad-based BEE Act
No. 53 of 2003
Legislative Enabling
Framework
Broad-based BEE
Strategy
Strategic
Framework
Codes of Good Practice
Implementation Framework
and Guidelines
Generic or
Sector-specific
BEE
Scorecards
Interpret
BEE
Definitions
Set BEE
Indicators,
Weightings
and
Targets
Guidelines
to draw
up BEE
charters
Guidelines
to maintain
Institutional
Framework
(BEE Council
/Accreditation
Agencies) 5

6. Agenda
AN IMPLEMENTATION FRAMEWORK FOR BROAD-BASED BLACK ECONOMIC EMPOWERMENT
STRUCTURE OF THE CODE OF GOOD PRACTICE
CODE 000: IMPLEMENTATION FRAMEWORK
CODE 100: EQUITY OWNERSHIP
CODE 200: MANAGEMENT 6

7. Code of Good Practice (Structure)
Each Code explains all issues pertaining to a key BEE element and can consist of one or more statements
A Statement include a related set of principles that guides the implementation of one BEE issue
Code of
Good
Practice
Phase 1
Code 000:
Framework
Statement 000:
Conceptual Framework
Statement 010:
Charter Guidelines
Code 100:
Ownership
Statement 020:
BEE Council
Code 200:
Management
Statement 030:
Broad-based BEE
Implementation
Code 300:
Employment Equity
Statement 040:
Glossary
Phase 2
Code 400:
Skills Development
Statement 050:
BEE Rating agencies
accreditation
Code 500:
Affirmative Procurement
Code 600:
Enterprise Development
Statement 100:
Ownership
Code 700:
CSI and Industry Specific 7
Code 800:
BEE Practice Notes
Statement 200:
Management

8. Structure of the Code of Good Practice
The Benefits of the Adopted Structure:
Logical Flow of the Structure: The Code is structured according to the logical flow of BEE scorecard.
Flexibility of the Structure: It enables the Minister and DTI to expand, amend or remove individual statement as and when required, without having to re-issue the entire Code of Good Practice.
Best Practice: The structure is similar to those used by the Generally Accepted Accounting Practice internationally. 8

9. Agenda
AN IMPLEMENTATION FRAMEWORK FOR BROAD-BASED BLACK ECONOMIC EMPOWERMENT
STRUCTURE OF THE CODE OF GOOD PRACTICE
CODE 000: IMPLEMENTATION FRAMEWORK
CODE 100: EQUITY OWNERSHIP
CODE 200: MANAGEMENT 9

10. Code 000 – Implementation Framework
Objective of this Code:
This code comprises of statements that:
Establish the conceptual framework
Summarizes the indicators, weightings and targets for
each element of the Scorecard
BEE elements
Provide application guideline for the generic BEE
Scorecard
Establish different institutional framework to facilitate the
implementation of the Strategy and the Code of Good
Practice. 10

11. Code 000 – Implementation Framework
Statement(s) currently contained in this Code:
Statement 000: Conceptual Framework
Statement 010: Sector Transformation Charters
Statement 020: BEE Advisory Council
Statement 030: Implementation of Broad-based BEE
Statement 040: Glossary
Statement 050: Accreditation Agencies 11

12. Statement 000 – Conceptual Framework
Key Principles
Description
Implication
Substance over Form
Broad-based BEE must be measured and reported according to economic reality rather than legal form
Penalize the use and reporting of ‘fronting’ or ‘sham’ BEE structures and entities.
Prevent BEE from becoming a box-ticking exercise and lose its socio-economic substance.
Broad-based BEE Scorecard
BEE is an integrated socio-economic process which aims at empowering all black people
BEE is measured based on seven core elements: ownership, management, employment equity, skills development, affirmative procurement, enterprise development and residual 12

13. Old scorecard vs New scorecard
No targets included
Targets included
No points allocated for women
Points allocated for women
Preferential procurement based on black ownership
Preferential procurement based on BEE contribution
No bonus points for over-performance
Bonus points given for over-performance
Indicators limited
More options for indicators 13

14. Statement 010 – Sector Transformation Charter
Outline the process to be followed in
formulating a sector charter
Establish the status of sector transformation
charter
Identify principles to be applied to harmonise
the different charters
Outline the process of constituting Charter
Councils and prescribe the powers of these
Councils 14

15. Statement 010 – Sector Transformation Charter
Key Principles
Description
Implication
Qualification Criteria
Only sectors interacting directly with the government, as determined by government are encouraged to develop sector charters.
Ensure that charters are only developed in key economic sectors.
Preclude entities from avoiding the application of the generic scorecard through sector charters.
Guideline for setting targets, weightings and indicators
The charters cannot deviate from the definitions and principles of the Code.
Prevent sectors from circumventing the BEE principles of the Act, Strategy and the Code through charters
Reduce confusion resulting from multiplicity of definition for the same BEE principles in different charters.
Publication of charter in the Gazette
Minister to publish in the Gazette as a charter if meet all s12 requirements. Minister can also elect to publish charter as a Code (s9) if it meet all requirement of the Strategy and this Statements.
Gazetted Charter are an evidence of sector commitment to transformation
On the other hand, Charter gazetted as a Code of Good Practice has same status as a Code (can be used in determination of BEE status) 15

16. Statement 030 – Implementation of Broad-based BEE
Identify policy instruments and initiatives that
can promote broad-based BEE
Align the implementation of policy
instruments and initiatives to broad-based
BEE 16 1

17. Statement 030 – Implementation of Broad-based BEE
Key Principles
Description
Implication
Policy Instruments
Identifies policy instruments and initiatives that can be used to promote broad-based BEE
Increase awareness of public and private sector decision maker of when broad-based BEE status can be applied
Application of Broad-based Principle
Differentiate between the use of broad-based measures (based on the scorecard) and narrow-based measure (based solely on ownership). Identify the risk of narrow-based application to the BEE process and the economy.
Provide implementation and reporting guidelines to align policy instruments to broad-based BEE
Raise the awareness of the risks and potential conflicts around the use of narrow-based BEE measures
Promote the adoption of the scorecard as contained in the strategy and the Code.
Transitional
Provisions
Entities currently applying measures that are either narrow-based or that are contrary to the Code will be given 12 months to adapt their decision-making and reporting mechanisms.
Align all public and private sector policy instrument and initiatives to broad-based BEE over 12 months
Enhance the multiplier effects as envisaged in the broad-based BEE model 17

18. Other Statements within Code 000
Key Principles
Description
Implication
Advisory Council
(020)
Establish the guidelines for the creation and the operations of the BEE Advisory Council
Facilitate the creation and operation of the BEE Advisory Council
Glossary
(040)
Provide a standard glossary of all terms and definitions used in the Code of Good Practice
Collate all BEE terms and definitions used in the Code of Good Practice
Provide a centralized source of BEE definitions that can assist sector organizations, entities and practitioners
Approved Accreditation Agencies
(050)
Establish the technical and BEE qualification criteria for accreditation agencies. Create an approval mechanism for dti to approve accreditation agencies.
Create a framework whereby Government can leverage the work and information of the accreditation agencies to accelerate BEE
Provide an approval framework to ensure that all accreditation agencies have the necessary technical and BEE credentials to evaluate BEE 18

19. Agenda
AN IMPLEMENTATION FRAMEWORK FOR BROAD-BASED BLACK ECONOMIC EMPOWERMENT
STRUCTURE OF THE CODE OF GOOD PRACTICE
CODE 000: IMPLEMENTATION FRAMEWORK
CODE 100: EQUITY OWNERSHIP
CODE 200: MANAGEMENT 19

20. Code 100 – Ownership Objective of this Code:
This code comprises of statements that inform the recognition
and measurement criteria for black ownership.
The code also ensures that the BEE process can result in the
transfer of genuine, substantive and sustainable ownership to
black people.
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. 20

21. Code 100 – Ownership Statement(s) currently contained in this Code:
Statement 100: Recognition and Measurement of BEE Ownership
Objectives
To increase the number of black people that manage, own and control enterprises and productive assets.
Provide recognition and measurement criteria for black ownership
Provide key principles to be used in determining ownership by black people 21

22. Statement 100 – Ownership Key Principles Description Implication
Ownership as Economic Interest and Voting Rights
Ownership is measured as an entitlement to both voting rights and economic interests.
Prevent transactions where black people are given voting right but no economic interest.
Prevent fronting transactions where no real economic transfer take place.
Flow Through Principle
Ownership is included if it is held by natural person. In the case of holding by a juristic person such as a company, only the portion of ownership in that entity by a natural black person will be included.
Pierce through pyramid holding structures that are been used to inflate black ownership in entities
Measures and reports the actual levels of economic ownership held by black people
Will determine what are the actual economic benefits flowing to the BEE equity holders.
Restrictions
Identifies and exclude any equity subject to any rights limitations
Penalize transactions where the rights attached to the equity holding of black owners are limited
Reduce ‘Fronting’ transactions 22

23. Flow Through Principle
Effective black ownership in Company C is 51%*51%*51% = 12.5 percent

24. Determinant of Ownership Score
All Black S/H
All Black S/H
Voting Right
Ownership
(20% of
BEE Scorecard)
Black Women
Black Women
Economic Benefit
Broad-based Groups
Broad-based
Groups
Unencumbered Interest
New Entrants
New Entrants
MEASUREMENT PRINCIPLE:
Recognize and reward companies for the ability of black people to exercise and benefit from
ownership rights, as well as the extent of the beneficiary base.
(2 Ways to allocate scores for BEE Ownership)
Allocation by black people’s ability to exercise ownership rights including:
unrestricted voting right
the right to receive economic interest such as dividends and capital gains
unrestricted and unencumbered entitlement to economic interest
Allocation by the beneficiary base, taking into accounts participation by:
black women
new entrants, and
black designated groups (such as black workers, black youth, black people with disability and black people living in rural areas) 23 1

25. Ownership Score Allocation
Allocation by categories ensures that only companies with black women and designated group participant get 100%.
Allocation by ownership right differentiate between the rights accrual to black investors 24

26. 25
Ownership measured through the matrix table, allocating point for different categories of rights and different beneficiaries

27. Key Principles
Options and Contingent Claims: Where an option is used where the economic interest is contingent upon a future event, the economic interest will be projected on a fair and reasonable basis, but will be recognized as restricted economic interest.
Organs of State, Pension Funds and Superannuation Schemes: The BEE ownership by organs of state, pension funds and superannuation schemes are specifically excluded from the calculation from both numerator and denominator. The amount excluded from total ownership (denominator) is limited to the lower of 25 percent or the level of economic interest owned by black people. An enterprise with more than 75 percent ownership by the state is specifically exempted from the application of this statement. 26

28. Key Principles (Continued)
Bonus Points: The statement provide for:
one (1) bonus point to be awarded for new entrants, where the black people buying into the enterprise have not entered into a previous transaction where the fair market value of the company exceed R 20 million in value.
The statement also provide one (1) bonus point to be awarded to company who have exceeded the 25 percent target for voting right or economic benefits
Non-Circumvention:
The non-circumvention principle allows for identification of fronting or other structures which aims to misrepresent the level of ownership. Rating agencies are required to maintain a database of such structures. In order to ensure that ownership information is not misrepresented, enterprises are required to provide appropriate documentation to evidence their ownership. 27

29. Agenda
AN IMPLEMENTATION FRAMEWORK FOR BROAD-BASED BLACK ECONOMIC EMPOWERMENT
STRUCTURE OF THE CODE OF GOOD PRACTICE
CODE 000: IMPLEMENTATION FRAMEWORK
CODE 100: EQUITY OWNERSHIP
CODE 200: MANAGEMENT 29

30. Code 200 – Management Objective of this Code:
This code contains the statements which guide the
recognition and measurement of black management
representation. Management represent the second leg
of direct empowerment component of the BEE
balanced scorecard.
Statement(s) currently contained in this Code:
Statement 200: Recognition and Measurement of
Management 30

31. Statement 200 – Management
Provide Recognition and Measurement Criteria for Management
Key Principles
Description
Implication
Weighted Measurement Criteria
The measurement criteria for management is weighted to give recognition to key executive (2), executive (1) and non-executive positions (0.5)
Reward enterprises for appointing black management into key executive rather than non-executive positions
Prevent black management requirement from becoming a numbers game
Management Target
The management target is currently set at 40 percent of the weighted score
Similar to mining charter requirements
Percentage score calculated as a percentage of the target
Limitation of non-executive recognition
The statement limit the recognition of non-executive to 10 percent of the scorecard
Prevent enterprise from achieving quota by only appointing black non-executives
Counters market trend in appointing black non-executives rather than executives
Additional Recognition for Women
Black women management at all levels are allocated more significant weightings
Provide bonus and reward enterprise which appoint black women management 31

32. 32

33. Thank You 33