1. ARMSCOR BEE PRACTICE Presented by Minah Sindane-Bloem Acting General Manager Corporate Affairs To The Portfolio Committee on Defence August 2005

2. Definitions BLACK ECONOMIC EMPOWERMENT
Integrated and coherent socio-economic process
Economic transformation of South Africa
Significant increase in black people that manage, own
and control the country’s economy
Significant decreases in income inequalities

3. Definitions Broad Based Black Economic Empowerment
Increase number of black people that manage, own and
control enterprises and production assets
Human Resources and Skills development
Achieving equitable representation in all occupational
categories and levels in the workforce
Preferential procurement
Investment in enterprises owned or managed by black
people

4. Definition Black Enterprise At least 50.1% ownership by black persons
Substantial management control by black persons
Ownership refers to economic interest (equity)
Management refers to membership of any Board
including executives

5. Definition Black Empowered Enterprise
At least 25.1% owned by black persons
Substantial management control by black persons
Ownership refers to economic interest
Management refers to executive directors

6. Definition Black woman-owned enterprise
At least 25.1% owned by a black woman or black
women
With substantial management control

7. Definition Balance Score Card Equity ownership Management
Employment equity (affirmative action)
Skills development
Preferential procurement
Local content

8. Armscor Accounts
Special Defence Account
Operational budget

9. Special Defence Account
Acquisition of capital equipment for the DOD
Contracts usually exceed R1m thus 90/10 preference point
system is used (BSC)
Armscor will use 75/25 preference point system
Armscor verifies BEE claim on submissions for contracts
Armscor maintains a data base of BEE entities
Armscor does audits of BEE credentials of suppliers to
address fronting
Armscor will set aside at least 15% of the contract value for
BEE sub-contracting
A target of 7.5% for last financial year and 8% achieved
Target set at 10% BEE spending for current financial year
Challenge – not many BEE companies available in the technical
environment

10. Operational Budget None core business eg. IT, equipment ect.
Most contracts are less than R1m thus 80/20 preference point system is used (BSC)
Armscor will use the 75/25 preference point system
Contracts not to exceed 36 months
Target for previous financial year was 30% and actual achieved is 45% (refer Armscor Annual Report pg. 39)
Target for Armscor Business was 40% and actual achieved is 45%
45% target BEE spending
Armscor generates a biannual report on BEE performance
Armscor has the right to conduct an audit

11. BEE Support Programmes
Pre-tender conferences to increase capacity of BEE
Post award debriefing sessions conducted with BEE
suppliers
Tender helpdesk
Help identify financial institutions
Facilitation of early payment cycles
BEE set asides
Joint venture facilitation eg. single source companies

12. Disqualification as BEE supplier
None value adding BEE companies
BEE fronting
Penalties will be applied

13. Conclusion BEE to be integrated in all of Armscor’s operations
Education programme for employees

14. Questions ? Comments