the dti CCC

REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT and CODES OF GOOD PRACTICE

27 JANUARY 2012

Overview • With the enactment of the BBBEE framework in 2007 government created a legally conducive and enabling environment to transform and build capacity in the economy through broaden the framework : • Significant progress has been achieved in the direct equity element as evidenced by the number of deal mergers in the past four years.

• Indirect elements have fallen under the radar • Change the behaviour of how BBBEE is being implemented, through effective monitoring and sanction for non-compliance 2

Observations The Presidential Council made the following observations: •

Moderate progress has been observed and noted in other elements.

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Many existing legislations are still misaligned to the principles of the Codes and the BBBEE Act, thus leading to ineffective implementation(Granting of licenses and Procurement)

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Tick box approach and circumvention has become prevalent

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Substantive application and the broad based component lacking 3

Key Interventions •

Amendment of B-BBEE Act: • B-BBEE Fronting • Regulating BBBEE Verification Industry • Clarifying the status of the Sector Codes

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Alignment of the BBBEE Act to other key pieces of legislation and other policy instruments ( e.g. PPPFA, NGP, IPAP and Mining Charter )

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Refinement of the Codes of Good Practice

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Monitoring and evaluation of BBBEE

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Establishing a BBBEE Commission 4

Key intervention

Key Challenge: • Non-alignment of key pieces of legislation and other policy instruments to B-BBEE policy thus leading to non-coherence when it comes to application across government, e.g. procurement and granting of licence Proposed Solution: Policy Alignment and Harmonisation •

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Alignment of the B-BBEE primary legislation to other key pieces of legislation and other policy instruments (e.g. NGP, IPAP, PPPFA, MINING ETC) BBBEE Act to be the overarching framework for BBBEE(mitigate conflict in law) 5

Proposed solution: cont.. • Transfer of general principles from the Codes to the BBBEE Act, including the concept of the balance score-card receiving express recognition in the Act; • BBBEE Act to have trumping provision over other conflicting provisions in Legislations dealing with empowerment; • Clarify the status of the BBBEE Codes and Sector Codes to ensure proper application across all spheres of Government and public institutions and the private sector;

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GAZETTED SECTOR CODES Gazetted in terms of section 9 (1) (Legal Code) • Tourism • Construction • Construction • Integrated Transport • Chartered Accountancy Gazetted in terms of Section 9 (5): (Public commentary) • Property • Financial Services Charter • ICT Gazetted in terms of Section 12(Statement of Intent) • MAC • AgriBEE Charter

Key Challenge: •

Key intervention

Circumvention of the B-BBEE Codes (Fronting) The sophistication of fronting practices has necessitated the need to amend the legislation and to strengthen enforcement in this area.

Proposed Solution: • Inclusion of specific statutory offences involving fronting and other forms of fraudulent misrepresentation of empowerment status and the specification of penalties and blacklisting of entities and/or management for those offences.

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Empowering the Special Investigation Unit to investigate all offences involving fronting or corruption with regard to the application of the Codes of Good Practice(for both public and private sector).

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Collaboration between the dti and National Treasury

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Key Challenge: •

Non regulated BEE Verification Industry, leading to opportunistic tendencies and lack of accountability

Proposed Solution (Administration and Institutions) •

Extend the mandate of the Independent Regulatory Board for Auditors as the institution with the responsibility for registering and regulating verification agencies. •

Specify provisions to regulate the verification industry by amending the Audit Professions Act

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Specifying the issues on which the Minister is empowered to propose regulations 9

KEY AMENDMENTS TO THE ACT

Administration and institutions •

Establishing an BEE Commission to deal with complaints concerning BBBEE transactions and other matters related thereto, including but not limited to fronting, noting of transaction advocacy, research etc .

• The Act will specify the h jurisdiction of the Commission and the threshold applicable to transactions. • It is envisaged that the jurisdiction of the Ombudsman will be limited to transactions involving substantial value. 10

Key Challenge: •

Lack of proper implementation by Government departments, Public entities, and Private sector Proposed Solution: • Strengthen Monitoring and Evaluation of B-BBEE •

Organs of State, public entities and other enterprises to prepare BBBEE plans and to report on compliance with such plans.

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All spheres of Government and public entities to submit regular reports on their compliance to B-BBEE annually;

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HODs and CEOs of the public entities must have a performance obligation to report on the implementation of B-BBEE and to be part of Ministries/Departments Performance Agreements

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Private Sector to include BBBEE reporting in the Sustainability11 Reports

CODES OF GOOD PRACTICE The proposed refinement of the Codes will entail inter alia: •

setting sub-minimums/threshold for each element;

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Enterprise Development(ED) and Procurement to be elevated with each requiring sub-minimum and enhanced recognition for ED targeted at key sectors in IPAP and NGP;

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The appropriate integration of financial and non-financial support services is critical in ensuring the success of some of the funding interventions by both the public and the private sector.

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The scorecard to be broadened to include designated groups in the main points;

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Alignment of the Employment Equity element to the Employment Equity Act: (Targets, reporting periods, and definitions)

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Align reporting times and Methodology EEA and BBBEE

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Skills Development Element to be aligned to the New Skills Development Strategy(NSDSIII, NGP) and to be outward focused

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THANK YOU

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