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Broad - Based Black Economic Empowerment - Ernst & Young

Broad - Based Black Economic Empowerment Broad - Based Black Economic Empowerment Overview We believe that Broad Based Black Economic Empowerment Developing criteria for entering into partnerships with the (BBBEE) is not simply to redress the wrongs of the past, but private sector Section 10 of Act 53 of 2003. a pragmatic growth strategy that aims to realise the country's full Economic potential. Therefore, embracing BBBEE In addition, government introduced the Broad - Based Black has not only proved to be the right thing to do, but is also Economic Empowerment Codes of Good Practice ( the important for the Economic growth of our country and for the Codes ) in February 2007, to guide and to measure the sustainability thereof.

Broad - Based Black Economic Empowerment A Business Imperative A BBBEE strategy is rooted in a vision to grow the economy and results in redressing the exclusion of “black” people and

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Transcription of Broad - Based Black Economic Empowerment - Ernst & Young

1 Broad - Based Black Economic Empowerment Broad - Based Black Economic Empowerment Overview We believe that Broad Based Black Economic Empowerment Developing criteria for entering into partnerships with the (BBBEE) is not simply to redress the wrongs of the past, but private sector Section 10 of Act 53 of 2003. a pragmatic growth strategy that aims to realise the country's full Economic potential. Therefore, embracing BBBEE In addition, government introduced the Broad - Based Black has not only proved to be the right thing to do, but is also Economic Empowerment Codes of Good Practice ( the important for the Economic growth of our country and for the Codes ) in February 2007, to guide and to measure the sustainability thereof.

2 Progress of transformation in the economy. This served as a framework with which to measure the level of compliance per The enactment of the Broad - Based Black Economic entity. Under the following pillars: Empowerment Act (53 of 2003) has resulted in all businesses being required to be assessed in terms of the Ownership Skills Development BBBEE compliance levels in order to remain competitive. Management Control Preferential Procurement This requirement has triggered a sequence of events that Employment Equity Socio- Economic Development compels companies to ensure that their BBBEE strategies are Enterprise Development implemented within the spirit' envisaged by government for the benefit of South Africans.

3 Section 9 of the BBBEE Act (2003) allows for the development and gazetting of Sector Codes, which enables As per the Act every organ of state and public entity must take an industry to tailor the requirements of the Codes to allow into account and as far as is reasonably possible, apply any for nuances that are unique to their industry. These Sector relevant code of good practice issued in terms of this Act in : Codes then require the approval of the DTI, to ensure that the aim and spirit of the DTI Codes are not detracted from Determining qualification criteria for the issuing of licences, Statement 003 of the Codes makes provision for the gazetting concessions or other authorisations in terms of any law; of Transformational Charters (in terms of Section 12 of BBBEE.)

4 Developing and implementing a preferential procurement Act) and sector codes (in terms of Section 9 of the BBBEE. policy; Act). Determining qualification criteria for the sale of state-owned enterprises; and PAGE 01. Broad - Based Black Economic Empowerment A Business Imperative A BBBEE strategy is rooted in a vision to grow the economy Due to the cleverly-crafted BBBEE legislation, all entities and results in redressing the exclusion of Black people and operating within South Africa are compelled to comply as an women from gaining access to South Africa's wealth, income imperative to remain competitive within the economy. equality, skills development and equal opportunities in general. This has been further emphasised by the recent gazetting It is of utmost importance that businesses operating within of the PPPFA regulations which came into effect on the 7th the South African economy take note that BBBEE is not solely of December, 2011.

5 The Department of Finance has utilised focused on the transfer of ownership. Most people are often these regulations to align the PPPFA legislation to the BBBEE. surprised to hear that it is possible for a traditional' white- legislation as gazetted by the DTI. owned company to achieve a higher BEE score than a Black - owned company. The Generic Scorecard within the Codes The 80/20 and 90/10 preference point system has been follows a Broad - Based approach in that it allows businesses aligned to the scoring under the BBBEE legislation, as depicted the flexibility to score points in areas such as Ownership, below. Management Control, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development and Socio- Economic Development.

6 This talks to government's intention of addressing transformation in a Broad - Based manner that would assist with the inclusion of all South Africans who presently do not have access to the mainstream economy. BBBEE Status of BBBEE Procurement Number of points Number of points Contributor Recognition Level (90/10 system) (80/20 system). 1 135% 10 20. 2 125% 9 18. 3 110% 8 16. 4 100% 5 12. 5 80% 4 8. 6 60% 3 6. 7 50% 3 4. PAGE 02. 8 10% 1 2. Non-compliant 0% 0 0. contributor The 80/20 preference point system is applicable to bids from between R30,000 and R1million. This figure is INCLUSIVE of taxes like VAT etc. The 90/10 preference point system is applicable to bids in excess of R 1 million. Broad - Based Black Economic Empowerment A Business Imperative (continued).

7 An entity therefore requires an annual verification to be Employment Equity and Skills Development strengthen the performed. With effect from 1 October 2011, only BBBEE skills base and operational effectiveness of your business, status level certificates issued by the following are valid: while diversity enriches your organizational culture for effective interaction with your clients. Verification Agencies accredited by the South African Procuring from Black enterprises, or empowering them, National Accreditation System (SANAS) improves their chance of commercial success and balances Registered Auditors approved by the Independent the country's Economic growth. Regulatory board of Auditors (IRBA) in accordance with Compliance increases your organisation's ability to the approval granted by the Department of Trade and participate in tender processes for business, with Industry (see Statement 005) government or private sector businesses, and it decreases Exempted Micro Enterprises- Statement 000, Section the likelihood of losing contracts with customers for the 4 of the B-BBEE Codes of Good Practice still applies for provision of goods and services suppliers with better BEE.

8 Determining eligibility of a Exempted Micro Enterprise. credentials. BBBEE reaffirms your entity's commitment as a BENEFITS OF COMPLYING responsible corporate citizen and assists in contributing to Direct Empowerment Ownership and Management the improvement and development of the quality of life of Control boosts the strategic direction and decisions of communities, thereby fulfilling social responsibilities and your business. growing the consumer base for more Economic growth. PAGE 03. Broad - Based Black Economic Empowerment Compliance Challenges CHALLENGES FACED WHEN ATTEMPTING TO COMPLY. A significant challenge faced by companies that have already established operations in South Africa, is the cost of compliance.

9 For a superior BBBEE contributor status to be achieved, BBBEE compliance should be entrenched throughout the organisation. The challenge with this is that an entity's reporting systems presently do not incorporate the BBBEE legislative requirements and the alignment of such, often requires a change to the Chart of accounts, amendments to the HR reporting system to incorporate the reporting of costs incurred per training intervention etc. Examples of further implementation challenges are as follows: Pillar Challenge Ownership Identification of a suitable BBBEE partner;. Retention of the BBBEE partner within the equity structure. Management control Employment and retention of board members and top management Employment equity Employment and retention of management Skills development Prioritisation of accredited skills training for employees Preferential Receipt of BBBEE certificates fromSuppliers.

10 Procurement Addressing the issue of Localisation. Enterprise development Alignment of the initiatives against the company's strategic And socio- Economic direction as well as a commitment of funds in this regard development PAGE 04. Broad - Based Black Economic Empowerment Our Services Our services cover the following aspects of BBBEE compliance: Strategy Development Reporting and Monitoring Framework For successful Current State Assessment This involves performing strategy development, implementation and roll out of an an independent assessment of the client's As Is status of appropriately designed reporting and monitoring framework their BBBEE and transformation efforts. The assessment will is essential.


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