REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT

1. SELECT COMMITTEE ON TRADE AND INTERNATIONAL RELATIONS 29 FEBRUARY 2012 REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT

2. Presentation Layout • Introduction • Objectives of the B-BBEE Amendment Bill • Key Interventions of the B-BBEE Amendment Bill • Conclusion

3. Introduction The Advisory Council developed key recommendations on areas that need refinement; Presentation to Cabinet Committee on 16 March 2011; Presentation to the Economic Cluster on 24 June 2011, Drafting of the Amendment Bill commenced in August 2011; Amendment Bill presented to Cabinet on 16 November 2011 Amendment Bill approved for public comment and gazetted on 9 Dec 2011 3

4. Key Principles to the Act • Align the Act with other legislation impacting on B-BBEE and with the Codes • Elevate the General principles of the Codes including the concept of the balanced scorecard and definitions • Establish the B-BBEE Commission to create an institutional environment for monitoring and evaluation of B-BBEE • Provide for the regulation of the verification industry by IRBA • Deal with non-compliance and circumvention by introducing offences and penalties • Trumping provision : B-BBEE Act to be the overarching framework for B-BBEE (mitigate conflict in law);

5. Alignment of the Act 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. Amendment: Policy Alignment and Harmonisation • Alignment of the B-BBEE primary legislation to other policy instruments (e.g. NGP, IPAP and PPPFA) • The status of the Codes enhanced to ensure compliance by all public entities, strengthening of Sec 10 which deals with economic activities. • B-BBEE Act to be the overarching framework for B-BBEE (mitigate conflict in law)

6. B-BBEE Commission Key Challenge: • Non monitoring and supervision of compliance with the B-BBEE Act and the Codes both within the public and the private sectors leading to the inappropriate implementation and circumvention of the objectives of the Act • Proposed Solution: • Establishing an BEE Commission to deal with complaints concerning B-BBEE transactions and other matters related thereto, including but not limited to: • Oversee, supervise and promote adherence to the Act • Promote advocacy and educational programs on B-BBEE, access to opportunities • Receive and investigate complaints on B-BBEE

7. Functions of the Commission:- • To strengthen and foster collaboration between the public and private sector in order to promote and safeguard the objectives of B-BBEE; • Keep a register of all B-BBEE transactions above the threshold to be determined • Analyse reports concerning B-BBEE compliance from organs of state KEY AMENDMENTs to the act

8. Industry Regulation 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 Professionals.Verification is a vital component of B-BBEE compliance and this industry needs to be regulated in order to ensure credibility and accountability;

9. Key Challenge: • 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.No effective sanctions exist in the current Act to deal with misrepresentation of the B-BBEE Status of Measured Entities 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; • Empowering the Special Investigation Unit to investigate all offences involving fronting/ corruption with regard to the application Act (for both public and private sector); • Collaboration between the dti and National Treasury. Offences and Penalties

10. Introduced definition of B-BBEE Fronting : • means a practice, scheme, transaction, arrangement or conduct that directly, indirectly, or potentially undermines, frustrates, impedes, prejudices or retards the achievement of the objectives of this Act or the implementation of any of theprovisions of this Act Proposed Solution: Offences and Penalties • Offences introduced for the provision of false information or misrepresentation of information to Verification Professionals • Providing false information or misrepresentation of information relevant to assessing the B-BBEE status of a Measured Entity to any organ of state or public entity • Failure by a B-BBEE Verification Professional or any procurement officer or other official of an organ of state or public entity to report offenses to an appropriate law enforcement agency Offences and Penalties

11. Penalties for Fronting Penalties: • fine or to imprisonment for a period not exceeding 10 yrs, 10% or both for a fine or imprisonment. • fine or to imprisonment for a period not exceeding 12 months or both for a fine or imprisonment. • In case of an enterprise to a fine of 10% of that enterprises annual turnover. • Any person/entity convicted of an offence , shall be banned from contracting or transacting any business with any organ of state and or public entity and shall be entered into the NT register of tender defaulters. • Any contract or authorisation awarded on account of false information furnished by or on behalf of an enterprise in respect of its BBBEE STATUS maybe cancelled at the sole discretion of an organ of state or public entity.

12. Govt, Public, and Private Key Challenge: • Lack of proper implementation by Government departments, Public entities, 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; • All spheres of Government and public entities to submit regular reports on their compliance to B-BBEE annually;

13. Govt, Public, and Private • Proposed solution: cont… • 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; • Private Sector to include B-BBEE reporting in the Sustainability Reports. 13

14. Way forward • 10 February 2012 was the end of the public commentary process. the dti is currently consolidating all the comments received; • A total of 45 submissions were received on the Amendment Bill; • The general response on the bill is supportive of the proposed amendments; and • In March 2012 the dti will report back to Cabinet and proceed to introduce the Bill into Parliament. 14

15. THANK YOU