Construction Charter

1. Construction Charter Portfolio Committee Briefing By Co-Chairs James Ngobeni and Mike Wylie

2. BACKGROUND • Despite progress since 1994 S.A.still face economic inequalities; • The constitution of R.S.A underlines the importance of redressing inequalities; • Government introduced various pieces of legislation; • The Broad Based Black Economic Empowerment Act 53 (2003) provides cohesions and guidance for the gazetting of Transformation Charters;

3. STATUS QUO • Business, Labour and Government embarked on a process during 2004; • Objectives: • Define scope • Ensure participation of ; • National Business Organisations including Women; • Labour unions; • Government Department • Create Integrated Management Committee and other committees to facilitate participation

4. STATUS QUO • Business: • ASAQS (The Association of South African Quantity Surveyors) • ABA (African Builders Association) • MBSA (Master Builders South Africa) • NABCAT (National Association of Black Contractors and Allied Trades) • NAFBI (National Federation for the Building Industry) • SAACE (The South African Association of Consulting Engineers) • SABTACO (South African Black Technical and Allied Careers Organisation) • SAFCEC (South African Federation of Civil Engineering Contractors) • SAIA (South African Institute of Architects) • SAISC (South African Institute of Steel Construction) • SAWIC (South African Women in Construction) • Women for Housing • Labour: • NUM • BCAWU • Government: • National Department of Public Works (Leading Department)

5. INTEGRATED MANAGEMENT COMMITTEE TECHNICAL TEAMS SECRETARIAT COMMUNICATIONS COMMITTEE DRAFTING TEAM BUSINESS CAUCUS LABOUR CAUCUS GOVERNMENT CAUCUS STAKEHOLDER FORUM LABOUR BUSINESS GOVERNMENT

6. Charter

7. Overview and Challenges • The industry is skewed in terms of race and gender • Over the past two decades the sector experienced declining investment and demand volatility. The prospect of increased investment goes hand in hand with increasing capacity and output. • There is a depleted skills base partly due to the sectors lack of appeal and factors such as workplace training, mentorship and recognition of prior learning will need urgent attention. • There is insufficient penetration and lack of sustainable growth of black companies. • Preferential procurement policies is being applied on a subjective basis leading to legal uncertainty. • The industry is fragmented.

8. Objectives of the Charter • Transformation, growth, competitiveness and efficiency • Enhance entrepreneurial development and sustainable growth of BEE companies through strategic partnerships. • Address skills development with a particular focus on women. • Achieve a substantial change in the racial and gender composition of ownership, control and management. • Bring to an end the malpractice of fronting. • Lay the foundation for the integration of the construction sector to provide a single access point.

9. Application and Reporting • Charter is applicable to all companies involved in the creation and/or maintenance of fixed assets related to residential or non-residential buildings, infrastructure, or any form of construction works in South Africa. • Annual reporting/auditing will be promoted. • Once in operation the charter will be reviewed periodically. • The charter will take into account the size and nature of participants. • There will be an oversight structure to implement and monitor.

10. STEPS TO FIN • Complete the template which defines the indicators of the elements of the scorecard. This work is virtually complete and shown on the following slides. • Populate the indicators with the relevant information on the existing situation in the industry. This info is available from a very thorough situational analysis which has been completed over the past 18 months in conjunction with CETA. We anticipate that this will be competed by the end of this week. • Finally the weightings and targets. There are discrepancies between industry, government and labour and compromises will be sought through a thorough discussion of the facts. We are hoping to complete this process by the end of June. • The qualitative part of the charter is complete and when the quantitative side (scorecard) is complete our work will be done.

11. SCORECARD TEMPLATE

12. VOTING RIGHTS Voting Rights in the Enterprise in the hands of black people Voting rights in the hands of black women Voting rights in the hand of broad-based groups ECONOMIC INTEREST Economic interest to which black people are entitled Economic interest to which black women are entitled Economic interest to which broad-based groups are entitled Unrestricted economic interest - full value transfer Ownership

13. BOARD Members of the Board who are black people as a % of the board Members of the Board who are black women as a % of the board EXECUTIVE MANAGEMENT Executive Management who are black people as % of Executive Management Executive Management who are black women as % of Executive Management Control

14. SENIOR MANAGEMENT Black senior management as percentage of total senior management Black women in senior management as percentage of senior management MIDDLE MANAGEMENT Black middle management as percentage of total middle management Black women in middle management as percentage of middle management JUNIOR MANAGEMENT Black Junior management as percentage of total junior management Black women in junior management as percentage of junior management Employment Equity

15. TRAINING COSTS Direct training cost as a percentage of payroll Percentage of above spent on black people Percentage of above spent on black women Percentage of above spent on black management Percentage of above spent on black women management LEARNERSHIP Learnerships as a percentage of employees Black learnerships positions as a % of total learnerships Black women learnerships as a % of total learnerships Youth learnerships as a % of total learnerships BURSARIES Bursary expenditure on black students, as % of payroll MENTORSHIP Implementation of an approved and verified mentorship programme Skills Development

16. Total procurement on BBBEE accredited companies measured as per the the various levels as a % of total procurement. Preferential Procurement Total score of 100% and above Total score of 80% and above Total score of 65% to 79.9% or small and micro enterprises Total score of 55% to 64.9% Total score of 40% to 44.9% Total score of 20% to 39.9%

17. Measurement by considering improvements in turnover, profitability, asset base, number of employees, ownership for designated groups, credit worthiness. Number ratio: BEPs turnover Medium (3m-36m) Large a (37m-59.9m) Large b (60m-119.9m) Large c (120m-200m) Large d (>200m) Number ratio: Contractors turnover Medium (12m-60m) Large a (61m-500m) Large b (501m-1000m) Large c (1001m-2000m) Large d (>2000m) Enterprise Development

18. DEVELOPMENT Development imperatives (still to be identified) CSI CSI as a percentage of annual profit after tax (all), or CSI as a percentage of payroll (BEPs only) and CSI as a percentage of turnover (Contractors only) (Measurement mechanism requires further discussion) Residual

19. Regulation and Scorecard • A scorecard will be implemented to measure progress in broad based black economic empowerment. • The charter and scorecard will be issued as a Code of Good Practice according to which companies will be evaluated when tendering for work. • This charter and scorecard will be finalised in accordance with the requirements of the Codes on Charter issued by DTI.

20. WAY FORWARD & CLOSURE

21. Thank You For further information: CTCG Secretariat: 011-455 1700 www.ctcg.co.za