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Amended B-BBEE Codes of Good Practice A strategy for Built Environment Professionals

Amended B-BBEE Codes of Good Practice A strategy for Built Environment Professionals 30 July 2014. 01 INTRODUCTION. 02 BEE IN CONTEXT. BEE in context. 924 021 entities registered for VAT. 03 Legislation. Preferential Procurement Policy Framework Act (PPPFA). 7 December 2011.

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Amended B-BBEE Codes of Good Practice A strategy for Built Environment Professionals

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  1. Amended B-BBEE Codes of Good Practice A strategy for Built Environment Professionals 30 July 2014

  2. 01INTRODUCTION

  3. 02BEE IN CONTEXT

  4. BEE in context 924 021 entities registered for VAT

  5. 03Legislation

  6. Preferential Procurement Policy Framework Act (PPPFA) 7 December 2011

  7. PPFA Points for BEE Level

  8. BBBEE Amendment Act 24 January 2014

  9. Section 10: Status of Sector Codes • Every organ of state and public entity must apply relevant code of good practice in: • issuing of licenses, concessions • developing and implementing a preferential procurement policy; • determining qualification criteria for the sale of state-owned enterprises; • developing criteria for entering into PPPs • awarding of incentives, grants, and investment schemes in support of broad-based black economic empowerment.  • An enterprise operating in a sector with a S9(1) Code may only be measured in accordance with that code • An enterprise must report annually on their compliance to the Sector Council.

  10. Section 1: Fronting Practice means a transaction, arrangement or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act; includes • black persons discouraged or inhibited from substantially participating in the core activities; • economic benefits received as a result of the BEE status do not flow to black people in the ratio specified; • legal relationship with a black person to achieve a certain BEE level without granting commensurate economic benefits expected; • an agreement with another enterprise to achieve enhanced B-BBEE status in circumstances in which – • significant limitations on identity of suppliers, service providers, clients or customers; • maintenance of business operations that are improbable having regard to resources; • terms and conditions not negotiated at arm’s length on a fair and reasonable basis;

  11. Section 20: Offences and Penalties A person is guilty of an offence if that person knowingly • misrepresents or attempts to misrepresent the B-BBEE status of an enterprise; • provides false information to Verification professional / any organ of state. A BEE Verification professional or any procurement officer or other official of an organ of state or public entity who becomes aware of fronting and fails to report is guilty of an offence. Any person convicted of an offence is liable • to a fine or imprisonment for a period not exceeding 10 years or both; • in the case of an enterprise, to a fine of 10% of annual turnover. Any person and/or entity convicted of an offence shall be banned from transacting with any public entity, and shall be entered into the National Treasury register of tender defaulters.

  12. 04NEW BEE CODES

  13. Key principles • Substance over form • Compliance measured “at the Date of Measurement” • Any misrepresentation OR attempt = fronting • Any initiative to split, separate, divide to qualify as EME, QSE or Start-up = fronting

  14. Application of the Codes 3.1.1 All Organs of State and Public Entities are measureable 3.1.2 All Measured Entities that undertake any economic activity with any organ of state or public entity are measureable

  15. Priority elements Ownership Sub-minimum = 40% of Net Value points = 3.2 points Skills Development (SD) Sub-minimum = 40% of total weighting points = 8 points Enterprise and Supplier Development (ESD) Sub-minimum = 40% of EACH of categories = 16 points Generics must comply with all 3 priority elements QSE must comply with ownership + 1 priority element

  16. Application of the new Codes • Transitional period exists until 30 April 2015 • All sector Codes must be aligned by this time • An entity may elect to be measured on amended Codes of Good Practice or on existing Codes of Good Practice during the transitional period • An entity operating under a Sector Code must apply that code until 30 April 2015 – thereafter the Generic Codes if the Sector Code has not been aligned

  17. New Thresholds

  18. New Scorecard

  19. BEE recognition levels

  20. OWNERSHIP

  21. What the research says about ESOPS In "The ESOP Performance Puzzle in Public Companies," published in 2006 issue of the Journal of Employee Ownership Law and Finance, Robert Stretcher, Steve Henry, and Joseph Kavanaugh.

  22. Points earned by 10% ESOP or BBOS

  23. MANAGEMENT CONTROL

  24. Management Control MANAGEMENT CONTROL = MANAGEMENT CONTROL + EMPLOYMENT EQUITY • Aligned to the EE Act (targets, reporting and definitions) • Must use current payroll data • Must apply sub-race group demographics for SM, MM, JM (not to Board / Executives or Disabled) • The description of each of the measurement categories is aligned with the EE Act • Adjusted recognition for gender collapsed into specific targets for women

  25. BEP’s measured on a single management target of 60%

  26. Other changes in Management Control • Definitions for Senior Top and Other Top removed • Executive management defined: CEO, COO, CFO • Other Executive management defined: HR, Transformation and others • If an entity does not distinguish between Executive Management and Senior Management, then: • Measure Executive and Senior out of 6 points • Apply the Executive Management target • (Avoid the sub-race group classification?)

  27. SKILLS DEVELOPMENT

  28. General Principles • Contribute to country’s economic and social development goals by developing skills that enrich decent work and sustainable livelihoods • Promote development of industrial skills base in critical sectors (production and value adding manufacturing that are labour intensive) • Support ‘Professional, Vocational, Technical and Academic Learning’ programmes through work integrated learning (apprenticeships, learnerships, internships, PP) • Strengthen skills and human resource base to support employment creation

  29. Skills Development requirements • WSP, ATR and Pivotal Report which are SETA approved • Implementation of Priority Skills Programme • Claim external training spend on unemployed • Trainee tracking tool for ‘absorption’ • Skills spend & Learnerships use demographic representation of black people (not for disabled or absorption) • For scoring purposes the targets should be further broken down into the race sub groups as defined in the EE Act. • Threshold requirement: • The measured entity must achieve a sub-minimum of 40% of the target

  30. BEP’s SD target spend = 1,5% + 0,3% = 1,8% BEP’s target = 1,5%

  31. Other changes • Category F + G treated as informal = limited to 15% of total spend • Accommodation, travel, catering, administration = limited to 15% of total spend • Mandatory sectoral training does not count: • Health and safety, First Aid? Fire? • Training outside SA must meet SAQA recognition to count • Measured entity no longer gets: • 1.25 enhancement of ABET • Salaries or Wages of employees still count if Learnership, Internship or Apprenticeship (B,C or D)

  32. Score maximum BEE points

  33. Maximum Tax benefits

  34. Minimum net cost of learnerships

  35. Tax deductible learnerships

  36. Maximum points for minimum cost

  37. ENTERPRISE & SUPPLIERDEVELOPMENT

  38. BEP’s ED target spend = 0,75% of leviable amount

  39. Empowering Supplier • A B-BBEE compliant entity which is a good citizen, and who complies with all regulatory requirements of the country and meets 3 of the following criteria: • At least 25% of Cost of Sales excluding labour and depreciation must be procured from local producers or suppliers, service industry labour costs capped at 15% • Job creation 50% of jobs created are for black people provided the number of black employees since the immediate prior verified B-BBEE measurement is maintained.

  40. Empowering Supplier • At least 25% transformation of raw material/beneficiation which includes local manufacturing, production and/or assembly and/or packaging • Skills transfer – 12 days per annum of productivity deployed in assisting black owned EME and QSE beneficiaries • EME’s and Start up Enterprises are automatically given Empowered Supplier status • QSE’s are required to meet 1 critieria.

  41. Enhanced recognition

  42. Socio-economic development

  43. Socio-Economic Development BEP’s SED target spend = 0,25% of leviable amount

  44. Socio Economic Development • Beneficiaries must be 75% black • Access to the economy • Priorities in this element are to redress the issues of education, poverty, unemployment, health for those communities who remain disadvantaged

  45. 05 Total BEE strategy

  46. Level 4 is achievable Ownership (10% ESOP / BBOS) = 13 Management Control Board (1 x BW non-exec) = 2 Management (2/3 easy) = 5 Skills Development (tax funded) = 25 ESD All ED ½ Procurement, Bonus point = 31 SED = 5 = 81 • LEVEL 4

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