BBBEE Codes of Good Practice and Procurement Regulations 24 November 2011

1. BBBEE Codes of Good Practice and Procurement Regulations24 November 2011

2. Background • Alignment of Preferential Procurement Policy Framework Act and BBBEE Codes of Good Practice • Frequently Asked Questions • Conclusions Contents

3. CONSTITUTION “Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons or categories of persons disadvantaged by unfair discrimination maybe taken” Chapter 2 of the Bill of Rights, Section 9 Background

4. CONSTITUTION • Section 217 of Act 108 of 1996, as amended by subsection 3 of Act. 61 of 2001 provides that: - • When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective. • Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for: • Categories of preference in the allocation of contracts; and • The protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination. • National legislation must prescribe a framework within which the policy referred to in subsection (2) may be implemented. Background

5. PPPFA • Preferential Procurement Policy Framework Act No 5. of 2000/2: • An Organ of State must determine its preferential procurement policy and implement it within the following framework: • 80/20 and 90/10 preference point system must be followed, i.e.:- • 10 and 20 points - HDI • 90 and 80 points - lowest price. Background

6. B-BBEE ACT • Section 10 of the B-BBEE Act: • Every Organ of State and Public Entity must take into account and, as far as is reasonably possible, apply any relevant code of good practice issued in terms of this Act in:- • Determining qualification criteria for the issuing of licenses, concessions or other authorisations in terms of any law; • Developing and implementing a preferential procurement policy; • Determining qualification criteria for the sale of state-owned enterprises; and • Developing criteria for entering into partnerships with the private sector. Background

7. ALIGNMENT • Cabinet approved the alignment of Preferential Procurement Regulations and the B-BBEE policy • The Preferential Procurement Regulations of 2011 will come into effect on 7 December 2011. • While the alignment of Preferential Procurement Regulations and the B-BBEE policy is a step in the right direction, the ultimate objective is the total overhaul PPPF Act No. 5 of 2000 Alignment of PPPFA Regulations and B-BBEE

8. ALIGNMENT Alignment of PPPFA Regulations and B-BBEE New PPPFA regulations use the B-BBEE scorecard to determine preference points

9. ALIGNMENT • The preferential Procurement Regulations are applicable to organs of state as contemplated in section 1(iii) of the PPPF Act and all public entities listed in Schedules 2,3A,3B, 3C and 3D of the PFMA and Municipal entities • The preferential Procurement Regulations will thus be extended to all organs of state for uniformity purposes. • The revised Regulations affirm the 80/20 preference point system for procurement of goods and service for a rand value of R1million and 90/10 preference point system above R1million • On 80/20 principle, 20 points scored by a bidder will be in respect of B-BBEE status level and 90/10 principle, 10 points will be in respect of B-BBEE status level. Alignment of PPPFA Regulations and B-BBEE

10. B-BBEE Recognition Levels

11. CALCULATION OF POINTS FOR B-BBEE RATINGS Alignment of PPPFA Regulations and B-BBEE

12. In addition, the revised Regulations address the objectives of Industrial Policy Action Plan, especially those aimed at promoting the procurement of domestically produced goods and services. • The Regulations empower the dti to designate specific industries of critical and/or strategic importance where such tenders should prescribe that only locally manufactured products will be considered or that only locally manufactured products with a prescribed minimum threshold for local content will be considered. Alignment of PPPFA Regulations and B-BBEE

13. HOW DO I DETERMINE THE VALIDITY OF A BEE RATING CERTIFICATE? • With effect from 1 October 2011, only B-BBEE status level certificates issued by the following are valid: • Verification Agencies accredited by the South African National Accreditation System (SANAS) (see Statement 005) • Registered Auditors approved by the Independent Regulatory Board of Auditors (IRBA) in accordance with the approval granted by the Department of Trade and Industry (see Statement 005) • Exempted Micro Enterprises- Statement 000, Section 4 of the B-BBEE Codes of Good Practice still applies for determining eligibility of a Exempted Micro Enterprise. Frequently asked questions

14. HOW DO I DETERMINE THE VALIDITY OF A BEE RATING CERTIFICATE? • As at the end of September 2011 there are 78 SANAS Accredited Verification Agencies • Click on link for a list of all SANAS Accredited Verification Agencies • http://www.sanas.co.za/directory/bbee_default.php • Click on link of BEE verification agencies that are in possession of valid pre-assessment letter • http://www.thedti.gov.za/economic_empowerment/docs/verification/LOA_Preassessments.pdf • There are No IRBA approved registered auditors yet! Frequently asked questions

15. HOW DO I DETERMINE THE VALIDITY OF A BEE RATING CERTIFICATE? Frequently asked questions

16. B-BBEE VERIFIED ENTITIES Frequently asked questions Click on link for example BEE Certificate_l.pdf

17. HOW DO I DETERMINE ELIGIBILITY OF AN EXEMPTED MICRO ENTERPRISES (EMES)? • Any enterprise with an annual Total Revenue of R 5million or less qualifies as an Exempted Micro-Enterprise. • Exempted Micro-Enterprises are deemed to have B-BBEE Status of "Level Four Contributor" having a B-BBEE procurement recognition of 100%. • In an instance were the Exempted Micro Enterprise is more than 50% owned by black people, the enterprise qualifies for a promotion to a B-BBEE Status of "Level Three Contributor" having a B-BBEE procurement recognition of 110% Frequently asked questions

18. HOW DO I DETERMINE ELIGIBILITY OF AN EXEMPTED MICRO ENTERPRISES (EMES)? • Sufficient evidence of qualification as an EME is • an auditor’s certificate (2011 EME Letter) or • certificate issued by an accounting officer, or • verification agency • Cost reduction and stifling growth at EME level • Biggest beneficiaries of B-BBEE through Enterprise Development and Preferential Procurement Frequently asked questions

19. JOINT VENTURE B-BBEE STATUS • A trust, consortium or joint venture must submit a B-BBEE status level certificate in order to qualify for points • A trust, consortium or joint venture will qualify for points as an unincorporated entity provided they submit their consolidated scorecard as prepared for each separate tender Frequently asked questions

20. HOW TO DETERMINE THE B-BBEE STATUS OF TERTIARY INSTITUTIONS • If a service is provided by only a tertiary institutions, such services must be procured from the tertiary institutions identified by means of bidding process. Tertiary institutions must submit their B-BBEE status in terms of the B-BBEE Codes of Good Practice’ Specialized Scorecard. Frequently asked questions

21. LOCAL CONTENT • Paragraph 9(1) of the draft Regulations empowers the dti to designate specific industries where tenders should prescribe that only locally manufactured products with a prescribe minimum threshold for local production and content will be considered. This will come into effect after the dti has designated in line with national development and industrial policies. National Treasury will issue relevant instructions and guide • Where there is no designated sector, a specific tendering condition may be prescribed minimum threshold for local content will be considered in accordance with directives issued by the National Treasury in consultation with the dti. Frequently asked questions

22. The broader economic developmental agenda must address inter alia: • Ensuring that BBBEE contributes to the broader developmental objectives of government. • Create a conducive environment for access to economic opportunities • Promotion of entrepreneurial initiatives among the majority of South Africans • Alignment and consistency in policies, legislation and programmes of Government Conclusion

23. List of Western Cape verification agencies and the sectors they are accredited to verify

24. Enquiries ☎ 0861 888 126☒ redtape@pgwc.gov.zawww.westerncape.gov.za