Overview of the Charter

November 2006

White Black Women Men

90%

6%

94%

10%

White Black Women Men

22%

78%

25%

75%

Status Quo

ELEMENT CONTR. BEC.

OWNERSHIP 10%-14% 10%-14%

SNR MANAGEMENT ALL – 6%

W - 0%

ALL-10%

W – 1%

MID MANAGEMENT ALL -15%

W – 1%

ALL – 13%

W – 2%

JUN

MANAGEMENT

ALL – 56%

W - 2%

ALL – 37%

W – 12%

Status Quo• Scope • All enterprises that are involved in the

creation, expansion, and/or maintenance of fixed assets related to residential or non-residential buildings, infrastructure, or any other form of construction works in South Africa

• 13 National Organisations, Government and Labour

• Structures – IMC, Technical Teams etc

• Current Status

Legislative PathBroad-Based

BEE Act

Broad-BasedBEE Strategy and

Scorecard

The Codes of Good Practice

(To be finalized)

IndustryCharters

(To be negotiated)

• Enabling framework for the promotion of BEE• Empowers Minister to issue Codes of Good Practice• Establishes the BEE Advisory Council

• Defines Government’s Broad-Based Strategy• Provides the generic balanced-scorecard

• Further interpretation of the BEE Act• Determines qualification criteria for licensing• Criteria for entering PPP with private sector

• Outlines industry-specific BEE weightings and targets• Establishes the residual elements of the scorecard• Standardizes industry BEE initiatives and reporting•Section 9 & 12 of Act

ScorecardElements Weighting Target Company

PerformanceScore

Ownership 25 30 15 12.5

Control 10

Employment E 10

Skills Dev. 20

Procurement 20

Enterprise Dev 10

CSI 5

TOTAL

(15/30)* 25 = 12.5

Indicators

Board (Weight 5)

Executive M (Weight 5)

Black (3.5)B Women (1.5)

All scores add up to 100

Determines level of BEE contribution

100

Level 1 100% and < 135%

Level 2 85% - less 100%

125%

Level 3 75% - less 85% 110%

Level 4 65% - less 75% 100%

Level 5 55% - less 65% 80%

Level 6 45% - less 55% 60%

Level 7 40% - less 45% 50%

Level 8 30% - less 40% 10%

Level 9 <30% 0%

Public Sector: 80/20 and 90/10 – Score will directly translate to the BEE points allocated within targeted procurement points.

Private Sector: Will be measured in accordance with table below:

Where any enterprise is in excess of 50% owned by black people, it will qualify to be registered a level higher.

Application

Application: Size Differentiation

Size Average Annual TO Number of Employees

Contr. BEP Contr. BEP

Micro <R1m <R300 000

5 2

Small >R1m, <R12m

>R300 000, <R3m

6-60 3-9

Medium >R12m, <R60m

>R3m, <R36m

61-300 10-100

Large >R60m >R36m >300 >100Current:

•Micro Enterprise exempt

•Small Enterprises can select 70 point s and score accordingly

The Codes will provide a national standard for BEE verification

Rating Agencies will have to be Accredited by the DTI (SANAS)

- Has to be member of ABVA

- Capacity to verify

- Pitfalls

Balanced scorecard approach / intrusive auditing process

Issue BEE compliance certificate that will be valid for 12 months

Listing on the National Empowerment Directory

Role of BEE Verification agencies

The Verification ProcessDuties of Company

- Preparation of own scorecard- Substantiate with proof – portfolio of proof- Essential documentation

Duties of Verification Agency

- Independence

- Issue of Certificate

- Report to DTI / Charter Council

- Report Fronting Practices

Ownership Weight25

Target7 Year

Var.

Voting R Voting rights in the hands of black people

4 30%

Voting rights in the hand of black women

2 10%

Economic Interest

Economic Interest to which black people are entitled

5 30%

Economic interest to which black women are entitled

2 10%

Economic interest to which black broad based groups and or black designated groups, specifically employees are entitled

5 10% 5%

Realisation Points

Ownership Fulfillment 1 Yes

Net Equity Value 6 30%

Control Weight10

Target4/7 Year

Var.

Board Members of the board who are black as % of board

3.5 40%

Members of the board who are black women as % of board

1.5 20%

Executive Management

Executive management who are black people as % of executive management

3.5 25/40%

Executive management who are black women as % of executive management

1.5 10/16%

Employment Equity W10

Target4/7 Year

Var.

Senior Management

Black senior management as % of senior management

2 25/40% Black30/40%

Black women in senior management as % of senior management

1.5

10/16%

Middle Management

Black middle management as % of middle management

2 30/40%

Black women in middle management as % of middle management

1.5

12/16%

Junior Management

Black junior management as % of junior management

2 65%

Black women in junior management as % of junior management

1 27% Women12/16%

Skills Development Weight15

Target7 Year

Var.20

Training Cost

Direct training cost as % of payroll 2 1.5%

% of Above on black people 2 70%

% of Spend on black people spent on black women

1 25%

% of Spend on black people spent on black management

1 25%

% of Spend on black management spent on black women management

0.5 20%

Learnership

Learnership as % of employees 1 2.5% 1.5%

Black learnership positions as % of total learnerships

1.5 70%

Black women learnerships as % of black learnerships

1 35%

Learnerships for black designated groups as % of black learnerships

1 30%

Bursaries Bursary Expenditure on black students as % of payroll

2 0.3%

Mentorship

Implementation of an approved and verified mentorship programme

2 Yes

Procurement Weight20

Target7 Year

Var.

Procurement

Total procurement on BBBEE companies as % of procurement

20 70%

Enterprise Development

15 10

EnterpriseDevelopment

Input 5 List 5

Total Turnover Ratio 5 5% 2.5

Output 5 GDP 2.5

Residual 5

Corporate Social Investment as % of payroll

0.25%

Way forward

• Section 9 to DTI year end

• Circular issued (interim)