PRESENTATION TO THE dti PORTFOLIO COMMITTEE:

8TH MARCH 2013 Presented by Xolani Qubeka

Chief Executive Officer

Objectives of Presentation

Objectives of the Presentation•To highlight key BBC positions related to the BBBEE Amendment Bill•To support key aspects of our submissions•To ensure a stable policy environment, and less ambiguity on interpretation and application•To generally support government policy on BBBEE and economic transformation

Introduction

Vision Statement•An inclusive and expanding economy which generates wealth for the majority of its citizensSummary of Our Objectives•To be a cohesive and united voice of Black Business and professionals and advance cooperation and collaboration with other progressive organisations

•To contribute towards a comprehensive enterprise development culture as the Game Changer towards accelerated and sustainable economic growth that leads to alleviation of poverty, new job creation as well as eradication of gross inequalities

•The creation of Black Industrialists and expanding the middle class that would contribute proportionately to the fiscus

Introduction

Member Organisations

•African Builders Association•The Association of the Advancement of Black Accountants of South Africa•The Association of Black Securities and Investment Professionals•Black Business Council in Built Environment•The Black Business Executive Circle•The Black Conveyancers Association•Black Lawyers Association•Black Management Forum•Foundation for African Business and Consumer Services•National Black Contractors & Allied Trades•National African Federated Chamber of Commerce and Industry•National Black Business Caucus•National Society of Black Engineers•South African Black Technical and Allied Careers Organisation•South African Institute of Black Property Practitioners•South African Medical and Dental Practitioners•South African Women in Construction•Siyakha Federation of Building Contractors•Women in Food and Hospitality•South African Women Entrepreneurs' Network •National Association for Youth in Construction•South African Football Association

Target Market

BBC Member Organisations•Fostering a more focused, stronger and responsive affiliatePublic Sector•An integrated economic transformation policy environment that fosters uniformity of policy implementation across all tiers of government Private Sector•Good corporate citizens that support and implement economic transformation policies based on genuine business imperatives, rather than self-serving narrow compliance objectivesCommunity •Fostering and inculcating a work ethic that eliminates the culture of dependency and entitlement

BBC Policy Outline

Black Industrialists

Focus Areas•Creation of a Ministry of SMMEs•Building a Robust Manufacturing Sector•Developing large black owned construction companies•Create a vibrant black management and consulting sector •Developing the wholesale and retail sector

• Revitalizing the township retail base

•Developing agricultural, cattle and commercial sectors in rural areas•Investment in renewable energy sector•Investment in public sector infrastructure programmes

• PRASA, TRANSNET, ESKOM

•Special funding for youth and women owned businesses•Establishment of a Black-owned bank

Realities of the SA Economy

Key Drivers of the Economy:•The Economy is still dominated by white owned Businesses•Only less than 2% of the JSE is black•The major beneficiaries of public sector spending still goes to white-owned companies

• The pattern has in fact increased since 1994, the bigger is getting even much bigger•Black companies still only feature in the periphery of the economy•The major beneficiaries of large infrastructure projects remain large companies•The legacy of apartheid within the economy is too large and entrenched and requires bold steps to change its construct •The current BBBEE legislation encourages fronting and fraud•The BBBEE Act and its Regulations are highly biased against wholly-black-owned companies •The PPPFA is one of the major impediments to BBBEE and should be repealed•SA companies are happy to invest in other African economies with even more drastic empowerment initiatives than they do here•DFI’s are not friendly to start-ups, SMMEs and Cooperatives•The economy cannot transform itself , the BBBEE Amendment Bill should deliver true transformation….the time is now

Myths about BBBEE

Negative Sentiments Attributable to BBBEE:•That BBBEE promotes corruption•That BBBEE equals sub-standard and shoddy workmanship•FALSE! •BBBEE characterized by SMME’s

• SMMEs in their nature do lack capacity and do make mistakes, including white owned SMMEs• SMMEs do not have the balance sheet to corrupt, and constitutes the smallest beneficiaries of

public sector spending•Large companies remain the largest beneficiaries of public sector procurement spend•Large companies have a much bigger balance sheet and concoct creative corrupt practices•It is large companies that services the public sector that forges relationships with senior public servants

• Play golf• Own hospitality suites in various sport facilities around the country• Have access to facilities and schemes to international sporting games, so called World Cups!

•It’s mostly large companies that the Public Protector is investigating almost continuously•Major retailers do not employ or entertain senior public servants in their companies or boards

The BBBEE Amendment Bill

Key Issues on the BBBEE Amendment Bill:

Status of the BBBEE Act

•For South Africa to achieve the stated objectives of the BBBEE legislation it is imperative that it be implemented consistently throughout all spheres of the economy without ambiguity

•This will avoid the current confusion in the various sectors of the economy on the issue of transformation since at least 18 pieces of legislation pronounce on issues of transformation some of which are contradictory to the BBBEE Act

•The inclusion of a trumping provision that ensures that the BBBEE Act supersedes any other piece of legislation pronouncing on transformation requirements in each sector is imperative to achieve the above

•This will ensure policy certainty and importantly ensure that investors understand the policy objectives and strategy on transformation in a coherent and consistent fashion

•This will also further enhance the impact of all BBBEE initiatives as they will be informed by the same rules and approach and will enable the South African people to properly assess the impact of this legislation

The BBBEE Amendment Bill

Key Issues on the BBBEE Amendment Bill:

Status of the BBBEE Act

•The current Amendment Bill states that State Organs should only apply the Codes of Good Practice as far as is reasonably possible

•This provision has proven to be the undoing of BBBEE in the past as it provides an escape clause to compliance with BBBEE and therefore negating the very efforts that Government is trying to promote

•This provision should be amended to read that all state organs must comply with the requirements of the Act and the Codes of Good Practice on BBBEE to ensure the consistent application of this legislation throughout all spheres of the economy

•This will also further enhance the impact of all BBBEE initiatives as they will be informed by the same rules and approach and will enable the South African people to properly assess the impact of this legislation

The BBBEE Amendment Bill

Key Issues on the BBBEE Amendment Bill:

Beneficiaries of the BBBEE legislation

•It has been our experience to date that the current BBBEE legislation and its regulations have not achieved the objectives of the Act and have in fact benefited the white establishment

•It is imperative that the fact that the intended beneficiaries are various categories of black people be emphasised so that when we judge the effectiveness thereof we can specifically focus on the benefit that black people have received as a result of the implementation of the legislation

•It should be clear that the focus is redressing the socio-economic challenges that black people still face and this will ensure that black people receive the economic benefits that this legislation and the Constitution envisaged and will enhance the levels of equality amongst the various racial groupings within our economy

The BBBEE Amendment Bill

Key Issues on the BBBEE Amendment Bill:

Non compliance with BBBEE legislation

•The misrepresentation of BBBEE compliance is often termed Fronting and gives the impression that such misrepresentation by companies is unique to the BBBEE landscape which therefore reduces its relevance within the broader economic context

•It is our submission that Fronting is in fact misrepresentation as envisaged within the Companies Act and should as such be treated in a similar fashion to the provisions of the Companies Act on misrepresentation

•This will ensure that misrepresentation within the context of BBBEE is elevated to its rightful status as a criminal offence with the necessary sanctions in law and will therefore be treated as harshly is misrepresentation within Company Law is treated

•BBBEE is a political and economic imperative and should not be relegated to a feel good initiative by our Government which does not have any relevance to the long term stability of our country

The BBBEE Amendment Bill

Key Issues on the BBBEE Amendment Bill:

BBBEE compliance and Verification

•Companies the world over are required to report using certain internationally accredited standards•Such reporting is often a listing requirement and a license to operate in many economies•Examples would be compliance with International Financial Reporting Standards, compliance with the Global Reporting Initiative which promotes economic sustainability•We believe that all companies operating in South Africa should equally be required to report annually on transformation•Company reporting is currently regulated by the Independent Regulatory Board of Auditors and it is our submission that reporting on BBBEE should be regulated by this internationally regulatory body•SANAS is an inappropriate body to accredit BBBEE and as a result this status has relegated the status of BBBEE compliance to being not an important area of consideration by corporate South Africa

The BBBEE Amendment Bill

Key Issues on the BBBEE Amendment Bill:

BBBEE Sector Codes

•BBBEE legislation and its regulations are meant to provide policy certainty throughout al the sectors of our economy•Whilst we appreciate the partnership relationship that Government is seeking to achieve through encouraging various sectors to develop their own BBBEE charters, we believe that the unintended consequence of this is that it has created further confusion in the market place and has allowed sectors to develop substandard targets for themselves•We submit therefore that the generic BBBEE Codes should at a minimum be the benchmark for every sector to comply with and best we submit that sector Codes should be completely done away with as the negate the very objective of policy consistency and ability to uniformly determine the level of transformation throughout the economy

Transformation in Investment Management Industry

• Investments management assets total R3 trillion• Black Owned and Black Managed investment management firms manage less

than 3%• 18 years after the advent of democracy

• Gender equity in the investment management industry severely lacking• Gatekeepers in the industry generally rely on

• “big is best”• “big is safe” • “show us a track record on your own”

to the detriment of black owned and managed investment management firms• BBBEE Act and Amendment needs to be amended to include all gatekeepers

in the investment management industry (Gatekeepers are defined as: retirement funds and its trustees, asset and actuarial consultants, multi-managers, LISP platform providers, employee benefits service providers etc.)

• The retirement funds are not a signatory to the Financial Sector Charter• This is a significant setback for economic development and poverty alleviation

BBBEE Amendment Bill

CONCLUSION:• We call upon legislators to apply

their minds and ensure that South Africa builds a just and equitable society and deliver economic justice…there is no other way

• THANK YOU!