Government’s strategy for Broad-based Black Economic Empowerment

1. Government’s strategy for Broad-basedBlack Economic Empowerment

2. B-BBEE Strategy • B-BBEE Act • Review of Strategy • Old scorecar vs New scorecard • Concerns & Risk around BEE • COGP as a BEE implementation framework • COGP Structure • Debates around BEE • BEE Support • NEF • Other Support • Conclusion Overview

3. B-BBEE Strategy • B-BBEE Strategy document released in March ’03; • B-BBEE Act no. 53 of 2003; • Codes of Good Practice;

4. B-BBEE Strategy (Cont.) A process that: • directly contributes to the economic transformation of South Africa; • brings about significant increases in the numbers of black people who manage, own and control the country’s economy; and • Results in significant decreases in income inequalities

5. The broad objectives of this initiative are • Contribute towards economic transformation and growth • Ensuring an increased participation of Blacks in the economy. • Ensure optimum intermediation of finance and capital from Black households and redirecting these towards productive investments that benefit the same communities. • Ensuring state assets are allocated first to Black Entrepreneurs and as such remain in the hands of SA citizens. B-BBEE Strategy (Cont.)

6. Core elements Weightings Ownership 20 % Management 10 % Skills Development 20 % Employment Equity 10 % Preferential Procurement 20 % Enterprise Development 10 % Residual 10 % B-BBEE Strategy (Cont.)

7. THE B-BBEE ACT KEY ELEMENTS • Setting clear objectives for broad based empowerment • Enabling framework for Codes of Good Practise • Creation of a BEE Advisory Council • Legislative endorsement for sector Charters

8. Review of Strategy • Public hearings held in 2003 where inputs into draft strategy were made • Such changes have been incorporated into new revised strategy • Revised strategy to be issued together with the codes of good practice • Revised strategy to include new scorecard

9. Old scorecard vs New scorecard

10. Current Concerns and Risks around Broad-based BEE Process • Inconsistent application of BEE – by private sector and different state organs resulting in confusion in the market • Lack of full understanding and appreciation of the principles of broad-based BEE – People interpret and apply BEE principle to meet their own requirement • Extensive debates and delays due to differences in interpretation - Market participants debate specific BEE issues 4. Disparity in Charter Definitions and Targets – Results in dilution/negation of potential B-BBEEE impact 5. Lack of Implementation Guidelines can result in ‘Fronting’ or ‘Sham’ transactions promoted

11. Code of Good Practice as the BEE Implementation Framework Broad-based BEE Act No. 53 of 2003 Legislative Enabling Framework Broad-based BEE Strategy Strategic Framework Codes of Good Practice Implementation Framework and Guidelines Generic or Sector-specific BEE Scorecards Interpret BEE Definitions Set BEE Indicators, Weightings and Targets Guidelines to draw up BEE charters Guidelines to maintain Institutional Framework (BEE Council /Accreditation Agencies)

12. Each Code explains all issues pertaining to a key BEE element and can consist of one or more statements A Statement include a related set of principles that guides the implementation of one BEE issue Code of Good Practice Phase 1 Code 000: Framework Statement 000: Conceptual Framework Code of Good Practice (Structure) Statement 020: Charter Guidelines Code 100: Ownership Statement 030: BEE Council Code 200: Management Statement 070: Broad-based BEE Implementation Code 300: Employment Equity Statement 090: Glossary Phase 2 Code 400: Skills Development Statement 100: Ownership Code 500: Affirmative Procurement Code 600: Enterprise Development Statement 140: Government Ownership Code 700: CSI and Industry Specific Statement 200: Management Code 800: BEE Practice Notes

13. Preferential Procurement Policy Framework Act • Changes made to the PPPFA regulations in order to align them with the B-BBEE strategy • Use of balanced scorecard in determining preference points • Minimum BEE points required for preference points to be given • Move from narrow-based to broad-based BEE in determining preference points • Next to review the PPPF Act to align it with the B-BBEE Act

14. BEE Support • Relaunch of the NEF on 31 May 2004 • Products with focus on addressing market failures • R2bn capitalisation from National Treasury • Leadership problems experienced • Fraud allegations quickly and decisively dealt with • Reconstitution and strengthening of management structures

15. Group and entrepreneurial schemes • Black SMME sector • Community and rural development projects • Start-ups, expansion and buy-ins/outs • Debt and/or equity funding • Funding of R250k –R10m NationalEmpowerment Fund

16. Contact details - (011) 772 8000 • -Group and entrepreneurial schemes • SMME sector • Community and rural development projects • -Start-ups, expansion and buy-ins/outs • -Development projects • Debt and/or equity funding • Funding of R250k –R10m NationalEmpowerment Fund

17. Khula Enterprise Finance • Industrial Development Corporation • Small and Medium Enterprise Development Programme • Black Business Supplier Development Programme Other Support

18. the dti coordinates and provides strategic input and leadership in the drafting process of the transformation charters for seven priority sectors for BEE: • Financial service charter; • Transport and maritime charter; • Agriculture charter; • Auto and Aerospace Industry Charter; • ICT charter; • Construction Services; • Engineering Services; Transformation charter process

19. 7 Sub-Sectors Public -proclamation of charter Phase 1: consultation and early negotiation and draftting Phase 2: advanced stage of negotiation and drafting Phase 3: almost complete stage of negotiation and drafting Financial Service charter Transport Services charter Automobile charter ICT charter Agriculture sector charter Engineering service charter Construction sector charter Last Phase: Submission of draft to Advisory Council for comments and ratification – dti to publish charter after ratification FSC-Negotiations and drafting of the charter almost completed. Still working on targets. Charter council appointed • June 2005 is a deadline date for the formulation of all charters. • Submission of drafts to the Advisory Council for comments and ratification. • dti to publish charters after ratification. • Dti to gazzette all charters • Implementation, Monitoring & Evaluation process Transformation Charter Process, cont. Transport service charter: All 8 sub-sectors have completed negotiation on balanced score card. 80% of work is done and with 20% remaining. • Automobile sector charter: • Task team established • Negotiations are at the early stage • Seven OEMs are drafting their enterprise charters with scorecards • Components & Retail drafting sub-sector charters ICT- Negotiations and drafting almost completed. Still to appoint charter council. Ready to submit the draft to the line dept. Agriculture- Negotiations and drafting still continuing. Consultation process being undertaken with stakeholders to ensure inclusivity. Engineering Services Charter-??? Construction sector charter-negotiations and drafting almost completed. Still to appoint charter council.

20. Additional Sectors developing charters - dti providing technical advice and leadership as well: • Property sector charter; • (consultation process completed, negotiation and drafting started) • Cosmetics and toiletry sector charter; • (consulting with all stakeholders and starting negotiation and drafting) • Clothing and Textile Footwear Manufacturing charter; • (consulting with all stakeholders and starting negotiation and drafting) • Pharmaceutical Manufacturing; • (consultation process completed, negotiation and drafting is at advanced stage) • Advertising, Marketing and Communication charter; • (drafting of the charter is completed-to be presented to parliament, dti and charter council for ratification) • The South African Institute of Chartered Accountants charter • (consultation process completed, negotiation and drafting is at advanced stage) • Health sector charter process; • (consultation process still to take place, task team appointed, develop framework-early phase of negotiation and drafting of charter) Transformation charter process, cont.

22. The benefits of empowerment should be shared across society and impact as widely as possible • The Strategy aims to mobilize all South Africans to support BEE as an integral component of economic stability and of efforts to increase South Africa and the regions productive capacity. • Partnership initiatives are thus critical. • Since the adoption of the broad-based BEE strategy much has been achieved: • Sixty two BEE deals in 2003 , valued @ R 21.2 b Conclusion