review of broad based black economic empowerment act and codes of good practice 27 january 2012 27...
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REVIEW OF BROAD BASED BLACK REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT and ECONOMIC EMPOWERMENT ACT and
CODES OF GOOD PRACTICECODES OF GOOD PRACTICE
27 JANUARY 201227 JANUARY 2012
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Overview
• With the enactment of the BBBEE framework in 2007 government created a legally conducive and enabling environment to transform and build capacity in the economy through broaden the framework :
• Significant progress has been achieved in the direct equity element as evidenced by the number of deal mergers in the past four years.
• Indirect elements have fallen under the radar
• Change the behaviour of how BBBEE is being implemented, through effective monitoring and sanction for non-compliance
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The Presidential Council made the following observations:
• Moderate progress has been observed and noted in other elements.
• Many existing legislations are still misaligned to the principles of the Codes and the BBBEE Act, thus leading to ineffective implementation(Granting of licenses and Procurement)
• Tick box approach and circumvention has become prevalent
• Substantive application and the broad based component lacking
Observations
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• Amendment of B-BBEE Act:
• B-BBEE Fronting
• Regulating BBBEE Verification Industry
• Clarifying the status of the Sector Codes
• Alignment of the BBBEE Act to other key pieces of legislation and other policy instruments ( e.g. PPPFA, NGP, IPAP and Mining Charter )
• Refinement of the Codes of Good Practice
• Monitoring and evaluation of BBBEE
• Establishing a BBBEE Commission
Key Interventions
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Key intervention
Key Challenge:• Non-alignment of key pieces of legislation and other policy
instruments to B-BBEE policy thus leading to non-coherence when it comes to application across government, e.g. procurement and granting of licence
Proposed Solution: Policy Alignment and Harmonisation
• Alignment of the B-BBEE primary legislation to other key pieces of legislation and other policy instruments (e.g. NGP, IPAP, PPPFA, MINING ETC)
• BBBEE Act to be the overarching framework for BBBEE(mitigate conflict in law)
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Proposed solution: cont..
• Transfer of general principles from the Codes to the BBBEE
Act, including the concept of the balance score-card receiving express recognition in the Act;
• BBBEE Act to have trumping provision over other conflicting provisions in Legislations dealing with empowerment;
• Clarify the status of the BBBEE Codes and Sector Codes to ensure proper application across all spheres of Government and public institutions and the private sector;
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Gazetted in terms of section 9 (1) (Legal Code)
• Tourism
• Construction
• Construction
• Integrated Transport
• Chartered Accountancy
Gazetted in terms of Section 9 (5): (Public commentary)
• Property
• Financial Services Charter
• ICT
Gazetted in terms of Section 12(Statement of Intent)
• MAC
• AgriBEE Charter
GAZETTED SECTOR CODESGAZETTED SECTOR CODES
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Key intervention Key Challenge:
• Circumvention of the B-BBEE Codes (Fronting) The sophistication of fronting practices has necessitated the need to amend the legislation and to strengthen enforcement in this area.
Proposed Solution:
• Inclusion of specific statutory offences involving fronting and other forms of fraudulent misrepresentation of empowerment status and the specification of penalties and blacklisting of entities and/or management for those offences.
• Empowering the Special Investigation Unit to investigate all offences involving fronting or corruption with regard to the application of the Codes of Good Practice(for both public and private sector).
• Collaboration between the dti and National Treasury
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Key Challenge:
• Non regulated BEE Verification Industry, leading to opportunistic tendencies and lack of accountability
Proposed Solution (Administration and Institutions)
• Extend the mandate of the Independent Regulatory Board for Auditors as the institution with the responsibility for registering and regulating verification agencies.
• Specify provisions to regulate the verification industry by amending the Audit Professions Act
• Specifying the issues on which the Minister is empowered to propose regulations
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KEY AMENDMENTS TO THE ACT
Administration and institutions
• Establishing an BEE Commission to deal with complaints concerning BBBEE transactions and other matters related thereto, including but not limited to fronting, noting of transaction advocacy, research etc .
• The Act will specify the h jurisdiction of the Commission and the threshold applicable to transactions.
• It is envisaged that the jurisdiction of the Ombudsman will be limited to transactions involving substantial value.
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Key Challenge:
• Lack of proper implementation by Government departments, Public entities, and Private sector
Proposed Solution:
• Strengthen Monitoring and Evaluation of B-BBEE
• Organs of State, public entities and other enterprises to prepare BBBEE plans and to report on compliance with such plans.
• All spheres of Government and public entities to submit regular reports on their compliance to B-BBEE annually;
• HODs and CEOs of the public entities must have a performance obligation to report on the implementation of B-BBEE and to be part of Ministries/Departments Performance Agreements
• Private Sector to include BBBEE reporting in the Sustainability Reports
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CODES OF GOOD PRACTICE
The proposed refinement of the Codes will entail inter alia:
• setting sub-minimums/threshold for each element;
• Enterprise Development(ED) and Procurement to be elevated with each requiring sub-minimum and enhanced recognition for ED targeted at key sectors in IPAP and NGP;
• The appropriate integration of financial and non-financial support services is critical in ensuring the success of some of the funding interventions by both the public and the private sector.
• The scorecard to be broadened to include designated groups in the main points;
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• Alignment of the Employment Equity element to the Employment Equity Act: (Targets, reporting periods, and definitions)
• Align reporting times and Methodology EEA and BBBEE
• Skills Development Element to be aligned to the New Skills Development Strategy(NSDSIII, NGP) and to be outward focused
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THANK YOU