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UNDERSTANDING BEE

AMENDED CODES TRAINING SESSION

OVERALL TABLE OF CONTENTS

1. B-BBEE Amendment Act 46 of 2013History; Key Changes; Key Definitions; Offences and Penalties

2. Problem StatementObjectives in DTI’s own words

Economic Impact of the Thresholds

Objectives- Envisaged modus operandi / whirl – wind effect

3. Key Framework Matters3.1 Priority Elements3.2 QSE’s3.3 Recognition Levels + Qualification Criteria3.4 Overall Scorecard3.5 Discounting Principle

4. Elements• Scorecards• Key Issues• Key Changes• Key Formulae• Key Calculations• Documentary Evidence Checklists

5. QSE6. Specialised Scorecard

NEW BEE ACT: EMPOWERMENT AMENDMENT ACT 46 OF 2013

Material Amendments

• Aligning the Act and the codes

• Introduction of a trumping clause

• Creating the B-BBEE Commission

• Specifying requirements re: monitoring, evaluation & reporting

• Introducing offences, penalties & prohibitions

• Introducing the concept of “B-BBEE Verification Regulator &

Verification Professionals”

• Clarifying & extending Minister’s power to make regulations

(faster effection and implementation of fraud-busting measures)

Definitions

Introduction of/amendment to the following definitions (must know)

• ‘B-BBEE Initiative’

• ‘broad-based black economic empowerment’

• ‘black people’ (amendment incorporated from code)

• ‘Commission’

• “fronting practice”

• ‘knowing’, ‘knowingly’ means:

• Having actual knowledge

• Was in a position where ought to have

• Known

• Investigated; to know

• Taken other measures; to know

Aligning the codes and the Act

• Minister may allow organs of state and public entities to set criteria for

procurement & other economic activities that exceed those set out in

the codes;

• Every organ of state must take into account any relevant code of good

practice in terms of this Act;

• An enterprise in a sector with an issued sector code may only be

measured for B-BBEE compliance in line with that code;

• Enterprises required to report annually on B-BBEE compliance to sector

councils and BEE Commission

Offences, penalties and prohibitions• Knowingly providing false information to the Commission

(see proposed definition of “knowingly”)

• Misrepresenting the B-BBEE status of an enterprise

• Providing false information or misrepresenting information to a B-BBEE verification professional in order to secure a particular B-BBEE status

• Providing false information or misrepresenting information relevant to assessing the B-BBEE status of an enterprise, to any organ of state or public entity

• Engaging in a ‘fronting practice’ (as defined in s1)

• Failing to report an offence by verification professionals, procurement officers or other officials of an organ of state or public entity)

• Subsection 1 Penalty (Knowingly committing an offence)

• Maximum penalty 10 years imprisonment (and/or a fine),

• If the offender is not a natural person, maximum fine of 10% of its annual turnover

• Subsection 2 Penalty (offence relating to the Commission, or for a failure to report):

• Maximum penalty is 1 year imprisonment (and/or a fine)

REVISED CODES OBJECTIVES

Problem Statement

Triple Socio-Economic Challenge:

Poverty

Inequality

Unemployment

Triple Macro- Economic Challenge

Trade Deficit (Net importer; Insufficient Production)

Insufficient economic growth

High Budget Deficit

Objectivesin DTI’s own words

o To change SA culture to be supportive of entrepreneurship and diversification of value chains

o Concerted effort in linking B-BBBE with other government economic development strategies such as IPAP, CSDP, New Growth Path, etc. (the real economy)

o Focus on Businesses and industries that result in significant job creation and addressing of socio-economic challenges

o Empowerment efforts should result in the promotion of a culture of venturing into new territories, operational excellence and risk taking

o Symbiotic relationship between the public and the private sector and amongst private sector players, and large and small enterprises to unlock opportunities

Economic Impact of the Thresholds

SIZE OF THE COMPANY

Survivalists, Micro and Very Small

QSE (R 10 m to R 50 m)

Large ( More than R 50 m)

878 032

34 118

11 871

NO % BEE compliance

No compliance

Relaxed compliance

Full Compliance

95 %

3%

2%

SOURCE: SARS 2012

• Above companies include only current active filers/ economically active companiestotalling 924 021

• Up to 95% of all economically active companies exempted from B-BBEE compliance

• Companies that are expected to comply with the generic scorecard represent 2% of allactive fillers

• Softer landing for 3% = QSE’s

Objectives

Envisaged modus operandi / whirl – wind effect

Objectives:

To eradicate:

Poverty, Inequality,

Unemployment

Trade Deficit

Government Policy

Documents:

ASGI_SA, NIPF, IPAP,

CSDP, NIPP/NDP?

Favored Strategies

Supplier development, Localization,

Entrepreneurship promotion Symbiotic relationships

Job creation

Key Means / Policy

Emphasis:

Good governance, Economic

growth, Operational excellence,

Competitiveness, Development,

Productivity & Industrialization

ELEMENT SUMMARIES

Overall Framework and related issues All organs of state and public entities now measureable under the Codes

o No longer limited to schedule 2 &3

Introduction of Priority elements Generics

Ownership(OC), Skills Development and (SD) & Enterprise & Supplier Development(SED)

Discounting of BBBEE status by 2 levels:

On non-compliance with threshold requirements for any above elements results

OC- 40% of Annual NET Value Target

SD- 40% of the target

ESD- 40% of the target set out in 2.1.1, 2.1.2 and 2.2.2

QSEs

o Discounting of BBBEE status by 1 level on non-compliance with threshold requirements for OC and SD OR ESD

o Eligibility as QSE

o Threshold changed from R5-R35m to R10m-R50million

o Have to comply with all elements of the scorecard

Discounting Principle

Introduction of Priority Elements:

Ownership (OC),

Skills Development (SD)

Enterprise & Supplier Development (ESD)

Discounting of BBBEE status by 1 level if non-compliant

On non-compliance with threshold requirements for any above elements:

OC- 40% of Annual NET Value points

SD- 40% of the points

ESD – 40% of the target set out in

2.1.1- Procurement

2.1.2 - Supplier Development

2.2.2 - Enterprise & Supplier Development

OWNERSHIP

OWNERSHIP INDEX

Measurement CategoriesOwnership Measurement categories1 General Measurement Principles

2 Flow through & Modified Flow Through Principles

3 Exclusion Principle

4 Foreign Companies

5 Economic Interest

6 Voting Rights

7 Acquisition debt

8 Net Value

9 B-BBEE Participants

9.1 Natural persons

Individuals,

New Entrants

Designated Groups

9.2 Juristic persons

Companies

Non-profit Companies

rusts, ESOPSs, Broad Based Schemes

Discounting principleOwnership Measurement categories

9.3 Others

Mandated Investments

Private Equity Funds

Equity Equivalents

BEE Facilitators

Sale of assets

Foreign Operations

10 Other considerations / Complex Structures

10.1 Complex Structures

10.2 Recognition of Ownership after sale or loss of sharesby black participants

11 Consolidated Scorecard

12 Unincorporated Joint Venture

Ownership Scorecard

Indicator DescriptionWeighting Points Compliance

Target

2.1 Voting

Rights

2.1.1 Exercisable Voting Rights in the Entity in

the hands of Black people4 25%+ 1 Vote

2.1.2 Exercisable Voting Rights in the Entity in

the hands of Black women2 10%

2.2 Economic

Interest

2.2.1 Economic Interest in the Entity to which

Black people are entitled4 25%

2.2.2 Economic Interest in the Entity to which

Black women are entitled2 10%

2.2.3 Economic Interest of any of the following Black natural people in the Measured

Entity

2.2.3.1 Black designated groups; 3 3%

2.2.3.2 Black participants in Employee Share

Ownership Programmes;

2.2.3.3 Black people in Broad-based Ownership

Schemes;

2.2.3.4 Black participants in Co-operatives

2.2.4 New Entrants 2 2%

2.3 Realisation

Points

2.3.1 Net Value8

Refer to

Annexure C

25

Ownership Key Issues

Increased the Weighting of the scorecard from 20 to 25 points

Introduced discounting if threshold not met of 40% on Net Value annual targets

Ownership is one of the priority elements

(If threshold not achieved entity will still score whatever actual points achieved BUT the overall score will be discounted)

Consolidated ownership fulfilment and net value points

(previously separate points)

May only choose either MFT or Exclusion Principle; not both

Modified flow through may only be applied once in the entire structure, and not once in every chain of ownership

Enhanced the Private Equity provisions

to help bolster black ownership and management thereof

Enhanced the Equity Equivalent provisions To introduce more flexibility and align with National Imperatives

Only South African based regulated investments qualify as Mandated Investments

Sale of assets – Once empowered always empowered if meeting criteria –

sale of separately identifiable related business: assets, business or equity instrument.

Ownership Key Issues Conti... The element does not incorporate bonus points (previous bonus point areas, being

New Entrants and Marginalised Participants have been elevated to actual point

areas)

New entrants threshold increased from R20 million to R50 million

Discretionary family trusts are now permitted.

There is still no discretion permitted on Broad Based schemes

Broad-Based Ownership Schemes

Ministerial Technical Task Team set up to:

• Explore the appropriate balance between active and passive ownership.

• Table recommendations in that regard.

• Recommendations to be used to make further pronouncements or

amendments to the ownership scorecard

Key Indicators/ Assertions

The Ownership Element deals with 7 major assertions (i.e. the verification objectives):

To determine whether the measured entity meets the criteria under the Ownership element of B-BBEE the Verification Professional shall:

Obtain sufficient and appropriate evidence proving that the calculation of Net Value is accurate and prepare a report detailing the method used in the findings.

Obtain sufficient and appropriate evidence proving that the Exercisable Voting Rights and Economic Interest in respect of shares carrying preferred rights are properly allocated and classified.

Obtain sufficient and appropriate evidence proving that the calculation of Designated Group is not misstated by the Measured Entity.

Obtain sufficient and appropriate evidence proving that ownership in the hands of Black People in relation to complex structures, sale of assets and equity equivalents is dealt with appropriately.

To establish proof as evidence that the measured entity meets the criteria under the Ownership element, the B-BBEE Verification Professional shall inter alia:

Obtain sufficient and appropriate evidence to ensure transfer or issue of equity rights can be verified through appropriate legal and statutory documentation.

Obtain sufficient and appropriate evidence to determine effect of any third party rights that may be attached to the equity instruments held by the black participant.

Determine the accuracy of the scorecard.

For beneficiaries that are listed as black trace the beneficiaries to sufficient and appropriate evidence that the natural people who are beneficiaries qualify as Black People in terms of the TSC.

Document Checklists

OWNERSHIP

Issue/Document Details

Shareholding lists

Structure Shareholding Organogram /

Effective ownership structure

Register& Share register - Measured and all intervening companies

Certificates Share certificates - Measured and intervening entities

Share Categories List and claim details with all special shareholders:

Exclusions/ Participants Special Inclusions

Cross-cutting

CIPC Registration

Certificate

CK1/2 or CM1 of all intervening companies

Memorandum of Incorporation / Articles and Memorandum of Association together with all

resolutions effecting changes to these documents

Shareholders’ Minutes/

Attendance Registers

Minutes of the last 2 shareholders’ meetings

(Especially attendance registers)

IDs Certified copies of individual black shareholder’s IDs (Measured entity and all intervening

companies)

Shareholders

Agreement/ MOI

Key clauses covering all assertions to be verified (e.g. transaction amount, special

conditions, value, voting rights, cession,

Transaction details Share purchase / sale / subscription agreement

Flow-through Proof Proof of ultimate full ownership by individual Black Shareholders

Economic Interest MOI / Shareholders Agreement; key clauses on voting, special condition, condition

precedent AFS, Loan Agreement condition, cession, Minutes/ Attendance register, vesting

conditionsVoting Rights

Document ChecklistsOWNERSHIP

Issue/Document Details

Valuation

Value Company valuation (Independent or company)

Financing Financing agreement and summary; Written declaration by ME

Loan balance Proof of outstanding balance on any loan associated with purchase; sworn affidavit from

black shareholders on the current ownership and acquisition debt status, Debt valuation

Net Value Net value report and proof of accuracy, publicly traded price proof

Substance vs form

3RD Party Rights Service level agreements between company and black shareholder/s

Cession Cession agreements

Preference shares Proof of correct calculation of Voting Rights and Economic Interest

Other Other key agreements to determine substance over form

Exclusions NB 40% limit calculation, Preference independent competent person report

Organs of State PFMA Schedule listing; founding Act; AFS, Share Register

Mandated Investments Competent person’s report / Share Register, Proof of value assigned, status

Non-Profit Company Competent person’s report / Share Register, Proof of value assigned, status

Foreign Operations Proof of correctness of calculation, Independent competent person’s Report, AFS,

Segmental Analysis

BEE Participants

New Entrants Evidence of new entrant status declarations by black shareholders

Document Checklists

OWNERSHIP

Designated Groups Declaration by Black Participant ME

Unemployed UIF Rewards, Bank Account record, Letter from the Chief

Youth ID, Birth certificate, Letter from the Chief

People with Disabilities Medical certificate, Social Services grant registration proof

Living in Rural & Under-

developed areas Proof of address; GPS maps, Municipal Maps

Black Military Vets Qualification ito the Military Vets Act 18 of 2011

Juristic Persons NB BEE certificate preferable

Companies BEE Certificate, CIPC certificate

Non profit companies CIPC certificate

Personal trusts Trust Deed, Constitution, Declaration

Broad-Based Trusts

Trust deed Trust deed of any trust holding shares in enterprise

Including proof of registration / lodgment

Trustee list Trustee list and Chairperson at measurement date

(name. race, gender, nationality, independence status)

Beneficiary list Beneficiary list at measurement date

(name. race, gender, nationality, independence status)

Share of interest in income and capital

Proof of flow-through interest in income and capital

AFS Financial statements of the trust

Affidavit

Competent Person’s report

Trust Affidavit / Competent person’s report

That trust established for legitimate commercial reason

IDs Beneficiaries Certified copies of IDs: Beneficiaries (Participants)

IDs Trustees Certified copies of IDs: Trustees

Special trusts Proof of compliance with requirements of annex 100B

MANAGEMENT CONTROL

MANAGEMENT CONTROL INDEX

1 Management Control Scorecard

2 Key Issues

3 Calculations Steps

4 QSE Scorecard

Management Control ScorecardCRITERIA WEIGHT TARGET

BOARD PARTICIPATION

2.1.1 Exercisable Voting Rights of black Board members as a percentage of all Board 2 50.00%

2.1.2 Exercisable Voting Rights of black Female Board members as a percentage of all Board 1 25.00%

2.1.3 Exercisable Voting Rights of Executive black Board members as a percentage of all such

employees2 50.00%

2.1.4 Exercisable Voting Rights of Executive black Female Board members as a percentage of

all such employees1 25.00%

2.2 Other Executive Management:

2.2.1 Black Executive Management as a percentage of all such employees 2 60.00%

2.2.2 Black Female Executive Management as a percentage of all such employees 1 30.00%

2.3 Senior Management:

2.3.1 Black employees in Senior Management as a percentage of all such employees 2 60.00%

2.3.1 Black female employees in Senior Management as a percentage of all such employees 1 30.00%

2.4 Middle Management:

2.4.1 Black employees in Middle Management as a percentage of all such employees 2 75.00%

2.4.2 Black female employees in Middle Management as a percentage of all such employees 1 38.00%

2.5 Junior Management:

2.5.1 Black employees in Junior Management as a percentage of all such employees 1 88.00%

2.5.2 Black female employees in Junior Management as a percentage of all such employees 1 44.00%

2.6 Disabled Employees:

2.6.1 Black disabled Employees as a percentage of all employees 2 2%

TOTAL 19.00

Management Control Key Issues

Combines previous MC & EE

MC highlights

– ARG calculation removed

– Bonus point : independent non-exec director removed

– Top management target up to 60% from 40%

– Combined senior top & other top in top management with

combined points reduced from 5 to 3 points

- No double counting of Black Executive directors & Other Executive Mgt

EE highlights

– ARG not applicable

– Senior, Middle & Junior management : compliance targets based on demographicrepresentation of black people ((A/C/I)

– EAP targets bonus points removed

– Sub-minimum removed

- Current payroll data must be used

Mgt Control Calculation Steps

FORMULA 1 – Calculating points for Black People in junior, middle & senior mgt

STEP 1 – Calculate the percentage black employees in senior, middle or junior management as a percentage of all senior, middle or management

STEP 2 – Adjust the EAP to remove white people (adjusted EAP)

STEP 3 - Proportional EAP Split Target (SCT)

STEP 4 - Maximum Allowable Points Formula (MAP)

STEP 5 - Score per race group

FORMULA 2 - Calculating points for Black Females in junior, middle & senior mgt

STEP 1 – Calculate the percentage black females in senior, middle or junior management as a percentage of all senior, middle or management

STEP 2 – Adjust the EAP to remove white people (adjusted EAP)

STEP 3 - Proportional EAP Split Target (SCT)

STEP 4 - Maximum Allowable Points Formula (MAP)

STEP 5 - Score per race group

MC Calculations

MC Calculations Formula 1

STEP 1 – Calculate the percentage black employees in senior management as a percentage of all senior management

AM CM IM AF CF IF

Total Black employees in SM

1 1 0 0 0 2

Total employees in SM

8

% of Black employees

12.50% 12.50% 0.00% 0.00% 0.00% 25.00%

MC Calculations Black People Step 2 - Adjusted EAP to remove white employees

A The total population EAP target as per the CEE Report – 2016 EAP

B The total Black population EAP target as per the CEE Report

C The averaging of the total Black population EAP target excluding the White percentages

AM CM IM WM AF CF IF WF

100%

EAP Target 42.10% 5.40% 1.70% 5.60% 35.30% 4.60% 1.00% 4.30%

AM CM IM AF CF IF90.10%

EAP Target 42.10% 5.40% 1.70% 35.30% 4.60% 1.00%

AM CM IM AF CF IF

EAP Target 42.10% 5.40% 1.70% 35.30% 4.60% 1.00%

Divided by EAP Sum 90.10%

Adjusted EAP 46.73% 6.00% 1.90% 39.18% 5.11% 1.11%

MC Calculations Black PeopleSTEP 3 - Proportional EAP Split Target

STEP 4 - Maximum Allowable Points Formula

AM CM IM AF CF IF

Adjusted EAP 46.73% 6.00% 1.90% 39.18% 5.11% 1.11%

Multiplied by the target 60.00%

Split Compliance Target 28.04% 3.60% 1.14% 23.51% 3.01% 0.67%

AM CM IM AF CF IF

Adjusted EAP 46.73% 6.00% 1.90% 39.18% 5.11% 1.11%

Multiplied by the points 2

Max Points 0.93 0.12 0.04 0.78 0.10 0.02

MC Calculations Black PeopleSTEP 5 - Score per race group

AM CM IM AF CF IF

% of Black employees (Step 1)

Divided Split Compliance Target (Step 3)

Multiplied by Max Allowable Points (Step 4)

Total Score

MC Calculations Black Females

Formula 2

STEP 1 – Calculate the percentage black females in senior, middle or junior management as a percentage of all senior, middle or management

AF CF IF

Total Black females in SM

0 0 2

Total employees in SM8

% of Black employees0.00% 0.00% 25.00%

MC Calculations Black Females

Step 2 - Adjusted EAP to remove white

A The total population EAP target as per the CEE Report

B The total Black population EAP target as per the CEE Report

C The averaging of the total Black population EAP target excluding the White percentages

AM CM IM WM AF CF IF WF

100%

EAP Target 42.10% 5.40% 1.70% 5.60% 35.30% 4.60% 1.00% 4.30%

AF CF IF40.90%

EAP Target 35.30% 4.60% 1.00%

AF CF IF

EAP Target 35.30% 4.60% 1.00%

Divided by EAP Sum 40.90%

Adjusted EAP 86.31% 11.25% 2.44%

MC Calculations

STEP 3 - Proportional EAP Split Target

STEP 4 - Maximum Allowable Points Formula

AF CF IF

Adjusted EAP 86.31% 11.25% 2.44%

Multiplied by the target 30.00%

Split Compliance Target 25.89% 3.38% 0.73%

AF CF IF

Adjusted EAP 86.31% 11.25% 2.44%

Multiplied by the points 1

Max Points 0.86 0.11 0.02

MC Calculations Final Scores

STEP 5 – Score per race group

AF CF IF

Actual % of Black female employees (Step 1) 0.00% 0.00% 25.00%

Divided Split Compliance Target (Step 3) 25.89% 3.38% 0.73%

Multiplied by Max Allowable Points (Step 4) 0.86 0.11 0.02

Total Score 0.00 0.00 0.02

CALCULATION OF POINTS – FINAL MEASUREMENT OF SENIOR MANAGEMENT

CALCULATION OF

B-BBEE POINTS FOR THE ELEMENT FORMULA USED SCORE

3.1. Black employees in Senior Management

as a % of all Senior Management SUB-RACE GROUP CALC = 0.55

3.2. Black female employees in Senior Management

as a % of all Senior Management SUB-RACE GROUP CALC = 0.02

MC Calculations

AIC CALCULATION FOR GENERIC ENTERPRISES

Black Employees Calc Black Female Employees Calc

Occupation Level AM CM IM AF CF IF BP Score AF CF IF BF Score

Senior Management12,50% 12,50% 0,00% 0,00% 0,00% 25,00% 0,00% 0,00% 25,00%

SCT28,04% 3,60% 1,13% 23,51% 3,06% 0,67% 25,89% 3,37% 0,73%

MAP0,93 0,12 0,04 0,78 0,10 0,02 0,86 0,11 0,02

Score0,41 0,12 0,00 0,00 0,00 0,02 0,55 0,00 0,00 0,02 0,02

Middle Management 11,11% 0,00% 11,11% 11,11% 11,11% 0,00% 11,11% 11,11% 0,00%

SCT35,04% 4,50% 1,42% 29,38% 3,83% 0,83% 32,80% 4,27% 0,93%

MAP0,93 0,12 0,04 0,78 0,10 0,02 0,86 0,11 0,02

Score0,30 0,00 0,04 0,30 0,10 0,00 0,73 0,29 0,11 0,00 0,40

Junior Management27,27% 18,18% 0,00% 9,09% 0,00% 9,09% 9,09% 0,00% 9,09%

SCT41,12% 5,27% 1,66% 34,48% 4,49% 0,98% 37,98% 4,95% 1,08%

MAP0,93 0,12 0,04 0,78 0,10 0,02 0,86 0,11 0,02

Score0,62 0,12 0,00 0,21 0,00 0,02 0,97 0,21 0,00 0,02 0,23

Disabled Employees1,67%

The MC QSE Scorecard

SUB-RACE GROUP CALCULATIONS NOT APPLICABLE

INDICATOR DESCRIPTION WEIGHT TARGET

1.1 Executive

Management

1.1.1 Black representation at

Executive Management 5 50%

1.1.2 Black female representation at

Executive Management 2 25%

1.2 Senior,

Middle and

Junior

Management

1.2.1 Black representation at

Senior, Middle and Junior

Management

6 60%

1.2.2 Black female representation at

Senior, Middle and Junior

Management

2 30%

TOTAL 15

SKILLS DEVELOPMENT

SKILLS DEVELOPMENT INDEX

1 SD Scorecard

2 Key Measurement Principles

3 SD Calculations

4 SD QSE Scorecard

Skills Development Scorecard

CRITERIA WEIGHT TARGET

2.1.1.1. Skil ls development expenditure on Learning Programmes

specified in the LPM for black people as a % of Leviable Amount8,00 6,00%

2.1.1.2. Skil ls development expenditure on Learning Programmes

specified in the LPM for black employees with disabilities as a % of

Leviable Amount

4,00 0,30%

2.1.2.1. No. of black people participation in Learnerships,

Apprenticeships and Internships as a % of total employees4,00 2,50%

2.1.2.2. No. of black unemployed people participating in training

specified in the LPM as a % of number of employees4,00 2,50%

2.1.3 No. of black people absorbed by the measured and industry

entity at the end of the Learnership programme5,00 100,00%

TOTAL 25,00

2.1.1. SKILLS DEVELOPMENT EXPENDITURE ON ANY PROGRAMME SPECIFIED IN THE

LEARNING PROGRAMME MATRIX FOR BLACK PEOPLE AS A % OF THE LEVIABLE AMOUNT

2.1.2. LEARNERSHIPS, APPRENTICESHIPS, AND INTERNSHIPS

BONUS POINTS

Key Measurement Principles

Introduced a General Principles section

Alignment between the element and government objectives

Introduced a 40% subminimum to avoid discounting of the overall score

Compliance targets based on the EAP demographic representation (A/C/I)

Focus of training black people (not only black employees);

Introduced learner absorption target

Targeted spend is 6% of leviable payroll.

Current category F and G (work based and informal training) is capped at 15%

Non-core training costs like travel & accommodation also included in above 15% cap

International training will be recognised if the training meets SAQA requirements

There is a new Learning Programme Matrix

Sectoral mandatory training such as Health and Safety is excluded

The following pre-requisites need to be complied with in order for a Measured Entity to receive points for Skills Development:

Workplace Skills Plans, Annual Training Reports and PIVOTAL Reports must be developed and submitted before being approved by the SETA. Once the entity has received a notification from the SETA that these have been approved, they are then in compliance with this requirement.

Implementation of Priority Skills (scarce&critical) programme generally, and more specifically for Black people.

BONUS POINTS for absorption - This measures the organisation’s ability to secure permanent or long term contract employment for the learner(s) or to assist the learner(s) proceed with further education and training

Key Measurement Principles

SD Calculations Entity A’s leviable payroll for the measurement period under review is R 5 250

000.00. At the end of the Measurement Period, the entity had 66 employees. The company employed the 2 African female unemployed learners upon completion of their programme.

They spent the following on training Black employees and unemployed Black people:

PROGRAMME AM CM IM AF CF IF

Skills Programmes:

First Aid R 44 500 R 25 000 R 40 500

MS Office R 14 500 R 14 500 R 14 500

Pastel (African disabled employee)

R 19 000

Forklift Training R 100 500 R 18 500

MS Excel (Indian disabled employee)

R 16 750

Total R 145 000 R 18 500 R 41 750 R 74 000 R 14 500 R 14 500

% of Leviable pay

Total Black Spend as a percentage of Leviable payroll:

Learnerships/ Internships/ Apprenticeships:

Employed 1 1 1 1

Unemployed 1 2

% Representation (out of 66) 3.03% 1.52% 4.55% 1.52%

SD Calculations

Same 5 step sub-race group calculation methodology applicable

Step 1: Calculate the percentage spend on black people as a percentage of leviablepayroll

AM CM IM AF CF IF

Skills SpendR 145 000 R 18 500 R 41 750 R 74 000 R 14 500 R 14 500

Leviable Payroll R 5 250 000

% of Leviable Payroll

SD QSE Scorecard

INDICATOR WEIGHT TARGET

1.1 Skills development expenditure on learning

programmes specified on the learning programme

matrix for black people as a % of leviable amount

15 3%



matrix for black women as a % of leviable amount

7 1%



matrix for black people with disabilities as a % of

leviable amount

3 0.15%

BONUS POINTS

1.4 No. of black people absorbed by the measured

entity and industry at the end of the learning

programme

5 100%

TOTAL 25

ESD Scorecard

ESD INDEX

1 ESD Scorecard

2 PP Key Changes

3 ES Requirements

4 ES Document Checklist

5 Considerations on Enhanced Recognition

6 Rules of Imports

7 Designated Sectors

8 PP Document Checklist

9 ESD Scorecard

10 ESD Key Changes

11 ED & SD Doc Checklist

12 The QSE Scorecard

ESD Scorecard

Preferential Procurement: Weighting

points: Target:

B-BBEE Procurement Spend from all Empowering Suppliers based on the B-BBEE Procurement

Recognition Levels as a percentage of Total Measured Procurement Spend.

5 80%

B-BBEE Procurement Spend from all Empowering

Suppliers that are Qualifying Small Enterprises based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement

Spend.

3 15%

B-BBEE Procurement Spend from all Empowering Suppliers that are Exempted Micro Enterprises

based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend.

4 15%

B-BBEE Procurement Spend from all Empowering Suppliers that are at least 51% black owned

based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend.

9 40%

B-BBEE Procurement Spend from all Empowering

Suppliers that are at least 30% black female owned based on the B-BBEE Procurement

Recognition Levels as a percentage of Total Measured Procurement Spend.

4 12%

Bonus Points

B-BBEE Procurement Spend from Designated Group Suppliers that are at least 51% black

owned.

2 2%

TOTAL excluding bonus points 25

TOTAL incl bonous points 27

Preferential Procurement Key Changes

• Only Empowering Suppliers (ES) qualify to contribute to the PP scorecard,

• Measured in 4 indicators, generic companies need to comply with at least 3, and QSE’s 1

• Changes to permissible Exclusions: (esp. Imports)

• Threshold requirement: Must achieve minimum of 40% of the targets for (all 3)

• B-BBEE Procurement Spend on All Empowering Suppliers; and

• Supplier Development Contribution; and

• Enterprise Development Contribution.

Considerations on Enhanced Recognition

BO EME/QSE and 3 year contract – 1.2 x

SD beneficiary and 3 year contract – 1.2 x

First Time supplier – 1.2

Rules For Imports

The following goods and services may be excluded:

(a) Imported capital goods or components for value-added production in SA provided that;

(i) There is no existing local production of such capital goods or components; and

(ii) Importing those capital goods or components promoted further value-added production in SA.

(b) Imported goods and services other than those listed above if there is no local production of those goods or services including, but not limited to, imported goods and services that:

(i) Carry a brand different to the locally produced goods or services; or

(ii) Have different technical specifications to the locally produced goods and services.

(c) The exclusions of imports listed under section (b) above are subject to them having

developed and implemented an Enterprise Development and Supplier Development plan for

imported goods and services.

Designated Sectors

Companies that import goods that have been designated by the Minister of the DTI for local production cannot exclude the value of these imports from Total Measured Procurement Spend – see page 65 of the manual for the updated list

PP Document ChecklistPREFERENTIAL PROCUREMENT

Issue Description / Details

Lists/Claim

BEE suppliers

List of BEE suppliers: names and contact details

Management Representation letter (on completeness of expenses)

Exclusions List of all excluded procurement, reasons& related spend

Procurement worksheet

Spreadsheet calculation of BEE procurement

including all relevant BEE multipliers for each supplier

TMPS

Proof of total measured procurement spend –

Cost of sales

Operating expenses

Capital expenses

Exclusions

AFS (Detailed income statement / Trial Balance / Cash-flow statement)

Evidence

B-BBEE status B-BBEE certificates / Affidavits / CIPC certificates

Creditors LedgerCreditors’ Ledger for measurement period

Specific InclusionsEvidence of all Critical Inclusions??? (Refer Inclusions Schedule)

(Public Sector / Monopolies / Pass-through from Labour Brokers / Imports)

Exclusions

Proof of excluded procurement spend

Supplier letters

Competent person’s reports

Motivation letters

Invoices and proof of payment

Management Representation Letter

Import Exclusions

Importer Registration Certificate

VAT declaration from SARS

Management Representation letter on the reasons for exclusions

Localization plan

Proof of implementation of Localization plan

Plans submitted to previous verifier where applicable

Evidence of meeting 1 of 5 criteria

Expenditure Confirmation Supplier invoices

Proof of payment

Creditors ledger

Enhanced Recognition: Management Representation letter, Contract, Previous year’s PP Spreadsheet, Proof of Payment

E.D Beneficiary See ED Section: Acknowledgement or receipts, Value Proof, Proof of activity, Previous BEE Report, Proof of payment, Blackness proof, ED Agreement

First Time SupplierContract, Previous year’s PP Spreadsheet and Ledgers, Management Representation letter

Designated Group Status Refer to Ownership Section 8 (a) to (d)

Enterprise & Supplier Dev Key Changes

• Annual calculation method only

• Bonus points introduced

• Only > 50% (At least 51% BO) BO EME’s and QSE’s qualify as eligible

ED Beneficiaries (Category B deleted);

• Requirement for an “Enterprise and Supplier Development Plan”

• Points and target split between “Enterprise” & “Supplier”

Development

• Shorter payment period points calculation changed

• Shorter Payment Periods points limited to 15% X 15 (10) points =

2.5 (1.5) points

• Enterprise Development now integrated within Preferential

Procurement

ED & SD Document ChecklistENTERPRISE & SUPPLIER DEVELOPMENT

Issue Description / Details

Lists

Contributions List of qualifying contributions made, by category

Evidence

Benefit MatrixJustification of the benefit as per benefit matrix

NPAT Proof of accurate NPAT calculation over 12 months

NPAT / Indicative

Profit margin applicabilityAFS for NPAT

Industry Norms stats table for indicative profit margin

Agreements Enterprise development agreements determining the relationship with beneficiary

Beneficiary Qualification

Independent competent person’s report / BEE certificates confirming qualification / blackness and size

(QSE or EME) of beneficiary enterprise

Proof of ED objective i.e. ED / SD Plan. Contributed to development, sustainability, and financial and operational independence of

those beneficiaries.

Proof of implementation Proof of execution having taken place

Receipt Confirmation of receipt by beneficiary

PaymentProof of timely payment (Payable be end of measured period).

Nonmonetary contribution Schedule of Rand value determination, with supporting evidence, e.g. timesheets

Proof of no duplicated

claims

Previous measurement period’s ED Claim

Previous BBBEE report / confirmation by previous verifier

Proof of ED Value Proof of payment

Evidence of value calculation

Proof of Supplier Status Invoices / Ledger / Proof of payment

The QSE Scorecard

CRITERIA WEIGHT TARGET

2.1.1. B-BBEE Procurement Spend from all Empowering Suppliers based on the B-BBEE

Procurement Recognition Levels as a % of Total Measured Procurement Spend5.00 80.00%

2.1.2. B-BBEE Procurement Spend from all Empowering Suppliers that are QSEs based

on the applicable Procurement Recognition Levels as a % of Total Measured

Procurement Spend

3.00 15.00%

2.1.3. B-BBEE Procurement Spend from all EMEs based on the applicable Procurement

Recognition Levels as a % of Total Measured Procurement Spend4.00 15.00%

2.1.4. B-BBEE Procurement Spend from all Empowering Suppliers that are at least 51%

black owned based on the applicable B-BBEE Procurement Recognition Levels as a %

of Total Measured Procurement Spend

9.00 40.00%

2.1.5. B-BBEE Procurement Spend from all Empowering Suppliers that are at least 30%

black women owned based on the applicable B-BBEE Procurement Recognition Levels

as a % of Total Measured Procurement Spend

4.00 12.00%

B-BBEE Procurement Spend from Designated Group Suppliers that are at least 51%

black owned2.00 2.00%

2.1. Annual value of all Supplier Development Contributions made by the Measured

Entity as a % of the target10.00 2% of NPAT

2.3.1. Annual value of Enterprise Development Contributions and Sector Specific

Programmes made by the Measured Entity as a % of the target5.00 1% of NPAT

4.4.1. Bonus point for graduation of one or more Enterprise Development

beneficiaries to graduate to the Supplier Development level1.00

4.4.2. Bonus point for creating one or more jobs directly as a result of Supplier

Development and Enterprise Development initiatives by the Measured Entity1.00

TOTAL 44.00

2.1 PREFERENTIAL PROCUREMENT

BONUS POINTS

2.2. SUPPLIER DEVELOPMENT

2.3. ENTERPRISE DEVELOPMENT

2.4. BONUS POINTS

SPECIALISED SCORECARD

SPECIALISED SCORECARD INDEX

Specialised EME

Exempt Micro Enterprises (organisations with an annual total revenue/allocated budget/gross receipts of R 10 million or less)

EMEs are automatically deemed Level 4 contributors UNLESS:

They have at least 75% black beneficiaries -> they will be deemed a Level 1 contributor; OR

They have at least 51% black beneficiaries -> they will be deemed a Level 2 contributor.

Specialised QSE

Specialised QSE Scorecard

Specialised Generic Scorecard

FAITH NGWENYA

B-BBEE MATTERS TO NOTE

EXEMPTED MICRO ENTITIES (EME)

A measured entity that has total revenue of R10 million rand or less on a generic scorecard (not falling into any of the sector charters) qualifies as an EME.

An EME is deemed to have a B-BBEE status of Level four contributor thus having a B-BBEE recognition level of 100%.

An EME which is 100% black owned qualifies for elevation to Level One contributor having a recognition level of 135%.

An EME which is at least 51% black owned qualifies for elevation to Level two Contributor having a B-BBEE recognition level of 125%

Qualifying Small Enterprises (QSE)

A measured entity with an annual total revenue of between R10m and R50m qualifies as a QSE.

A QSE which is 100% black owned has an enhanced B-BBEE status as a Level One recognition level.

A QSE which is at least 51% black owned qualifies for a Level Two B-BBEE recognition level.

QSE’s meeting the above enhanced B-BBEE recognition level only require a Sworn affidavit.

Any other QSE that does not fall into the above categories must comply with all the elements (five elements) for the purposes of measurement.

SWORN AFFIDAVITS

Please note that:

In the new codes you may NEVER issue a certificate for the EME

An EME only requires a sworn affidavit signed by a commissioner of oaths

PROFESSIONAL ACCOUNTANT (SA)

A SAIPA member is an ex officio Commissioner of Oaths and thus can commission an EME affidavit

When signing as a commissioner you must be independent of the information that you are commissioning in other words, you can not determine the annual revenue and also commission for that same client

SWORN AFFIDAVIT

A SWORN AFFIDAVIT IS COMMISSIONED FOR FREE YOU MAY NOT CHARGE FOR SIGNING IT.

IT MAY NOT BE ON THE COMMISSIONER OF OATHS’ LETTERHEAD i.e. if you as an accountant are commissioning the affidavit you may not have the affidavit template on your letterheads

EME CERTIFICATES ISSUED ON THE NEW CODES

Any EME certificate issued on the new codes is INVALID and must be withdrawn with immediate effect

A client in possession of an invalid EME certificate is therefore NON COMPLIANT

PROFESSIONAL ACCOUNTANT ASSISTING A CLIENT TO PREPARE FOR A BEE VERIFICATION

An entity falling outside the exempt requires a verification to be performed by a SANAS accredited Verification Professional

A SAIPA member may offer or be requested to assist the client to prepare for a BEE verification

This is one of the value add that the accountant may offer to their clients

To be of assistance it is important that you have read and understand the B-BBEE Act and the Codes of Good Practice

WHAT EVIDENCE WILL BE REQUIRED FROM YOUR CLIENT – TO VERIFY THE OWNERSHIP ELEMENT?

FOR A PRIVATE/PUBLIC COMPANY

Organisational structure or Organogram

Valid B-BBEE certificate indicating the black; OR

Shareholders agreement

Share register, share certificates

Certified copies of ID of black shareholders in particular or

Written confirmation from a registered auditor/independent accounting professional or independent reviewer confirming the percentage of Black ownership as defined in the Codes of Good Practice.


FOR A CLOSE CORPORATION


CK document

Clear certified copies of ID of the black members or

Written confirmation from a registered auditor or accounting officer confirming the percentage of Black ownership as defined in the Codes of Good Practice.


FOR A PARTNERSHIP


Partnership agreement

Valid B-BBEE certificate indicating the black

Clear certified copies of ID’s of black partners or

Written confirmation from a registered auditor or accounting officer confirming the percentage of Black ownership as defined in the Codes of Good Practice.


FOR A TRUST


Trust deed

Letter of authority from the Master of High Court

List of beneficiaries

Clear certified copies of IDs of the black trustees and beneficiaries


FOR INDIVIDUAL

Clear certified copy of an ID of the black owner

EEA1 form if employed

WHAT EVIDENCE WILL BE REQUIRED FROM YOUR CLIENT – TO VERIFY THE MANAGEMENT CONTROL ELEMENT?

General documentation

Organogram

Job grade system

Employment contract

Certified ID copies

EEA2 – Employment Equity report as submitted to Department of Labour

EEA4- Income Differential statement as submitted to DoL

WHAT EVIDENCE WILL BE REQUIRED FROM YOUR CLIENT – TO VERIFY THE MANAGEMENT CONTROL

ELEMENT?

Board participation

CoR39/CK document

Board organogram (if different to organisational)

Latest minutes of meetings of directors

Confirmation from an auditor, accounting officer or independent accounting professional confirming executive and non executive directors

WHAT EVIDENCE WILL BE REQUIRED FROM YOUR CLIENT – TO VERIFY THE SKILLS DEVELOPMENT

ELEMENT?

FOR TRAINING FALLING INTO CATEGORY A TO F

Invoices and proof of payment

Proof of attendance

FOR CATEGORY G TRAINING

Attendance register

Trainers salary advice for the month of training

FOR ALL OTHER RELATED COSTS

Invoices

Proof of payment

Identified specific training intervention

Quotations or any form of market related document