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PPFA Points for BEE Level
B-BBEE Level 80/20 90/10
Level 1 20 10
Level 2 18 9
Level 3 16 8
Level 4 12 5
Level 5 8 4
Level 6 6 3
Level 7 4 2
Level 8 2 1
Non-Compliant 0 0
Section 10: Status of Sector Codes
1. Every organ of state and public entity must apply relevant code of good practice in:
– issuing of licenses, concessions– developing and implementing a preferential procurement policy;– determining qualification criteria for the sale of state-owned enterprises;– developing criteria for entering into PPPs– awarding of incentives, grants, and investment schemes in support of broad-based black
economic empowerment.
2. An enterprise operating in a sector with a S9(1) Code may only be measured in accordance with that code
3. An enterprise must report annually on their compliance to the Sector Council.
Section 1: Fronting Practice
means a transaction, arrangement or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act; includes •black persons discouraged or inhibited from substantially participating in the core activities;•economic benefits received as a result of the BEE status do not flow to black people in the ratio specified;•legal relationship with a black person to achieve a certain BEE level without granting commensurate economic benefits expected;•an agreement with another enterprise to achieve enhanced B-BBEE status in circumstances in which –
– significant limitations on identity of suppliers, service providers, clients or customers;
– maintenance of business operations that are improbable having regard to resources;
– terms and conditions not negotiated at arm’s length on a fair and reasonable basis;
Section 20: Offences and PenaltiesA person is guilty of an offence if that person knowingly•misrepresents or attempts to misrepresent the B-BBEE status of an enterprise;• provides false information to Verification professional / any organ of state.
A BEE Verification professional or any procurement officer or other official of an organ of state or public entity who becomes aware of fronting and fails to report is guilty of an offence.
Any person convicted of an offence is liable• to a fine or imprisonment for a period not exceeding 10 years or both; • in the case of an enterprise, to a fine of 10% of annual turnover.
Any person and/or entity convicted of an offence shall be banned from transacting with any public entity, and shall be entered into the National Treasury register of tender defaulters.
Key principles
• Substance over form• Compliance measured “at the Date of Measurement” • Any misrepresentation OR attempt = fronting• Any initiative to split, separate, divide to qualify as EME, QSE or Start-up
= fronting
Application of the Codes
3.1.1 All Organs of State and Public Entities are measureable
3.1.2 All Measured Entities that undertake any economic activity with any organ of state or public entity are measureable
Priority elements
OwnershipSub-minimum = 40% of Net Value points = 3.2 points
Skills Development (SD)Sub-minimum = 40% of total weighting points = 8 points
Enterprise and Supplier Development (ESD)Sub-minimum = 40% of EACH of categories = 16 points
Generics must comply with all 3 priority elementsQSE must comply with ownership + 1 priority element
Application of the new Codes Transitional period exists until 30 April 2015
All sector Codes must be aligned by this time
An entity may elect to be measured on amended Codes of Good
Practice or on existing Codes of Good Practice during the transitional
period
An entity operating under a Sector Code must apply that code until 30
April 2015 – thereafter the Generic Codes if the Sector Code has not been
aligned
New ThresholdsEME QSE Generic
New Thresholds < R10m R10 – R50m > R50m
BEP Thresholds < R1,5m R1,5 – R11,5m > R11,5m
100% Black Owned Level 1 Level 1 Get rated
51% - 99% Black Owned Level 2 Level 2 Get rated
0% - 50% Black Owned Level 4 Get rated Get rated
Evidence Affidavit Affidavit / Cert Certificate
New ScorecardElement Code series Current Weighting Proposed Weighting
Ownership 100 20 25
Management Control 200 10 19
Employment Equity 15
Skills Development 300 15 20 + 5
Enterprise and Supplier Development 400 20 40 + 4
Enterprise Development 15
Socio-Economic Development 500 5 5
TOTAL 118
BEE recognition levelsB-BBEE Status Current Qualification New Qualification B-BBEE recognition level
Level One ≥100 points ≥100 points 135%
Level Two ≥85 but <100 points ≥95 but <100 points 125%
Level Three ≥75 but <85 ≥90 but <95 110%
Level Four ≥65 but <75 ≥80 but <90 100%
Level Five ≥55 but <65 ≥75 but <80 80%
Level Six ≥45 but <55 ≥70 but <75 60%
Level Seven ≥40 but <45 ≥55 but <70 50%
Level Eight ≥30 but <40 ≥40 but <55 10%
Non-Compliant <30 <40 0%
OWNERSHIP Weighting Points
Compliance Target
2.1 Exercisable Voting rights in the hands of the following black people:
2.1.1 Black People 4 25% + 1
2.1.1 Black Women 2 10%
2.2 Economic interest in the hands of the following black people:
2.2.1 Black People 4 25%
2.2.2 Black Women 2 10%
2.2.3 Economic Interest of the following black natural people (broad-based groupings) in the Enterprise:- black designated groups;- black Participants in Employee Ownership Schemes;- black beneficiaries of Broad based Ownership Schemes; or- black Participants in Co-operatives
3 3%
New Entrants 2 2%
2.3 Realisation Points:
2.3.1 Net Value 8
TOTAL 25
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What the research says about ESOPS
In "The ESOP Performance Puzzle in Public Companies," published in 2006 issue of the Journal of Employee Ownership Law and Finance, Robert Stretcher, Steve Henry, and Joseph Kavanaugh.
Points earned by 10% ESOP or BBOS
Category and Ownership Indicator Weighting Points
Compliance Target
10% ESOP Points
2.1 Exercisable Voting rights in the hands of black people:
Black People 4 25% + 1 10% 1.6
Black Women 2 10% 5% 1.0
2.2 Economic Interest in the hands of the following black people:
Black People 4 25% 10% 1.6
Black Women 2 10% 1.0
Economic Interest of the following black natural people (broad-based groupings) in the Enterprise:- black designated groups;- black Participants in ESOP; black beneficiaries of BBOS; or- black Participants in Co-operatives
3 3% 10% 3.0
2 2% 10% 2.0
2.3 Realisation Points:
2.3.1 Net Value 8 3.2
Total 25 13.4
Management Control
MANAGEMENT CONTROL = MANAGEMENT CONTROL + EMPLOYMENT EQUITY
•Aligned to the EE Act (targets, reporting and definitions)•Must use current payroll data•Must apply sub-race group demographics for SM, MM, JM (not to Board / Executives or Disabled)•The description of each of the measurement categories is aligned with the EE Act•Adjusted recognition for gender collapsed into specific targets for women
Management Control Generic Points Generic Targets
2.1 Board Participation
2.1.1 Exercisable voting rights of black board members 2 50%
2.1.2 Exercisable voting rights of black female board members 1 25%
2.1.3 Exercisable voting rights of black executive directors 2 50%
2.1.4 Exercisable voting rights of black female executive directors 1 25%
2.2 Executive Management
2.2.1 Black Executive Management 2 60%
2.2.2 Black Female Executive Management 1 30%
Managemet Control Generic Points Generic Targets
2.3 Senior Management
2.3.1 Black employees in Senior Management 2 60%
2.3.2 Black female employees in Senior Management 1 30%
2.4 Middle Management
2.4.1 Black employees in Middle Management 2 75%
2.4.2 Black female employees in Middle Management 1 38%
2.5 Junior Management
2.4.1 Black employees in Junior Management 1 88%
2.4.2 Black female employees in Junior Management 1 44%
2.6 Employees with disabilities
2.6.1 Black disabled employees as a percentage of all employees 2 2%
Total 19
BEP’s measured on a single management
target of 60%
Other changes in Management Control
• Definitions for Senior Top and Other Top removed• Executive management defined: CEO, COO, CFO • Other Executive management defined: HR, Transformation and others• If an entity does not distinguish between Executive Management and
Senior Management, then: - Measure Executive and Senior out of 6 points- Apply the Executive Management target- (Avoid the sub-race group classification?)
General Principles
• Contribute to country’s economic and social development goals by developing skills that enrich decent work and sustainable livelihoods
• Promote development of industrial skills base in critical sectors (production and value adding manufacturing that are labour intensive)
• Support ‘Professional, Vocational, Technical and Academic Learning’ programmes through work integrated learning (apprenticeships, learnerships, internships, PP)
• Strengthen skills and human resource base to support employment creation
Skills Development requirements
• WSP, ATR and Pivotal Report which are SETA approved• Implementation of Priority Skills Programme• Claim external training spend on unemployed • Trainee tracking tool for ‘absorption’ • Skills spend & Learnerships use demographic representation of black
people (not for disabled or absorption)• For scoring purposes the targets should be further broken down into
the race sub groups as defined in the EE Act.• Threshold requirement:
- The measured entity must achieve a sub-minimum of 40% of the target
Skills Development Weighting Points
Compliance Targets
2.1.1 Skills Development Expenditure on any program specified in the Learning Programme Matrix for black people as a percentage of Leviable Amount
2.1.1.1 Skills Development Expenditure on Learning Programmes specified in the Learning Programme Matrix for black people as a percentage of Leviable Amount
8 6%
2.1.1.2 Skills Development Expenditure on Learning Programmes specified in the Learning Programme Matrix for black people with disabilities as a percentage of Leviable Amount
4 0.3%
2.1.2 Learnerships, Apprenticeships and Internships:
2.1.2.1 Number of black people participating in Learnerships, Apprenticeships and Internships as a percentage of total employees 4 2.5%
2.1.2.2 Number of unemployed black people participating in Learnerships, Apprenticeships and Internships as a percentage of total employees 4 2.5%
Total 20
BONUS POINTS
2.1.3 Number of learners absorbed by the Measured Entity and industry at the end of the learnership program
5 100%
BEP’s SD target spend = 1,5% + 0,3%
= 1,8%
BEP’s target = 1,5%
Other changes
• Category F + G treated as informal = limited to 15% of total spend• Accommodation, travel, catering, administration = limited to 15% of
total spend• Mandatory sectoral training does not count:
- Health and safety, First Aid? Fire?
• Training outside SA must meet SAQA recognition to count• Measured entity no longer gets:
- 1.25 enhancement of ABET
• Salaries or Wages of employees still count if Learnership, Internship or Apprenticeship (B,C or D)
Tax deductible learnershipsAbled Disabled
Learnership cost 30,000 30,000
Sourcing 1,000 1,500
PLWD accommodation - 4,500
Stipend (R2,000pm x 12) 24,000 24,000
Cost per learner 56,000 60,000
S11(a) Deduction 15680 16800
S12 H Rebate 16800 28000
Youth wage subsidy 12000 12000
Mandatory SETA Grant 2000 2000
Net cost per learner 9,520 1,200
Average Net Cost per Learnership 5,360
Maximum points for minimum cost
Example
Co. with 200 employees 5% of workforce = 10
Net cost per learnership R5360
Total net cost R53,600
Points earned 27
Net cost per point R1,985
2.1 Preferential Procurement Weighting Points
Compliance Targets
2.1.1 BEE Procurement Spend from all Empowering Suppliers based on the BEE recognition levels 5 80%
2.1.2 BEE Procurement Spend from Empowering Suppliers QSE’s based on the applicable BEE recognition levels 3 15%
2.1.3 BEE Procurement Spend from Empowering Suppliers EME’s based on the applicable BEE recognition levels 4 15%
2.1.4 BEE Procurement Spend with Empowering Suppliers that are at least 51% black owned 9 40%
2.1.5 BEE Procurement Spend with Empowering Suppliers that are at least 30% black women owned 4 12%
Total 25
BONUS POINTS BEE Procurement Spend with Designated Groups that are > 51% black Owned
2
2.2 Supplier Development Weighting Points
Compliance Targets
2.2.1 Annual value of all Supplier Development Contributions as a percentage of the target 10 2% of NPAT
2.3 Enterprise Development
2.3.1 Annual value of all Enterprise Development Contributions and Sector Specific Programmes as a percentage of the target 5 1% of NPAT
2.4 Bonus PointsOne or more ED beneficiaries graduate to SD
1
Creating one or more jobs as a result of ED and SD 1
BEP’s ED target spend = 0,75% of leviable amount
Empowering Supplier A B-BBEE compliant entity which is a good citizen, and who complies
with all regulatory requirements of the country and meets 3 of the
following criteria: At least 25% of Cost of Sales excluding labour and depreciation
must be procured from local producers or suppliers, service industry labour costs capped at 15%
Job creation 50% of jobs created are for black people provided the number of black employees since the immediate prior verified B-BBEE measurement is maintained.
Empowering Supplier At least 25% transformation of raw material/beneficiation
which includes local manufacturing, production and/or assembly and/or packaging
Skills transfer – 12 days per annum of productivity deployed in assisting black owned EME and QSE beneficiaries
EME’s and Start up Enterprises are automatically given Empowered
Supplier status
QSE’s are required to meet 1 critieria.
Enhanced recognition
Criteria Enhancement
3 year contract with supplier x spend by 1.2
Black owned QSE or EME that is not an SD beneficiary but has a 3 year contract x spend by 1.2
First time supplier x spend by 1.2
Socio-Economic Development
Criteria Weighting Points Compliance Target
Annual (not average) value of all Socio-Economic Development Contributions by the Measured Entity as a percentage of the target
5 1% of NPAT
BEP’s SED target spend = 0,25% of leviable amount
Socio Economic Development
Beneficiaries must be 75% black
Access to the economy
Priorities in this element are to redress the issues of education,
poverty, unemployment, health for those communities who remain
disadvantaged
Level 4 is achievable
Ownership (10% ESOP / BBOS) = 13Management Control
Board (1 x BW non-exec) = 2Management (2/3 easy) = 5
Skills Development (tax funded) = 25ESD
All ED ½ Procurement, Bonus point = 31SED = 5
= 81
LEVEL 4