Current dti Codes vs amended dti Codes
2014
BEE scorecard by element and
indicator, comparing old and new
Codes:
Management Control
Strategic transformation, sustainable change
Page 2
Management Control Scorecard: Board and top management
Current Criteria
Weighting
Points
Compliance
Targets
Board Participation
Exercisable Voting Rights of black
board members as a percentage of all
board members using the Adjusted
Recognition for Gender
Black Executive Directors as a
percentage of all directors using the
Adjusted Recognition for Gender
Bonus Points: Black Independent
Non-Executive Board Members
Black Other Top Management using the
Adjusted Recognition for Gender
TOTAL
Weighting
Points
Compliance
Targets
Exercisable Voting Rights of black board
members as a percentage of all board
members
2
50%
Exercisable Voting Rights of black female
board members as a percentage of all
board members
1
25%
Black Executive Directors as a percentage
of all directors
2
50%
Black female Executive Directors as a
percentage of all directors
1
25%
Assumed
N/A
Assumed N/A
Board Participation
3
2
+1
50%
50%
40%
Top Management
Black Senior Top Management using
the Adjusted Recognition for Gender
New Criteria
Bonus Points: None documented
Other Executive Management
3
40%
Black Executive management as a
percentage of all executive directors
2
60%
2
40%
Black female Executive management as a
percentage of all executive directors
1
30%
TOTAL
9
10 (+1)
Source: dti Codes 2013 and Simanye Analysis
Strategic transformation, sustainable change
Page 3
Management Control Scorecard: Employment Equity
Current Criteria
Weighting
Points
Compliance
Targets
New Criteria
Senior Management
Senior Management
Black employees in Senior
Management as a percentage of all
such employees using the Adjusted
Recognition for Gender (ARG)
Black employees (by race)
5
60%
Weighting
Points
Compliance
Targets
2
60%
1
30%
Black female employees (by race)
Middle Management
Middle Management
Black employees in Middle
Management as a percentage of all
such employees using the ARG
Black employees (by race)
2
75%
Black female employees (by race)
1
38%
Black employees (by race)
1
88%
Black female employees (by race)
1
44%
2
2%
4
75%
Junior Management
Black employees in Junior
Management as a percentage of all
such employees using the ARG
Junior Management
4
Employees with Disabilities: Black
employees with disabilities as a
percentage of all employees using the
ARG
2
Bonus points for meeting or exceeding
the EAP targets in each category under
the above
+3
TOTAL
15 (+3)
80%
3%
Employees with Disabilities: Black
employees with disabilities as a percentage
of all employees
TOTAL
10
Source: dti Codes 2013 and Simanye Analysis
Strategic transformation, sustainable change
Page 4
Details of key changes to Calculations
The Calculation of Management Control Indicators
1.
Black (female) employees in Senior Management as % of all senior management
2.
Black (female) employees in Middle Management as % of all middle management
3.
Black (female) employees in Junior Management as % of all junior management
% of black employees for
each occupational level as
measured in the MC
scorecard using the annual
EAP targets as published in
the Regulations of the EE Act
and CEE Report, as
amended from time to time.






AM
A=
C
+
CM
C
+
IM
C
+
AF
C
+
CF
C
+
IF
C
The compliance target as per the
Regulations of the EE Act and CEE
Report for that measurement subcategory
6
AM is the percentage of employees in the measured category that are African Males
CM is the percentage of employees in the measured category that are Coloured Males
IM is the percentage of employees in the measured category that are Indian Males
AF is the percentage of employees in the measured category that are African Females
CF is the percentage of employees in the measured category that are Coloured Females
IF is the percentage of employees in the measured category that are Indian Females
*Note: The calculations are incorrect. Coloured and particularly Indian people highly overweighted due to there being
no caps on the results per race. However, caps should not exist for African representation.
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Page 5
Details of key changes and their impacts on measured entities

Shift in points and targets
− Previously Management Control and Employment Equity were worth 25 points plus 4 bonus points
combined which has been reduced to 15 (possibly 19) points
 Fundamental shift in measurement principles
− Under the previous Employment Equity Scorecard, no measured entity could receive any points
unless they achieved a sub-minimum of 40% of each of the targets – this sub-minimum has been
removed from the New Codes.
− Removal of adjusted recognition for gender in favour of separate measured for black women
− Addresses the intention of the Codes in promoting women, particularly in senior positions, in a
simple and efficient way without overly penalising male-dominated industries. Removing the
Adjusted Recognition for Gender is expected to have a slightly positive impact on scores for male
dominated companies and a slightly negative impact on scores for female dominated companies.
− Compliance targets for Senior, Middle and Junior Management are based on overall demographic
representation of black people as defined in the EE Act and CEE Report . The targets should be
broken down into specific criteria according to the different race subgroups within the definition of
‘Black’ (please note however that the calculation needs to be revised).
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Details of key changes and their impacts on measured entities (cont)
 Definitions of categories of employees
− A clear distinction between Executive Management (i.e. serve on the board) and Other Executive
Management (i.e. do not serve on the board) is introduced (although it is unclear how this is
measured as it seems incorrectly calculated). This is a welcome change as it is useful in terms of
creating consistency and eliminating previous ambiguity over classifying Senior Top and Other Top
Management.
− For companies that do not distinguish between Executive Management and Other Executive
Management, Executive Management is measurable as a single indicator under Other Executive
Management with a weighting of 6 points (4 for black executives as % of all executives; 2 for black
females executives as % of all executives).
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Page 7
EAP Targets
Profile of the National EAP by race and gender
Economically Active Population
AM
CM
IM
WM
FM
TOTAL
Male
African Male
Coloured Male
Indian Male
White Male
Foreign Male
40.3%
5.9%
1.8%
6.6%
0%
54.6%
AF
CF
IF
WF
FF
TOTAL
Female
African Female
Coloured Female
Indian Female
White Female
Foreign Female
33.8%
5.2%
1.1%
5.3%
0%
54.4%
Source: Statistics South Africa, September 2011 QLFS
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Summary of key changes to Employment Equity and Management Control
Employment Equity and Management Control have been merged into one element called Management Control (MC)
Management Control accounts for 15 points (although the total points add up to 19) compared with 25 under the current
Codes and incorporates Employment Equity criteria as well.
Sub-minimums under the Employment Equity section have been removed
The adjusted recognition for gender has been removed – although this has arguably been replaced with Economically Active
Population (EAP) targets across race and gender for the Employment Equity indicators, resulting in “social engineering” of
race and gender in companies – which will be particularly emphasised in smaller companies
Separate targets for black women at each level replace the Adjusted Recognition for Gender. Male dominated companies
will be better off; female dominated companies will score slightly less than previously
The formulae for Employment Equity are inherently flawed and need to be amended
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BEE scorecard by element and
indicator, comparing old and new
Codes:
Skills Development
Strategic transformation, sustainable change
Page 10
Skills Development (priority element)
Current Criteria
Weighting
Points
Skills Development expenditure on
training for black employees as a
percentage of Leviable amount*
Adjusted Skills Development
expenditure on training for black
employees with disabilities as a
percentage of Leviable amount*
Adjusted number of black employees
participating in Learning Programmes
as a percentage of total employees
N/A
6
3
6
N/A
N/A
N/A
TOTAL
15
Compliance
Targets
Weighting
Points
Compliance
Targets
8
6%
4
0.3%
5%
Number of black people participating in
learnerships, apprenticeships and
internships as a percentage of total
employees.
4
2.5%
N/A
Number of black unemployed people
participating in training specified in the
learning programme matrix as a percentage
of number of employees.
4
2.5%
N/A
Bonus points: Number of black people
absorbed by the measured and industry
entity at the end of the learnership
programme.
5
100%
3%
0.3%
New Criteria
Skills Development Exp on Learning
programmes for black people as a
percentage of Leviable Amount.
Skills Development Exp on Learning
programmes for black disabled employees
as a percentage of Leviable Amount.
TOTAL
20 (+5)
Source: dti Codes 2013 and Simanye Analysis
Strategic transformation, sustainable change
Page 11
Details of key changes and their impacts on measured entities

Sub-minimums
− Skills Development is a priority element. Entities must achieve at least 8 points on the element or else the
score is automatically discounted by one recognition level.

Key Measurement Principles
− Spend on skills development has doubled from 3% to 6% of payroll
− Mandatory sectoral training no longer qualifies as skills development
− Indirect costs such as travel and accommodation are capped at 15% of total skills expenditure
− In addition, only accredited learning counts in full, with 15% caps placed on internal and informal training
that is not accredited
− Even foreign training needs to be SAQA accredited
− Skills spend can now include people external to the organisation, but only the unemployed
− Introduction of measurement against the Economically Active Population (EAP) statistics
− Black’ has now been broken down into further race subgroups i.e. African, Coloured and Indian, with the
intention to ensure skills spend is focused on Africans
•
Bonus points
− Bonus points have been introduced for unemployed black people who are absorbed into the industry.
Source:
− However, companies may be incentivised to adopt fewer learners and ensure all of them are employed
Simanye in order to maximise points
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Page 12
Summary of key changes to Skills Development
Skills Development is now a priority element. The subminimum is 40% of the overall targets. If
entities do not achieve at least 8 points, there is an automatic drop of one recognition level.
The Skills Development target has doubled from 3% to 6%
‘Black’ has now been broken down into further race subgroups i.e. African, Coloured and Indian
in line with EAP targets – like with Employment Equity
Fundamental shift in the recognition of qualifying skills development spend
Focus on the unemployed, especially where they are hired into the industry
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Page 13
BEE scorecard by element and
indicator, comparing old and new
Codes:
Enterprise and Supplier Development
(incl Preferential Procurement)
Strategic transformation, sustainable change
Page 14
Enterprise and Supplier Development (priority element)
Current Criteria
Weighting
Points
Compliance
Targets
New Criteria
Weighting
Points
Compliance
Targets
5
80%
B-BBEE Procurement spend from all
Empowering Suppliers that are QSEs
3
15%
B-BBEE Procurement spend from all
Empowering Suppliers that are EMEs
4
15%
Preferential Procurement:
Preferential Procurement:
B-BBEE Procurement spend from all
Suppliers based on their BEE
recognition levels
B-BBEE Procurement spend from all
Empowering Suppliers Suppliers based on
their BEE recognition levels
B-BBEE Procurement spend from all
QSE and EME Suppliers based on their
BEE recognition levels
B-BBEE Procurement spend from all
Suppliers that are >50% black owned
B-BBEE Procurement spend from all
Suppliers that are >30% black women
owned
Total
12
3
70%
20%
3
12%
B-BBEE Procurement spend from all
Empowering Suppliers that are at least 51%
black owned
9
40%
2
8%
B-BBEE Procurement spend from all
Empowering Suppliers that are >30% black
women owned
4
12%
Bonus points: B-BBBEE Procurement
Spend from Designated Group Suppliers
that are at least 51% black
2
2%
20
25 (+2)
Source: dti Codes 2013 and Simanye Analysis
Strategic transformation, sustainable change
Page 15
Details of key changes and their impacts on measured entities: Procurement

Introduction of “Empowering Suppliers”
− Entities which do not meet the definition of an “empowering supplier” cannot receive any BEE
recognition irrespective of the BEE level attained

Potential exclusion of imports
− Original import exclusion provisions available under the 2007 Codes remain, provided the sector is
not a targeted sector for Local Content
− Where components are imported for value-added production there is no additional requirement, but
where goods/services are imported for other reasons (e.g. brand; technical specifications) this is
subject to having developed and implemented an E&SD plan for these imported goods and services,
which must include objectives, interventions, KPIs and an implementation plan

Shift in Procurement points and targets
− Points have decreased for general spend with Empowering Suppliers BEE suppliers but have
increased for all other criteria, especially spend with black owned suppliers
− Significant increase in targets for spend with >51% black owned suppliers (from 12% to 40%) and
with QSE’s and EME’s (from 15% to 30%)
 Multipliers
− 20% additional BEE spend can be claimed where companies have a 3 year contract in place with a
supplier that meets the definition of a S&ED beneficiary and/or first time suppliers
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Page 16
Enterprise and Supplier Development (priority element) cont.
Criteria
Weighting
Points
Compliance
Targets
Enterprise and Supplier Development:
N/A
Annual value of Enterprise
Development Contributions and Sector
Specific Programmes made by the
Measured Entity as a percentage of
target
N/A
TOTAL
Weighting
Points
Compliance
Targets
10
2% of NPAT
5
1% of NPAT
Enterprise and Supplier Development:
N/A
15
N/A
3% of NPAT
Bonus Points for the following (during measured period)
N/A
New Criteria
N/A
N/A
15
Annual value of all Supplier Development
Contributions made by the Measured Entity
as a percentage of target
Annual value of Enterprise Development
Contributions and Sector Specific
Programmes made by the Measured Entity
as a percentage of target
Bonus Points for the following (during measured period)
N/A
Graduation from Enterprise Development to
supplier development beneficiary
1
N/A
Jobs created by supported supplier from
Enterprise Development to Supplier
Development (a multiplier of 1.25)
1
TOTAL
15 (+3)
Source: dti Codes 2013 and Simanye Analysis
Strategic transformation, sustainable change
Page 17
Details of key changes and their impacts on measured entities: Enterprise Development
 S&ED beneficiaries
− Category A and B contributions are no longer applicable; E&SD contributions must be made to QSEs
and EMEs with at least 51% black ownership

Supplier Development must constitute 2/3 of the overall target (2% of NPAT)
− The new Supplier Development focus can be beneficial as it will potentially lead to points under
Procurement which is now a lot more challenging to achieve
− Measured entities will need to prioritise Supplier Development given the significant increase in
targets in Procurement, especially for black owned suppliers
− There are incentives to link the suppliers being developed with longer procurement contracts and this
is incentivised through higher points for such spend (new enterprises procurement is also
incentivised through higher multipliers for such spend)
 Significant changes to the Benefit Factor Matrix
− Recognition for anything other than direct grants has been reduced
− Early payment terms (over used/abused under old Codes) limited to 1.5 points
 Development of Enterprise and Supplier Development Plans
− Companies “are encouraged” to develop and implement an Enterprise and Supplier Development
plan for beneficiaries, which would include clear objectives, interventions, KPIs and an
implementation plan with milestones
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Page 18
“Empowering Suppliers” defined
An “empowering supplier” within a context of B-BBEE is a B-BBEE compliant entity, which is a
good citizen South African entity, compliant with all regulatory requirements of the country and
should meet at least three if it is a large enterprise or one if it is a QSE of the following
criteria:
a) At least 25% of cost of sales excluding labour cost and depreciation must be procured from
local producers or local supplier in SA, for service industry labour cost are included but
capped to 15%.
b) Job creation – 50% of jobs created are for Black people provided that the number of Black
employees since the immediate prior verified B-BBEE Measurement is maintained.
c) At least 25% transformation of raw material/beneficiation which include local manufacturing,
production and/or assembly, and/or packaging.
d) Skills transfer – at least spend 12 days per annum of productivity deployed in assisting Black
EME and QSE beneficiaries to increase their operation or financial capacity.
Note that EMEs and Start Ups are automatically recognised as Empowering Suppliers.
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Page 19
Comparison of old and new Benefit Factor Matrices
Qualifying contribution type
Contribution Amount
Old Codes
recognition
New Codes
recognition
Full grant amount /
verifiable cost
Discount amount
Verifiable cost
100%
100%
100%
80%
100%
70%
Outstanding loan amount*
Outstanding loan amount*
Outstanding loan amount*
Guarantee amount
100%
70%
60%
3%*
PrimeActual
70%
50%
N/A
3%*
PrimeActual
100%
80%
Ord div rateactual
70%
80%
Ord div rateactual
80%
60%
80%
Unclear
60%
Max 15%
Grant and related contributions
Grant contributions and direct costs incurred for support
Discounts in addition to normal business practice
Overhead costs incurred in supporting enterprise development
Loans and related contributions
Interest free loan with no security requirements supporting ED
Standard loan to black owned small businesses
Standard loans to other beneficiary enterprises
Guarantees provided on behalf of beneficiary
Lower interest rate (provide rate in addition to loan value)
Outstanding loan amount*
Equity investments and related contributions
Minority investment in black owned EME and QSEs
Minority investment in other beneficiary enterprises
Investment amount
Investment amount
Enterprise development investment with lower dividend to financier
Investment amount
Contributions made in the form of human resource capacity
Professional services rendered at no cost or at a discount and
supporting ED
Employee hours spent assisting beneficiaries
Shorter payment terms (must be within 15 days) – limit of 1.5 points
Hourly rate / discount
value
Monthly salary / 160
Max 15% of invoice value
* The average value of loans is based on the amount outstanding during the year and the number of months over which it was extended
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Page 20
Summary of key changes to Preferential Procurement and Enterprise Development
Preferential Procurement and Enterprise Development have been merged into one element
called Enterprise and Supplier Development (E&SD)
Entities must achieve a subminimum of 40% score on all targets across all indicators (except
bonus points) or else the score is discounted and there is an automatic drop of one level
Supplier development (new concept) must constitute at least 2/3 of the spend on enterprise
development (so 2% of NPAT) – the remaining 1/3 can be on other enterprise development
Imports can be excluded but only where sectors haven’t been designated by the dti for Local
Content and where the items are imported for local value-add or the Measured Entity has
designed and implemented a plan for imported goods and services
There are several new requirements for ED and procurement that will make it more difficult to
achieve a good score – and this is compounded by higher targets as well
Only businesses with empowering supplier status will count for procurement – very challenging
for large businesses and businesses operating in certain sectors
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Page 21
BEE scorecard by element and
indicator, comparing old and new
Codes:
Socio-economic Development
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Page 22
Socio-economic Development
Criteria
Weighting
Points
Compliance
Targets
New Criteria
Weighting
Points
Compliance
Targets
1% of NPAT
Enterprise and Supplier Development:
Enterprise and Supplier Development:
Average/cumulative annual value of
all Socio-economic Development
Contributions made by the
Measured Entity as a percentage of
target
5
Annual value of all Socio-economic
Contributions made by the Measured
Entity as a percentage of target
5
TOTAL
5
TOTAL
5
1% NPAT
The specific objective for socio-economic development
contributions changes from sustainable access to the
economy for those beneficiaries to income generating
actives for targeted beneficiaries
Source: dti Codes 2013 and Simanye Analysis
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Page 23
Key recommendations for companies wishing to maintain a high score in these areas
Although there are no material changes to Socio-economic Development, we
recommend the following:
 Evaluating SED initiatives compared to other element initiatives to determine if and where
initiatives should be located, based on most efficient point scoring
 Review strategies for
 Sustainability
 Impact
 Strategic link to the business
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Page 24