Transcript Document

FINANCIAL SECTOR CHARTER
presented by
Leila Moonda
September 2007
Overview
 Broad-based black economic empowerment

(BBBEE) is not a legal requirement – it is a
business imperative that may or may not lead to
a competitive advantage
The Codes of Good Practice and the FSC are
guidelines for measurement of BBBEE
compliance
The BBBEE Imperative
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Competitive advantage
Retain existing business / sales / customers
Increased sales volumes
Access to new markets
Staff retention and growth
Social imperative
Growth of the Black middle class = booming
economy
 Job creation = alleviate poverty and reduce
crime
 Personal perspectives
Who is Subject to the Charter
 Currently applies to signatories of the Charter
– Banks
– Long-term insurers
– Short-term insurers
– Re-insurers
– Managers of collective investments
– Asset managers
– Listed entities …
 Any other institution may opt-in
 Once the Charter is gazetted as a Sector Code, it
will apply to all institutions active in the sector, i.e
including intermediaries
Exemptions – under the current framework –
SUBJECT TO CHANGE WITH ALIGNMENT
 Less than 50 employees – human resource
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development provisions
Less than R10m designated investments –
empowerment financing
Both of the above – totally exempt, but may opt-in
Companies subject to global policy – certain Board
member provisions
Companies subject to global policy – ownership
provisions
Wholesaler – access provisions
Measurement of BBBEE Status under the Codes
 Exempt Micro Enterprise (EME)
–
–
–
–
Less than R5million turnover
Auto Level 4 status, regardless of compliance
If >50% Black owned – Level 3 status
Can opt to be measured as a QSE should they wish to
obtain a higher score
 Qualifying Small Enterprise (QSE)
– Turnover Between R5million and R35million
– Can select ANY of the 7 elements, 25 points each,
100 total
– Relatively easy to become BBBEE compliant
 Large Business
– Score on 7 elements out 100 points
The FSC elements
Human Resources Development
20
Employment Equity
15
Skills Deveopment
5
Access to Financial Services
18
Empowerment Financing
22
Procurement & Enterprise Development
15
Ownership & Control
22
Ownership
Control
Corporate Social Investment
14
8
3
The CoGP Elements
Element
Weighting
Code series reference
Ownership
20 points
100
Management control
10 points
200
Employment equity
15 points
300
Skills development
15 points
400
Preferential procurement
20 points
500
Enterprise development
15 points
600
Socio-economic development
5 points
700
CoGP Scorecard for QSEs
 Easy to become compliant
Element
Weighting
Ownership
25 points
Management control
25 points
Employment equity
25 points
Skills development
25 points
Preferential procurement
25 points
Enterprise development
25 points
Socio-economic development
25 points
Alignment recommendation re elements
 If the FSC adopts the approach that allows QSE’s to
score on fewer elements (e.g. 4 out of 6) and
intermediaries cannot comply with Access and
Empowerment Financing, it means that intermediaries
have to comply with the ownership provision.
 Intermediaries should make a recommendation to the
FSC Council that HRD be split between Employment
Equity and Skills Development and Ownership and
Control be split. This would see the FSC duplicate the 7
elements of the Codes and have two additional elements
of Access and Empowerment Financing, giving the FSC 9
elements.
 Intermediary QSE’s could then have the option of
selecting 4 of 7 elements (excluding Access and
Empowerment Financing)
HR Development
 Building a diverse, non-racial, non-sexist and
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sustainable intellectual pool
Un-quantified commitments to:
– Mentorship, Career Path programs
– Cultural Diversity and Gender sensitivity
programs
– Where possible, support Educational
Institutions
– Skills Audit to be undertaken to identify black
skills shortage
Employment Equity Targets in the FSC
and the CoGP
Codes
FSC
Targets
5 Year
5 Year
Senior Management
43%
20% - 25%
Senior Management Women
50% of Black
4%
Middle Management
63%
30%
Middle Management Women
50% of Black
10%
Junior Management
68%
40% -50%
Junior Management Women
50% of Black
15%
Disabled People
The CoGP have specific
targets for Black disabled
people
The FSC has no targets for
disabled people.
Employment Equity Alignment
 The FSC current catgorisation is according to salary
bands
 The DTI CoGP categorisation is as per the Employment
Equity Act
 The Trade Associations have put forward a position to the
Charter Council that the categorisation according to
salary bands be maintained.
 With the alignment process the targets in the FSC will be
increased to the targets in the CoGP. The Trade
Associations have proposed that the “Adjusted
Recognition for Gender” not be incorporated into the FSC,
but that there be a separate target for Black Women at
50% of the Black people target.
Skills Development
Codes
FSC
Skills Development spend on Black
employees
3.0%
1.5%
Spend on disabled Black employees
0.3%
None
Learnerships
5.0%
4.5%
2%
Companies with less than
50 staff are exempt
Targets
Targets for smaller companies
Skills Development spend on Black
employees
Skills Development Alignment
 The Trade Associations have recommended
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that the criteria and scoring in the FSC remain.
The TA’s have recommended that the
Learnership targets and scoring mechanism be
aligned to the Codes
Procurement & Enterprise Development (FSC)
 Currently premium scoring is awarded to Black
Owned, Black Women-owned, Black SMEs or
excellent performers in Sectoral Charters.
– As part of the alignment scoring will be aligned
to what is in the CoGP.
 Un-quantified Commitments
– Promote early payment to Black SMEs
– Encourage existing suppliers to become BEE
accredited
Preferential Procurement in the CoGP
 Promotes BEE compliance by all entities in a value chain
 Specific targets for buying from QSE and EME companies
– promote their sustainability
 Specific targets for buying from 50% black owned or 30%
black women owned entities
 Enhanced recognition for buying from value adding
suppliers, encourages local content (factor of 1.25)
– Means a company registered as a vendor under the
VAT Act of 1991, where NPAT + total labour cost >
25% of total revenue
 Enhanced recognition for buying from ED beneficiaries
(factor of 1.2)
Procurement
 Procurement from BEE accredited companies:
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– 50% by 2008
– 70% by 2014
– Same targets as per the CoGP
Suppliers currently have to be rated on a broad – based
methodology. Though this continues to be a problem as there are
no accredited verification agencies as yet. Self – assessment of
suppliers who are QSE’s has been discussed by the various Trade
Associations and the FSC Procurement committee and agreed to
be acceptable
 Procurement in the FSC will be aligned to the CoGP
Calculation of Procurement spend in the Codes
and the Charter
Supplier BBBEE Level
Codes
Charter
Title
Weight
Title
Weight
<29%
None
0%
“E” Rated
0%
30% - 39%
Level 8
10%
“E” Rated
0%
40% - 44%
Level 7
50%
“D” rated
50%
45% - 54%
Level 6
60%
“D” rated
50%
55% - 64%
Level 5
80%
“C” rated
75%
65% - 69%
Level 4
100%
“C” rated
75%
70% - 74%
Level 4
100%
“B” rated
100%
75% - 79%
Level 3
110%
“B” rated
100%
80% - 84%
Level 3
110%
“A” rated
125%
85% - 99%
Level 2
125%
“A” rated
125%
100% and over
Level 1
135%
“A” rated
125%
Enterprise Development
 Objectives
– Foster new BEE companies
– Develop existing BEE companies
 Mechanisms
– Skills transfer
– Secondment of Staff
– Infrastructure Support
– Technical and Administrative support and assistance
 Currently scored as part of Procurement, but as part of
the alignment process will be split from Procurement. The
current proposal is that it is scored as part of
Empowerment Financing
Enterprise Development in the CoGP (large)
Element
ENTERPRISE
DEVELOPMENT
Indicator
Average annual value of all
Qualifying Contributions made
by the Measured Entity
measured
Weighting
points
Compliance
Target
15
3% of NPAT
Access
As Brokers do not make products available, they can
apply for exemption from this criteria. However,
Brokers do have a role to play in assiting with the
distribution of Access products.
 Broadening the effective provision of financial services to LSM
1-5
 To ensure that majority have access to basic affordable
financial services
 Defining Effective Access:
- Affordability – cost effective services to LSM 1-5
- Innovative, user friendly products/services; and
- Non-discriminatory practices.
Consumer Education
 This is a sub-category of Access wth a target of
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0.2% of NPAT with a score of 2 points.
Even if intermediares receive exemption from
the Access provisions, they will still be required
to comply with the provisions of Consumer
Education.
Empowerment Financing
As brokers act as intermediaries, they do not hold any
“designated investments” in their own right and would
therefore be exempt from this provision of the FSC
 Mobilising resources for investment in socio-economic
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transformation
“Affected Institutions” – those taking “designated investments”
“Designated investments” – deposits, savings, investments, risk
insurance premiums
R123.5bn currently targeted
– BEE transaction financing (5 points)
– Targeted investments (low-income housing, transformational
infrastructure, agriculture, black SMEs) (17 points)
Targeted investment / BEE Transaction Financing targets
BEE Transaction Financing
R50bn
Low-income housing
R42bn / R32bn
Black SME finance
R5bn
Agriculture
R1.5bn
Transformational infrastructure
R25bn
Total Target
R123.5bn
Ownership & control
Enable genuine participation in the holding and strategic
direction of the Sector
 Black ownership to be aimed at:
– Promoting productive and sustainable participation by
black people
– Encourage involvement of broad based constituencies in
BEE transactions
– Encourage ownership that is likely to add value to the
financial institution
– Encourage funding structures that facilitate transfer of
economic interest
Control targets
Codes
FSC
Black Board Members
50% (using ARG)
33%
Black Woman Board
Members
25%
11%
Black Top/ Executive
Management
40%
25%
Black Woman Top/ Executive
Management
20%
4%
Corporate social investment
 Projects aimed at black people, have a strong developmental
approach & contribute toward transformation
 Promote investment by the sector in areas specific to the
needs of the majority
Target
– 0.5% p.a. of post tax operating profits (FSC)
– 1% of NPAT (CoGP)
 The recommendation is that as part of the aignment process
the target be increased to 0.8% of NPAT. With the
0.2%Consumer Education spend this wold equal the target
in the Codes.
Application
 Targets apply from 1st January 2004 until 31st December
2014. With the alignment process the dates are likely to
match the timeframe of the CoGP, i.e. to be extended to
2017.
 Principles embodied in the Charter are perpetual
Charter Council
 The Charter Council will establish an Executive with the delegated
mandate to:
– Receive, consider and approve Annual Audits from
Financial Institutions
– Issue guidance notes on the interpretation and
application of Charter
– Conduct reviews identified in the FSC
– Engage Govt., DFI’s, Regulatory Agencies & BEE
Advisory Council to promote implementation of the FSC
 Independent Body
Charter Council
Industry Associations
6
ABSIP
3
Labour
4
Community
4
Government
4
Charter Council Executive
 Principal Officer appointed 01st October 2005 – Enoch
Godongwana
 Chairman rotates every year amongst the constituencies,
currently Kennedy Bungane from ABSIP
 Council offices established at 66 Marshall street, Jhb CBD
Status
 Charter was gazetted as a Transformation
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Charter by the DTI on the 09th February 2007.
As the Charter has not yet been gazetted as a
Sector Code, government may still choose have
its financial sector suppliers rated against the
DTI Codes
The Charter Council is working towards having
the FSC gazetted as a section 9 Sector Code by
the end of 2007. That means that the new
provisions of the FSC will be applicable from the
01st January 2008.
Intermediaries Involvement
 The intermediaries are interacting with the

Principal Officer to ensure that their views
regarding the alignment are taken into account.
The Principal Officer has indicated that
members of associations that do not sit on the
Charter Council will be charged for a review of
their scorecards. The costs of this is still to be
confirmed.
Thank You
Mpowered Business Solutions
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Leila Moonda
011 268 – 1373
082 331 5251
[email protected]