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REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT and CODES OF GOOD PRACTICE

27 JANUARY 2012. REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT and CODES OF GOOD PRACTICE. Overview .

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REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT and CODES OF GOOD PRACTICE

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  1. 27 JANUARY 2012 REVIEW OF BROAD BASED BLACK ECONOMIC EMPOWERMENT ACT and CODES OF GOOD PRACTICE

  2. 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

  3. Observations • 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

  4. Key Interventions • 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

  5. 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) Key intervention

  6. 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;

  7. GAZETTED SECTOR CODES 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

  8. 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 Key intervention

  9. 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

  10. 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.

  11. 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

  12. 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; CODES OF GOOD PRACTICE

  13. 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

  14. THANK YOU

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