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Broad-Based Black Economic Empowerment Amendment Bill, 2012

Broad-Based Black Economic Empowerment Amendment Bill, 2012. PRESENTATION TO PORTFOLIO COMMITTEE ON TRADE & INDUSTRY JANUARY 2013. Introduction and Background. In 2003 the B-BBEE Act was promulgated into law

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Broad-Based Black Economic Empowerment Amendment Bill, 2012

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  1. Broad-Based Black Economic Empowerment Amendment Bill, 2012 PRESENTATION TO PORTFOLIO COMMITTEE ON TRADE & INDUSTRY JANUARY 2013

  2. Introduction and Background • In 2003 the B-BBEE Act was promulgated into law • Following various meetings by the BEE Presidential Advisory Council whereby four sub-committees were established, each sub-committee received presentations from various institutions and commissioned several researches.

  3. Introduction and Background, continued… • The subcommittees then tabled reports with the Presidential BEE Advisory Council, recommending the following legislative adjustments: • The amendment of the legislative framework to address, inter alia, circumvention, regulatory mechanisms and compliance

  4. Introduction and Background, continued… • The alignment of the primary legislation to other key pieces of legislation and policy instruments; and • Effective Monitoring, evaluation and reporting(consistent application across all spheres of government and sectors • strengthening access to procurement opportunities and funding, • increasing implementation capacity and technical capacity in the verification industry.

  5. Bodies and organisations consulted • The following bodies & organisations were consulted: • Presidential Advisory Council on B-BBEE • Economic and Employment Cluster Departments • Nedlac • Independent Regulatory Board of Auditors • Business Unity South Africa • Black Business Council

  6. Publication of draft Bill for public comment • Draft Amendment Bill published for public comment in December 2011 • Majority of comments broadly supportive of Bill • Comments studied by DTI and changes made to Bill, including – • Changing the terminology in key definitions • Adopting a different approach to applying the codes of good practice to organs of state and public entities • Specifying the powers of the proposed B-BBEE Commission in greater detail • revising the provisions dealing with penalties and offences

  7. Objects of the Bill Align the Act with other legislation impacting on B-BBEE and with the codes of good practice Establish the B-BBEE Commission to monitor and evaluate B-BBEE Deal with non-compliance and circumvention Give effect to Government policy aimed at reducing inequality, defeating poverty and creating employment

  8. MATERIAL AMENDMENTS • Aligning the Act and the codes • Creating the B-BBEE Commission • Specifying requirements re: monitoring, evaluation and reporting • Introducing offences penalties & prohibitions • Introducing the concept of “B-BBEE verification professionals” • Clarifying & extending the Minister’s power to make regulations

  9. DEFINITIONS The Bill proposes the introduction of/amendment to the following definitions – • ‘B-BBEE Initiative’ Page 2, lines 8 - 10 • ‘B-BBEE verification professional’ Page 2, lines 11 - 16 • ‘B-BBEE Verification Professional Regulator’ Page 2, lines 17-20 • ‘black people’ (amendment incorporated from code) Page 3, lines 3-12

  10. Definitions, cont… • ‘broad-based black economic empowerment’ Page 3, lines 15 - 32 • ‘Commission’ Page 3, lines 35-36 • ‘Department’ Page 3, line 38 • ‘fronting practice’ Page 3, line 39 - page 4, line 5 • ‘knowing’, ‘knowingly’ or ‘knows’ Page 4, lines 6 - 16 • ‘premises’ Page 4, lines 19 – 20 • ‘sector charters’ Page 4, lines 23 – 24

  11. Aligning the codes and the Act • Insertion of key definitions, including “B-BBEE initiative” and “fronting practice”; Pages 2-4 • Minister’s power to issue codes of good practice clarified, and Minister empowered to define, interpret and establish indicators to measure local production and content; Page 5, lines 6 and 10-11 • 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; Page 5, lines 13 – 16 Amendments proposed to align the codes and the Act and to clarify the status of the codes.

  12. Aligning the Act and the codes, cont… • Provide explicitly that codes of good practice remain in effect until amended, replaced or repealed; Page 5, lines 17-18 • An enterprise in a sector in respect of which the Minister has issued a sector code may only be measured for B-BBEE compliance in accordance with that code; Page 5, lines 36-39 • Enterprises required to report annually on B-BBEE compliance to sector councils Page 5, lines 40-44

  13. B-BBEE Commission The proposed B-BBEE Commission is intended to provide an institutional environment for the monitoring and evaluation of B-BBEE (proposed s13B – M) • s13B: Commission established as a trading entity within the administration of the DTI, headed by a Commissioner appointed by the Minister. Page 6, lines 12-16 • The Minister may issue directives of a general nature to the Commission concerning the performance of its functions, with which the Commission must comply. Page 6, lines 26-28

  14. B-BBEE Commission, cont. • s13C-D: Appointment of Commissioner, Deputy Commissioner and staff Page 6, line 31 – page 7, line 17 • s13E: Finances Page 7, lines 18 - 25

  15. B-BBEE Commission, cont… • S13F: Functions – • Oversee, supervise and promote adherence with the Act Page 7, lines 28-29 • Strengthen and foster collaboration between the public and private sector in order to promote and safeguard the objectives of B-BBEE Page 7, lines 30-32 • Receive and investigate complaints relating to B-BBEE Page 7, lines 33-34 • Investigate any matter relating to B-BBEE Page 7, lines 35-37 • Promote advocacy, access to opportunities and educational programmes and initiatives Page 7, lines 38-40

  16. Functions of B-BBEE Commission, cont… • Maintain a registry of major B-BBEE transactions Page 7, lines 41-43 • Receive and analyse prescribed reports concerning B-BBEE compliance Page 7, lines 44-46 • Promote good governance and accountability by creating an effective and efficient environment for the promotion and implementation of B-BBEE Page 7, lines 47-49 • Exercise such powers which are not in conflict with the Act as may be conferred by the Minister Page 7, lines 50 – 51

  17. B-BBEE Commission, cont… • S13G: Core obligations of the state, public entities (including SETAs) and listed companies to report to the Commission Page 8, lines 23-35 • S13H: Commissioner may delegate and assign powers, subject to certain conditions Page 8, lines 36-50 • S13I: Minister may appoint specialist committees to advise the Commission on the management of its resources / performance of its functions. Page 8, line 51 – page 9, line 41

  18. B-BBEE Commission, cont… • S13J-K: Commissions powers to conduct investigations set out. The Commission may investigate any matter concerning B-BBEE, in response to complaints received or on its own initiative Page 9, line 42 – page 10, line 46 • S13L: safeguards concerning confidential information submitted to the Commission Page 10, line 47 – page 11, line 11 • S13M: protections against conflicting interests of employees of the Commission Page 11, lines 12-25

  19. Offences, penalties and prohibitions • S13N: Offences in Connection with the Commission Page 11, lines 26-53 • Include: • Unauthorised disclosure of confidential information by a person acting on behalf of the CommissionPage 11, lines 27-38 • Hindering, obstructing, or improperly influencing the Commission Page 11, lines 40-44 • Knowingly providing false information to the Commission (see proposed definition of “knowingly” – s1) Page 11, line 45 The Bill proposes the introduction of offences, penalties and prohibitions to deal with non-compliance and circumvention

  20. Offences, penalties & prohibitions, cont… S13O: other offences & penalties • Misrepresenting the B-BBEE status of an enterprise Page 11, lines 55-57 • Providing false information or misrepresenting information to a B-BBEE verification professional in order to secure a particular B-BBEE status Page 12, lines 1-4 • Providing false information or misrepresenting information relevant to assessing the B-BBEE status of an enterprise, to any organ of state or public entity Page 12, lines 5-7

  21. Offences & penalties, cont… • Engaging in a ‘fronting practice’ (as defined in s1) Page 12, line 8 • Failing to report an offence under s13O(1) (applies to verification professionals, procurement officers or other officials of an organ of state or public entity) Page 12, lines 9-13

  22. Offences & Penalties cont • Penalties (s13O(3)-(6)) • Maximum penalty for an offence involving a misrepresentation of B-BBEE status is 10 years imprisonment (and/or a fine), or, if the offender is not a natural person, a fine of 10% of its annual turnover Page 12, lines 14-18 • Maximum penalty for an offence relating to the Commission, or for a failure to report, is 1 year imprisonment (and/or a fine) Page 12, lines 19-21

  23. Penalties, cont... • Value of the transaction which was derived from, or sought to be derived from, the commission of an offence to be taken into account in determining the amount of a fine Page 12, lines 22-25 • Court must report a conviction to Council and convicted person’s employer, or, if convicted person is a verification professional, to the B-BBEE Verification Professional Regulator Page 12, lines 26-30

  24. Offences, penalties & prohibitions, cont... • S13P: A person convicted of an offence under the Act is prohibited from contracting or transacting any business with an organ of state or public entity Page 12, lines 34-43

  25. B-BBEE Verification Professionals Proposed introduction of the concept of ‘B-BBEE Verification Professional’ to strengthen compliance with the Act (s1) • Defined as a person who performs any work in connection with rating the B-BBEE status of enterprises for an accredited rating agency. Page 3, lines 11-16 • As an interim measure, National Accreditation System to perform the role of the ‘B-BBEE Verification Professional Regulator’ Page 3, lines 17-20

  26. B-BBEE Verification Professionals, cont... • It is envisaged that, in future, Verification Professionals will be registered in terms of the Auditing Profession Act, and the Independent Regulatory Board for Auditors will function as the Verification Professional Regulator • This will require amendments to the Auditing Profession Act

  27. Regulations, guidelines & practice notes (proposed amendments to s14) • Minister’s power to make regulations clarified and extended. Page 12, line 46 – page 13, line 5 • In particular, Minister’s power to make regulations concerning the conduct of investigations by, and provision of information to, the Commission, are set out. Page 12, lines 49 - 55 • Minister may issue guidelines and practice notes relating to the interpretation and application of the Act Page 13, lines 4-5

  28. THANK YOU

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