FORWARDING AND CLEARING SUB-SECTOR CODE FOR B-BBEE – Indicators of Empowerment

This is the second article describing the FORWARDING AND CLEARING SUB-SECTOR CODE FOR B-BBEE.

This B-BBEE Sub-Sector Code for the F&C Industry seeks to encourage all stakeholders to pursue a transformation agenda according to the broad guidelines set out in the BEE National Strategy and B-BBEE Act 53 of 2003. It is necessary to set different targets and timeframes for the public and private industry as well, because the two are at different stages of the transformation process. This code will remain in effect until amended, substituted and repealed under Section 9 of the B-BBEE Act or with the parties to this sub-sector code process agreeing to do so.

OWNERSHIP

Vision
The vision is to achieve significant black ownership, management control and operational involvement throughout the F&C industry. Stakeholders recognise the high degree of knowledge in both local and international legislation as well as conditions that will be required in order to achieve this and commit ourselves to identifying opportunities for promoting the necessary skills development.

Guiding Principles
This principle is linked to the long-term strategy of growing the domestic F&C Industry so as to ensure that B-BBEE does not become a zero-sum game. Ownership is broken down into foreign ownership and South African ownership. The ownership target set is specifically aimed at the South African F&C Industry. With regard to foreign ownership, foreign companies, with local representation, will implement B-BBEE strategies, according to the guidelines provided by the F&C Sub-Sector Code. They will be encouraged to sell equity in their local operations. However, foreign companies that are unable to sell equity in their local operations should consider using the Equity Equivalent guidelines provided in the Code 100 of the B-BBEE Codes of Good Practice and set off increased achievements in this regard against the ownership requirement.

Stakeholder Undertakings

Foreign Ownership Market must commit to seek opportunities to sell equity to Black shareholders or participate in Equity Equivalent programmes approved by the Minister.

The Local Based Market Commits to the following:

1. Seek opportunities to broaden the ownership base of their companies and ensure that within the next 5 years at least black shareholders hold 25+1% of voting rights, with 10% of the voting rights held by black women.
2. 25% of the economic interest accrues to black shareholders in the form of both voting rights and economic interest, with a minimum of 10% earmarked for black women.
3. 3% is for Black designated groups, which includes Black people living with disabilities.
4. Ensure that the net economic interest of the black equity participants is 100% of their acquired share of the business within 5 years.

Qualifying Small Enterprises (QSEs), as defined in this sub-sector code, must commit to the following:

1. Increase the ownership base of their companies and ensure that a minimum of 25% of economic interest is in the hands of black people;
2. 25% + 1 vote voting rights, or equivalent thereof, are in black hands; and
3. Ensure that the net economic interest of the black equity participants is 60% of their acquired share of the business within 5 years. If this is achieved, it will be deemed that ownership fulfilment has been achieved.

The national government must commit to the following:

1. Facilitate means of funding the various B-BBEE initiatives that will enable Blacks, Black women and Black disabled persons to purchase the ownership stake proposed in this Charter.
2. Funding Mechanisms.

All stakeholders commit to the following:

1. Facilitate, through creative financing mechanisms, the acquisition of equity in their operations by Black shareholders.
2. Creating awareness about the F & C industry amongst the traditional banking institutions as well as public financing institutions.

Measurement Principles and the Application of the Charter: Measurement principles associated with the ownership element are contained in Statement 100 of Code 100 of the Generic Code of Good Practice. The formulae required in the determination of the ownership score are contained in Annexure 100 (c) of Statement 100 of Code 100 of the Generic Code of Good Practice.

The recognition of the sale of assets under the ownership element has the same meaning as that contained in Statement 102 of Code 100 of the Generic Code of Good Practice. The targets as contained in the ownership element of this Sub-Sector Code will apply. The recognition of the equity equivalent programmes for multinationals has the same meaning and interpretation as that contained in Statement 103 of Code 100 of the Generic Code of Good Practice.

The formulae required in the determination of the ownership score based on equity equivalent contributions are contained in Annexure 103 (A) of Statement 103 of Code 100 of the Generic Code of Good Practice. Measurement principles relating to the ownership element for QSEs are contained in Statement 801 of Code 800 of the Generic Codes of Good Practice.

MANAGEMENT CONTROL

Guiding Principle
The guiding principle is to increase the participation of Black people on F&C industry company boards and similar governing structures to create decision-making structures that truly represent the racial and gender diversity of our country. The industry will be transparent, eliminate unscrupulous business practices, including fronting, and adopt best-practice corporate governance policies as outlined in the “KINGS” reports.

Stakeholder undertakings

Private Industry Commits to the following:

1. Under normal circumstances, Black ownership will be accompanied by an equal level of management control. Private industry, however, commits to a total Black representation of 50% at the board level and a Black women representation of 25% at the board level.
2. Black people will occupy 50% of executive directors, while Black women will occupy 25% of executive directors.
3. Black people will also occupy 40% of senior top management, while Black women will occupy 20% of senior top management.
4. Private industry further commits to a Black representation of 40% at other top management levels and Black women’s representation of 20% at other top management levels.
5. QSEs within the sector commit to recruiting Black people in top management positions, where they should constitute 50.1% of total top management.

QSEs within this sector commit to recruiting Black women at the top management level, where they should constitute 25% of total top management, which is a bonus point sub-element.

Measurement principles associated with the management control element are contained in Statement 200 of Code 200 of the Generic Code of Good Practice. The formulae required in the determination of the management control score are contained in Annexure 200 (A)-B of Statement 200 of Code 200 of the Generic Code of Good Practice. The adjustment recognition for gender will not apply to Annexure 200 (A)-A.

Measurement principles needed for the application of the sub-sector code with regard to the management control element for QSEs are contained in statement 802 of code 800 of the Generic Codes of Good Practice.

EMPLOYMENT EQUITY

Guiding Principle
The principle is to increase the participation of Black people in management, professional and technical occupations in the F&C industry to create a workforce that truly represents the racial and gender diversity of our country. Compliance with the Employment Equity (EE) Act and presentation of accurate figures and statistics on EE to the Department of Labour (DoL) within the spirit of this Charter.

Private industry must commit to the following:

Within FIVE years:

45% representation of Black people in senior management and a 23% representation of Black women in senior management.
63% representation of Black people in middle management and a 32% representation of Black women in middle management.
68% representation of Black people in junior management and a 34% representation of Black women in junior management.
2% representation of Black disabled people throughout the measured entity, and 50% of this will be Black women.

Measured entities falling within the QSEs threshold commit that 40% of all management staff are Black within 5 years. 50% of these positions should be earmarked for Black women. QSEs within this sector commit that 60% of all staff should be Black within the 5 years. Black women should occupy 30% of all positions within 5 years.

Within TEN years:

60% representation of Black people in senior management and a 30% representation of Black women in senior management.
75% representation of Black people in middle management and a 38% representation of Black women in middle management.
80% representation of Black people in junior management and a 40% representation of Black women in junior management.
3% representation of Black disabled people throughout the measured entity of the points specific will only target that which has been achieved. for employment equity once a minimum of 40% is achieved.

Measured entities commit to 60% of all management staff being Black within 5 years; 50% of these positions should be earmarked for Black women.
QSEs within this sector commit to all 70% of all staff being black within the 5 years. 35% of all positions should be occupied by Black women within 5 years.
An understanding that the 10-year targets stated above may be subject to change as a result of a revision of the sub-sector coding 5 years from its inception.

Measurement principles on the employment equity element are contained in Statement 300 of Code 300 of the Generic Code of Good Practice.

The formulae required in the determination of the employment equity score are contained in Annexure 300 (A)-B of Statement 300 of Code 300 of the Generic Code of Good Practice. The formula for the determination of the adjusted recognition for gender — Annexure 300 (A)-A will not apply. Measurement principles for the determination of the Employment Equity score for QSEs are contained in Statement 803 of Code 800 of the Generic Codes of Good Practice.

The national government must commit to the following:

1. Ensuring that the Department of Labour plays a significant role in monitoring and supporting stakeholders in meeting their EE targets.
2. Ensure that the DOL will, in compliance with the EE Act, collect and publish detailed and aggregated statistics on the EE profile of the industry according to occupational level and occupational category by race. The department will also monitor the industry’s progress in meeting its targets and publish an annual report on the EE Profile of the industry according to occupational level and category.

The next article will summarise information related to skills development, preferential procurement, enterprise development, and socio-economic development.