RAIL SUB-SECTOR CODE FOR B-BBEE – INDICATORS OF EMPOWERMENT – OWNERSHIP AND MANAGEMENT CONTROL

Source: Gazette 32511, Notice 1162 OF 2009, Draft Integrated Transport Sector Codes

This second article, in a series, discusses the basics of the rail sub-sector code’s INDICATORS OF EMPOWERMENT. Please read the first article before reading this one.

The B-BBEE Sub-Sector Code for the Rail Industry seeks to encourage all stakeholders to pursue an aggressive transformation agenda according to the broad guidelines set out in the National Strategy and BEE Balanced Scorecard. It is necessary to set different targets and timeframes for the public and private industries, as the two are at different stages of the transformation process.

OWNERSHIP and the guiding principles

The guiding principle is to increase black ownership of assets, management control and operational involvement across the entire spectrum of the rail industry value chain and design appropriate funding mechanisms to facilitate the process. We recognise that the majority of rail industry assets are publicly owned and the challenge is to identify opportunities outside the public sector and use the purchasing power of the rail parastatals to fast track the development of new black enterprise in the industry.

Private industry must commit to the following:

1. Proactively seek opportunities to broaden the ownership base of their enterprises and ensure that a minimum of 25% + 1 vote is in the hands of black people;
2. Ensure that a minimum of 25% of economic interest accrues to black people;
3. Ensure that a minimum of at least 10% voting rights are in the hands of black women.
4. Ensure that 10% of economic interest is in the hands of black women.
5. Ensure that 3% is earmarked for black designated groups (including black people living with disabilities) and/or black participants in employee ownership schemes, broad-based ownership schemes and co-operatives within five years. This refers to black natural people.
6. If the ownership by black people living with disability is through a non-profit organisation or public benefit organisation, the organisation will require evidence that 85% of the beneficiaries are black people living with disability as defined in the Employment Equity Act in order to realise maximum bonus points; and
7. Qualifying Small Enterprises (QSEs) as defined in this sub-sector code must commit to the following:

7.1 Increasing the ownership base of their companies and ensuring that a minimum of 25% of economic interest is in the hands of black people;

7.2 25%+1 vote voting rights, or equivalent thereof, are in black hands; and

7.3 Ensure that the net economic interest of the black equity participants is 100% of their acquired share of the business within 5 years. If this is achieved, it will be deemed that ownership fulfilment has been achieved for both bigger entities (i.e., companies with turnover above R35 million) and qualifying small enterprises (i.e., companies within the R5 million and R35 million turnover threshold).

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 target contained in the ownership element of this Sub-Sector Code will apply. The recognition of the equity equivalent programmes for multinational 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

Private industry must commit to the following:

Ideally, an equal level of management control should accompany black ownership. Private industry must aspire to the following 5-year targets regarding management control:

1. Board Members: 33% of the exercisable voting rights are in the hands of black people.
2. Women Board Members: 16.5% of exercisable voting rights in the hands black women.
3. Executive Directors: 33% of all executive director positions are occupied by black people.
4. Women Executive Directors: 16.5% of all executive positions are occupied by black people.
5. Senior Top Management: 40% of all top senior management positions are occupied by black people.
6. Women in Senior Top Management: 20% of all senior top positions are occupied by black women.
7. Other Top Management: 40% of all other top management positions are occupied by black people.
8. Women – Other Top Management: 20% of all other top management positions are occupied by black women.
9. QSEs within the sector commit to recruiting black people in top management positions, where they should constitute 50.1% of total top management.
10. Recruiting black women at the top management level, where they should constitute 25% of all such positions.

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 in 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.