This fourth article, in a series, discusses the basics of the rail sub-sector code’s INDICATORS OF EMPOWERMENT. Please read the previous articles before reading this one.
Source: Gazette 32511, Notice 1162 OF 2009, Draft Integrated Transport Sector Codes
Preferential Procurement
Guiding Principle
The guiding principle is to use the significant purchasing power of the rail parastatals to develop and support existing BEE companies in the sector and make deliberate attempts to identify new entrants, particularly in areas such as heavy engineering and maintenance, which have traditionally excluded black people. A key area of focus will be to identify areas where there is relatively little procurement from black suppliers and develop strategies to rectify the situation.
However, quality and specification issues have to be reflected under procurement in order to ensure compliance with safety standards.
Private industry must commit to the following:
- B-BBEE Procurement: The private sector commits itself to procuring a minimum of 50% of B-BBEE procurement spend based on the recognition levels (see Appendix B) as a percentage of total measured procurement spend.
- B-BBEE Procurement for QSEs and EMEs: The private sector commits itself to procuring a minimum of 10% of all B-BBEE procurement spend from Qualifying Small Enterprises and EMEs.
- Procurement from 50% black-owned enterprises: The private sector commits itself to procuring a minimum of 9% of B-BBEE procurement spend from 50% black-owned enterprises.
- Procurement from 30% black women-owned enterprises: The private sector commits itself to procuring a minimum of 6% of B-BBEE procurement spend from 30% black women-owned enterprises.
- QSEs within this sub-sector commit to procuring a minimum of 50% of total procurement from B-BBEE-compliant suppliers.
- Adopt the guidelines on Accounting for Affirmative Procurement that will be set by the Transport Sector BEE Forum/Council.
All stakeholders must commit to the following:
- Ensure that companies and organisations develop uniform policies on accounting for affirmative procurement and adopt the guidelines that will be set by the Transport Sector BEE Forum/Council.
- Ensure that companies and organisations constantly explore possibilities to increase the amount of discretionary spending; for example, by supporting local procurement and/or content in line with the agreements reached by stakeholders at the Growth and Development Summit (GDS) whilst at all times complying with their safety management system requirements. This will require that companies and organisations state in their annual BEE reports the reasons for classifying an item of expenditure as “non-discretionary”. This information should be disclosed in a detailed statement that reconciles discretionary and non-discretionary expenditure.
- Companies and organisations should support the Proudly South African (PSA) campaign and note the agreement at the GDS that PSA is “an important means of taking the message of local content, fair labour standards, environmental sustainability and quality products and services to the nation.”
- As far as possible, companies and organisations should use local as opposed to foreign suppliers and state the reasons for using a foreign supplier. Where a foreign supplier must be used, companies and organisations must use the offset principle to secure the commitment of these companies to a set of BEE obligations.
- As far as possible, include early payment cycles, securities, guarantees, etc. when procuring from black-owned enterprises, QSEs & EMEs.
Measurement principles associated with the preferential procurement element are contained in Statement 500 of Code 500 of the Generic Code of Good Practice.
The formulae required in the determination of the preferential procurement score are contained in Annexure 500 (A) of Statement 500 of Code 500 of the Generic Code of Good Practice. Measurement principles required in evaluating the preferential procurement contributions made by QSEs within this sector are contained in Statement 805 of Code 800 of the Generic Codes of Good Practice.
Enterprise Development
Guiding Principle
The guiding principle is to help set up, nurture and grow viable BEE enterprises in the rail sector that are majority-owned by black operators while developing existing companies.
Private industry must commit to the following:
- Proactively seek opportunities to enter into joint ventures (and other forms of alliances) and make direct investments in BEE companies.
- Facilitate the development of creative financial mechanisms to enable BEE companies and employees to purchase equity in their companies.
- Enterprise development in the private sector will be measured as a percentage of Net Profit After Tax (NPAT) over a 5-year period. The private sector commits itself to an average annual value of enterprises development of 3% of NPAT.
- QSEs within this sub-sector aspire to make contributions to enterprise development, which will amount to 2% of NPAT evaluated annually over the next 5 years.
TETA must commit to the following:
- To develop training programmes specifically designed for black entrepreneurs within the rail industry.
- Contribute 10% of its allocation to developing training programmes specifically for entrepreneurs in this sector.
- Having 50% of all learners in such programmes being black people.
Measurement principles associated with the enterprise development element are contained in Statement 600 of Code 600 of the Generic Code of Good Practice. Qualifying contributions for the enterprise development element are contained in Annexure 600(A) — Benefit Factor Matrix of Statement 600 of Code 600 of the Generic Codes of Good Practice.
The formulae required in the determination of the enterprise development score are contained in Annexure 600 (A) of Statement 600 of Code 600 of the Generic Code of Good Practice.
Measurement principles required in evaluating the enterprise development contributions made by QSEs within this sub-sector are contained in Statement 806 of Code 800 of the Generic Codes of Good Practice.
Socio–economic Development
Guiding principles
The rail sub-sector is well placed to make a contribution towards the development of local rural communities. The guiding principle is to increase the impact of companies and organisations within the rail venue chain on rural communities.
All stakeholders must commit to the following:
- A target of 1% of NPAT on social development projects as identified by the organisation/company with a specific focus on rural development, which may include HIV/AIDS treatment and prevention, education, etc.
- QSEs within this sub-sector must contribute a minimum of 1% of NPAT evaluated annually to socio-economic development initiatives over the next 5 years.
- The value spent on contributions directed to the following programmes that will be rail sector-specific and designed areas will be enhanced by a factor of 1.25:
a. HIV Treatment and Prevention;
b. Education; and
c. Rural development structures.
Measurement principles associated with the socio-economic development element are contained in Statement 700 of Code 700 of the Generic Code of Good Practice. Qualifying contributions for the socio-economic development element are contained in Annexure 700(A) — Benefit Factor Matrix — of Statement 700 of Code 700 of the Generic Codes of Good Practice. The formulae required in the determination of the socio-economic development are contained in Annexure 700 (A) of Statement 700 of Code 700 of the Generic Code of Good Practice.
Measurement principles required in evaluating socio-economic development contributions made by QSEs within this sub-sector are contained in Statement 807 of Code 800 of the Generic Codes of Good Practice.