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Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

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Chartered Accountancy Charter

Section C from Theory to Practice: The Scorecard

11. Guiding Principles for the Preparation of the Scorecard

11.3 Element Weightings

 

There are seven key Elements that form the pillars to B-BBEE. The Elements, which provide a common base for measuring the impact of policy objectives of B-BBEE across different entities and sectors within the economy, are the following:

 

1 Ownership
2 Management Control
3 Employment Equity
4 Skills Development
5 Preferential Procurement
6 Enterprise Development
7 Socio-Economic Development

 

In terms of the Codes of Good Practice it is recommended that the overall Weightings attached to the different Elements of the scorecard follow the Generic Scorecard as presented in statement 000 of the Codes of Good Practice as closely as possible with a minimum of deviation.

 

However, in terms of code series 000, statement 003, the following principles need to be applied in developing and gazetting Sector Codes:

 

1. There must be common commercial and other characteristics within those enterprises operating in the sector which would make it feasible to formulate a transformation charter subject to the proposed Sector Code.
2. The proposed Sector Code must firstly address all the Elements in the Generic Scorecard.
3. The proposed Sector Code must use the same definitions in respect of all beneficiaries as those used in the Codes.
4. The proposed Sector Code must use the same calculation methodologies to measure compliance as those used in the Codes.
5. The proposed Sector Code may deviate from Targets and Weightings used in the Codes only where the deviations are justifiable based on sound economic principles, sectoral characteristics or empirical research.
6. The proposed Sector Code may introduce a new additional Element for measurement where such addition is justifiable based on sound economic principles, sectoral objectives or empirical research.
7. The proposed Sector Code must clearly define its scope of application.

 

In paragraph 11.1 of the CA Sector Code it was stated that the aim of the guiding principles was to closely align the CA Sector Code with that of the Generic Scorecard. However, as highlighted above, the Codes do make provision for deviations based on sound economic principles or sectoral characteristics or empirical research. The CA sector has come to the conclusion that there are sound economic principles, sectoral characteristics and empirical research to justify deviations from Element Weightings and even certain Targets. The justification is based on the following:

 

1.        Sound economic principles

• The South African economy needs more CAs and it is incumbent on the CA sector to meet the demands of the country by supplying sufficient numbers of these highly skilled individuals to the economy.
• As indicated in paragraph 4 of the Sector Code, not only growth in the number of African and Coloured CAs in general but also in female numbers is essential if the CA profession is to reflect the population demographics.

 

2.        Sectoral characteristics

• A study of the statistics in appendix 4 clearly indicates that there is no growth in the 'pipeline' to deliver the CAs. In fact, in 2007 there was a decrease in the number of candidates presenting themselves for the Qualifying Examination.
• It takes seven years to qualify as a CA. The commitment required, in terms of entry requirements, time and level of difficulty, has a far-reaching effect on the ability of the sector to deliver the required number of CAs.
• The CA sector does not only serve its own interests in terms of education and training people for its own sector, but also provides financially and managerially skilled persons for other sections of the business world and the broader economy.
• The CA(SA) designation is internationally recognised as being of a very high standard. The reality of this is that it is a designation that is internationally transferable, as is endorsed by the fact that 20% of SAICA members reside outside the borders of the country.
• Limited or no capital is required to become an owner / partner in a firm of RAs. However, this is offset by the significant skills and experience required for partnership / ownership status.
• Member firms of global networks are required to procure in terms of global firm policies.

 

3.        Empirical research

• In terms of an independent research report, the CA sector is experiencing an enormous shortage of trainees.
• A great deal of work and analysis has been done with regard to the 'pipeline' needs, which has to show a substantial growth if the CA sector is able to meet the demands of the economy.
• A research report was commissioned by the Human Sciences Research Council to identify the indicators / attributes required by learners to qualify as CAs. Two skills were identified as being essential, namely a proficiency in mathematics and literacy in English (numeracy and literacy skills).

 

As has already been stated, the vision of the CA Sector Code is to grow the number of Black people in the CA profession to reflect the country's population demographics, to empower and enable them to meaningfully participate in and sustain the growth of the economy, thereby advancing equal opportunity and equitable income distribution.

In order to achieve this vision and based on the economic principles and sectoral characteristics as well as the empirical research set out above, the focus of the CA Sector Code needs to be more on Employment Equity and Skills Development. Accordingly, five additional Weighting points were allocated to each of the Employment Equity and Skills Development scorecards. To balance the CA sector scorecard, ten Weighting points were then removed from the Preferential Procurement scorecard as this is not an area in which the CA sector can contribute greatly based on the nature of the CA sector business.

As a result, the Weighting points per the Codes of Good Practice compared to the CA Sector Code are as follows:

 

 

Code

CA sector

Ownership

Management Control

Employment Equity

Skills Development

Preferential Procurement

Enterprise Development

Socio-Economic Development

20%

10%

15%

15%

20%

15%

5%

20%

10%

20%

20%

10%

15%

5%

Total

100%

100%