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

Industry Charters

Chartered Accountancy Charter

Section C From Theory to Practice: The Scorecard

12. The Generic Scorecard for the CA Sector

12.2 Application of the CA Sector Scorecard

12.2.5 Preferential Procurement Scorecard

 

By means of the indicators listed below, the objective is to measure the extent to which the CA sector buys goods and services from companies with strong B-BBEE economic procurement recognition levels.

 

This is the section of the scorecard to which meaningful contributions by the CA sector are most limited in scope. While recognising the need for the CA sector to contribute to the development of black enterprises that provide goods and services to the sector, the nature and unique structure of the profession is such that a large portion of the procurement spend is not discretionary. This applies particularly to member firms of global networks. Therefore, based on sound economic principles, sectoral characteristics and empirical research in line with the principles set out in paragraph 11.3, the Preferential Procurement Weighting points of 20 were reduced to 10 Weighting points. The goal of this redistribution is to contribute to the achievement of the vision of the CA Sector Code.

 

The indicators and Weightings are as follows:

 

Preferential Procurement indicators

Weighting points

Compliance Target

Code

CA sector

For 2011

for 2016

•      B-BBEE procurement spend from all Suppliers based on the B-BBEE Procurement Recognition Levels as a percentage of total measured procurement spend

12

5

50%

70%

•      B-BBEE procurement spend from Qualifying Small enterprises or Exempted Micro Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of total measured procurement spend

3

2

10%

15%

•      B-BBEE procurement spend from any of the following Suppliers as a percentage of total measured procurement spend



o Suppliers that are 50% black owned

3

2

9%

12%
o Suppliers that are 30% black owned

2

1

6%

8%

 

• Enhanced recognition for spend on Enterprise Development beneficiaries: If a Measured Entity procures goods and services from a Supplier that is a recipient of Enterprise Development Contributions from the Measured Entity as set out in paragraph 12.2.6 of this Sector Code, the recognisable B-BBEE procurement spend to be attributed to that Supplier is multiplied by a factor of 1,2.

 

• Enhanced recognition for spend on Value-Adding Suppliers: In the case of a Value-Adding Supplier, the recognisable B-BBEE procurement spend that can be attributed to that Supplier is multiplied by a factor of 1,25.

 

• Enhanced recognition for Black-owned professional service providers and Entrepreneurs: A Measured Entity will enjoy enhanced recognition for procurement from professional service providers and Entrepreneurs who are black owned. The recognisable B-BBEE procurement spend that can be attributable to that Supplier is multiplied by a factor of 1,25. It must be noted that the intention of the Code is to encourage procurement from such service providers who have a shareholding in excess of 50% and that such services are in the social and consulting areas of service provision.

 

• Professional and consulting services shall mean (this list is not exhaustive)-
o Accounting and Auditing
o Actuarial Sciences
o Advertising and marketing
o Any other professional and consulting services
o Architectural services
o Asset/fund management services
o Corporate finance related services
o Engineering services (all kinds of engineering disciplines)
o Financial advisory services
o HR consulting services
o Information technology services and consulting
o Legal services (including all legal related services)
o Management consulting services
o Medical services
o Quantity surveying
o Real estate appraisers
o Real estate brokers and sales persons
o Real estate developers
o Real estate managers
o Recruitment services
o Scientists
o Strategic consultants
o Tax services
o Town planning services
o Training and development
o Transaction advisory services.

 

• For purposes of the CA sector, the following will be considered to be procurement items:
o All goods and services procured that comprise the cost of sales of the Measured Entity. Cost of sales is an amount arrived at by using opening and closing inventories in the calculation. For procurement purposes actual procurement for the period should be used.
o All goods and services procured that comprise operational expenditure of the Measured Entity.
o All capital expenditure.
o All goods and services procured from organs of state and public entities (e.g. Eskom, SAA) (see schedules 2 and 3 of the Public Finance Management Act of 1998).
o All goods and services procured from Suppliers that enjoy a monopolistic position.
o All procurements on behalf of a third party or a client where the cost of that procurement is included as an expense in the Measured Entity's annual financial statements.
o Payment to independent contractors and to labour brokers for services provided by individuals who are not Employees of the Measured Entity (i.e. Outsourced Labour Expenditure).
o All goods and services procured in carrying out B-BBEE initiatives. The procurement spend does not include the actual portion recognised under Enterprise Development and Socio-Economic Development (SED) Contributions, but does include any expenditure incurred in facilitating such contributions.
o All goods and services procured or imported from a non-South-African source.
o All goods and services procured from subsidiaries and holding companies of the Measured Entity.
o Payments made to any post-retirement funding scheme or to a medical aid and/or similar medical insurer by a Measured Entity for its Employees, excluding any portions of such payments which are a contribution to a capital investment of the Employee.
o Any commissions or similar payments payable by a Measured Entity.

 

• The following are the only permissible exclusions from the above total measured procurement spend:
o Any amount payable to any person which represents a lawful tax or levy imposed by an organ of the state duly authorised to impose such tax or levy.
o Procurement of services and goods on behalf of a third party where such an expense is not represented as an expense in the annual financial statements of the Measured Entity.
o Imported goods and services for value-added production (provided there is no existing local production of such capital goods and services and importing these goods and services promotes further value-added production within South Africa).
o Also imported goods and services where there is no local source or which has a different brand name than the local goods and services or has different technical specifications.
o Public sector procurement - all goods and services procured from organs of state and public entities listed in schedule 1 of the Public Finance Management Act and from state and public entities that have a statutory or regulated monopoly. The exception is procurement from local government authorities who are resellers of schedule 1 services.
o Salaries, wages, remuneration emoluments as well as any amount paid to an Employee as an Element of the salary or wage and any emoluments or similar payment paid to a director of a Measured Entity.
o Empowerment related procurement is excluded if it relates to

- investments in or loans to an Associated enterprise; or

- investments, donations or loans qualifying for recognition in terms of either Enterprise Development or SED contributions.

o Where a global firm allows its local partners no discretion about the purchase of certain goods or services, such costs must be excluded from the total measured procurement spend, where no local equivalent supply exists.

 

Measurement of B-BBEE procurement spend

 

Calculation of B-BBEE procurement spend

 

A= sum of (B x C)

 

Where      A      =      calculated total B-BBEE procurement spend for the Measured Entity. It is equal to the sum of the result of the product of Band C for each Supplier of the Measured Entity not excluded under the exclusion from total measured procurement spend

                   B      =      the value of procurement falling within total measured procurement spend and not excluded under the exclusion from total measured procurement spend from each Supplier of the Measured Entity

                   C      =      the B-BBEE Procurement Recognition Level of each such Supplier of the Measured Entity

 

Calculation of Preferential Procurement contributions to B-BBEE

 

 

Where      A      =      the calculated Preferential Procurement score for each indicator in the scorecard

                   B      =      the total B-BBEE procurement spend of the Measured Entity calculated under measurement of B-BBEE procurement spend as a percentage of total measured procurement spend of that Measured Entity

                   C      =      the compliance Target for each indicator in the scorecard

                   D      =      the Weighting points allocated to each indicator in the scorecard