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

Sector Codes

Defence Sector Code

16. Elements of the Defence Sector Code: Large Entities Scorecard

16.4 Enterprise and Supplier Development

 

16.4.1 The South African government focus areas for B-BBEE in the next 10 years link it to key government economic development strategies such as the Defence Industry Strategy, Industrial Policy Action Plan (IPAP), the Defence Industrial Participation Programme (DIPP), the National Industrial Policy Framework (NIPF), the National Development Plan (NDP) and the Black Industrialist Policy. Key aspects of all these strategies are the promotion of entrepreneurship, focusing on businesses that result in job creation, expanding business horizons by venturing into new fields, operational excellence and risk taking. The dti's Black Industrialists Policy is also important in this regard. This emphasis is carried through to the Generic Scorecard in which Enterprise and Supplier Development is a priority element carrying the highest weighting. Most Black businesses are SMME's. Empowerment policies and practices should not only support Exempted Micro Enterprises and Qualifying Small Enterprises but also assist them to grow into Large Enterprises.

 

16.4.2 The SADI is in a unique position to stimulate this growth and create new businesses. Public Entities should take the lead in driving such changes. The promotion of local content and stimulation of local manufacturing is also to be encouraged through this Sector Code.

 

16.4.3 The aim of Enterprise and Supplier Development programmes is—
16.4.3.1 to strengthen local procurement in order to help build South Africa’s industrial base in critical sectors of production and value adding manufacturing, which are largely labour-intensive industries;
16.4.3.2 to increase local procurement through capacity building achieved by incentivising appropriate local supplier development programmes by businesses supplying imported goods and services; and
16.4.3.3 to actively support procurement from Black Owned QSEs and EMEs by identifying opportunities to increase procurement from local suppliers in order to support employment creation.

 

16.4.4 Stakeholders therefore commit themselves to the following—

 

16.4.4.1 Organs of State and Public Entities

 

16.4.4.1.1 Public Entities and Organs of State shall be entitled to implement Targeted Procurement for Black Owned Enterprises.

 

16.4.4.1.2 Public Entities and Organs shall be entitled to require that Measured Entities doing business with it, sub-contract a minimum of thirty (30) per cent of a contract to the following entities that are at least 51% Black owned –
• Exempted Micro Enterprises or Qualifying Small Enterprises owned by Black females;
• Exempted Micro Enterprises or Qualifying Small Enterprises owned by Black people;
• Exempted Micro Enterprises or Qualifying Small Enterprises owned by Black Military Veterans;
• Exempted Micro Enterprises or Qualifying Small Enterprises owned by Black youth; and
• Exempted Micro Enterprises or Qualifying Small Enterprises by black people with disabilities.

 

16.4.4.1.3 Any Targeted Procurement shall not exceed 30% (thirty) per cent of the total procurement budget of the Organ of State or the Public Entity implementing targeted procurement in the first year after the promulgation of the Defence Sector Code, 35% (thirty-five) per cent in the second year and 40% (forty) percent in the third year.

 

16.4.4.2 Private Sector Enterprises

 

16.4.4.2.1 Private sector enterprises must, in instances where it is feasible or where it is required, subcontract not less than 30% (thirty percent) of any contract exceeding an amount of R30,000,000 (thirty million Rand) to:—
• Exempted Micro - Enterprises or Qualifying Small Enterprises owned by Black females;
• Exempted Micro - Enterprises or Qualifying Small Enterprises owned by Black people; and
• Exempted Micro - Enterprises or Qualifying Small Enterprises owned by Black Military Veterans;
• Exempted Micro - Enterprises or Qualifying Small Enterprises owned by young Black people;

 

All stakeholders undertake to use as a guide, the non-exhaustive list of Enterprise Development and Supplier Development Contributions in Schedule 1 of this Sector Code to meet the Enterprise and Supplier Development targets.

 

16.4.4.3 Defence Industry Enterprise and Supplier Development Fund

 

16.4.4.3.1 Stakeholders hereby agree to set up a Defence Industry Enterprise and Supplier Development Fund. Such a Fund will be administered by the Charter Council which may outsource the management of the Fund to any entity with the requisite skills, experience and capacity subject to such entity complying with the Charter Council’s directives and the aims and objectives of this Sector Code.

 

16.4.4.3.2 The Defence Industry Enterprise and Supplier Development Fund shall be utilised for Enterprise and Supplier Development Initiatives including the following:
• To fund Black owned entities in the SADI;
• To engage in initiatives that promote manufacturing in the SADI;
• To fund innovative Black owned technology entities within the SADI or whose products or services can be utilized by the SADI;
• To promote the development of intellectual property and exploitation in the SADI by and in collaboration with Black people;
• To promote and fund the development and transfer of Sovereign and Strategic capability and investing to ensure sustainability of such capabilities in the SADI; and
• Through funding and other measures support the growth of Black businesses within the SADI to compete internationally and promote exports.

 

16.4.4.3.3 The Charter Council shall determine the method of operation of the Enterprise and Supplier Development Fund and identify any additional Enterprise and Supplier Development Initiatives to be funded by it.

 

16.4.4.3.4 All funding by the Enterprise and Supplier Development Fund shall be by way of grants and related mechanisms.

 

16.4.4.3.5 The Charter Council shall ensure that costs for the administration and management of the Enterprise and Supplier Development Funds not exceed 3% (three) per cent of the total income of the Fund in any financial year.

 

16.4.4.3.6 All Measured Entities with the exception of Exempted Micro Enterprises must contribute 1% (one) per cent of their Net Profit After Tax (NPAT) to the Enterprise and Supplier Development Fund.

 

16.4.4.3.7 The Charter Council shall ensure that the Enterprise and Supplier Development Fund shall be established not later that 12 (twelve) months after the gazetting of this Sector Code.

 

16.4.4.3.8 Notwithstanding any provision to the contrary contained in this Sector Code, no stakeholder shall be required to contribute to the Enterprise and Supplier Development Fund in terms of clause 16.4.4.3.6 herein prior to the establishment of the Enterprise and Supplier Development Fund.

 

16.4.4.3.9 Notwithstanding any provision to the contrary contained in this Sector Code, in the period between the gazetting of this Sector Code and the establishment of the Enterprise and Supplier Development Fund, the annual value of Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity shall be 2% (two) per cent of NPAT. After the establishment of the Enterprise and Supplier Development Fund, paragraph 4 of the Enterprise and Supplier Development Scorecard dealing with contributions to the Enterprise and Supplier Development Fund, shall be applicable.

 

16.4.4.4 Foreign Enterprises

 

Foreign Enterprises shall place DIP contracts equivalent to seventy-five percent (75%) of the total DIP obligation with local (South African) B-BBEE compliant suppliers (Enterprises that are at least 25,1% owned by Black people and at least 25,1% controlled by Black people) while at least twenty-five percent (25%) of this value shall be placed with Enterprise and Supplier Development (ESD) beneficiaries.

 

Enterprise and Supplier Development Scorecard

 

B-BBEE

Element

Indicator

Description

Weighting

Points

Compliance Target

Enterprise and Supplier Development
1. Preferential procurement
1.1 B-BBEE Procurement Spend from all Empowering Suppliers based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend.

5

80%
1.2 B-BBEE Procurement Spend from all Empowering Suppliers that are Qualifying Small Enterprises based on the applicable B-BBEE Procurement Recognition Levels as percentage of Total Measured Procurement Spend

3

8%
1.3 B-BBEE Procurement Spend from all Exempted Micro Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend based on the Total Measured Procurement Spend

4

15%
1.4 B-BBEE Procurement Spend from Empowering Suppliers that are at least 51% black owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend

9

40%
1.5 B-BBEE Procurement Spend from Empowering Suppliers that are at least 30% black women owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend

4

12%
2. Bonus Points

B-BBEE Procurement Spend from Designated Group Suppliers that are at least 51% Black owned.

2

6%
3. Supplier Development

Annual value of all Supplier Development Contributions made by the Measured Entity as a percentage of the target

6

1% NPAT
4. Enterprise Development

Annual value of Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target

4

1% NPAT
5. Enterprise & Supplier Development Fund

Annual Contributions to the Enterprise and Supplier Development Fund

5

1% NPAT
6. Bonus Points
6.1 Bonus point for graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level

1

 

 
6.2 Bonus point for creating one or more jobs directly as a result of Supplier Development and Enterprise Development initiatives by the Measured Entity.

1

 

 
6.3 Bonus points for discharging DIP obligations for benefit of South African Entities that are 25.1% Black owned and managed.

2

75%

 

Total

40 Points