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

Industry Charters

Construction Sector Charter

Code Series 2600 : Measurement of Enterprise Development Element of Broad-Based Black Economic Empowerment

Statement 2600 : The General Principle for Measuring Enterprise Development

 

1)        Enterprise Development (ED) Scorecard

Criteria

Weighting Points

Compliance Target

 

Contractors

BEP'S

 

1.1

Enterprise Development Program

1.1.1

Compliance with the Requirements and Guidelines for an Enterprise Development Program (paragraph 2 and 3) calculated on the basis of the ED Matrix (Paragrpah 4). The Measured Entity must submit an annual portfolio of proof indicating compliance with the pre-requisites, as well as adherence to the Guidelines for an Enterprise Development Program.

5

5

1

(Refer to paragraph 4)

1.2

Enterprise Development Contributions

1.2.1

Average annual value of all Enterprise Development Contributions and Sector Specific Programmes made by the Measured entity as a percentage of NPAT/Leviable Amount

10

5

3% of NPAT (Contractor)

0.75% of Leviable Amount (BEP)

 

2) Pre-requisites for an Enterprise development Relationship

 

a) A relationship agreement of co-operation and assistance has to be in place between the established organization (EO) and developing organisation (DO).
b) The EO may not have an equity holding larger than 20% in the DO, either directly or through a flow through calculation.
c) The DO that can qualify for Enterprise Development must:
i) be a legal entity compliant with SA Revenue Service requirements;
ii) be an employer of at least three other permanently employed personnel and not merely a one person operation with temporary employees.
iii) must be 50% or more black owned or 30% or more black women owned.

 

3) Requirements for Enterprise Development Program

 

a) The Measured Entity must have proof of compliance with the following five requirements before the relationship with a potential recipient of enterprise development will be labeled as an official enterprise development relationship attached to the Measured Entity (and points will be allowed for this indicator in paragraph 4):
i) Developed a Needs Analysis for the developing organisation (DO).
ii) Generated a development program with milestones. At least three areas of development must have been identified per recipient applicable to the measurement period. The following areas can be targeted for development but is not limited to:
1. Management and labour skills transfer
2. Establishment of administrative systems
3. Establishment of cost control systems
4. Planning, tendering and programming skills transfer
5. Business skills transfer with emphasis on entrepreneurial and negotiation skills
6. Technical skills transfer with emphasis on innovation
7. Legal compliance
8. Procurement skills transfer
9. Establish credit rating/history
10. Establish financial loan capacity/history
11. Contractual knowledge transfer.
iii) Developed a schedule of activities to address the identified development areas. At least three areas must have been addressed per recipient applicable to the measurement period.
iv) Allocated Resources for the Development of the developing organisation involved in the enterprise development relationship. These contributions will be captured in the indicator dealing with Enterprise Development Contributions and relates to the activities in the Benefit Factor Matrix in Annexe 600(A), Pg 70 of the DTI Codes. If no contributions were made within the year of measurement this requirement has not been met. The cumulative count based on previous years' contributions does not qualify.
v) Appointed a champion for Enterprise Development. It must be an accountable and responsible person from at least senior management level within the Established Organisation (Measured Entity). This individual must be suitable qualified and experienced to monitor progress and complete a portfolio of proof for activities 3a i-iv for submission to a verification agent at the end of the measurement period.

 

4) The ED Ratio Matrix

 

Contractors

BEP's

Annual Turnover of Measured Entity during the current financial year

Requirements related to current measurement period

Annual Turnover of Measured Entity during the current financial year

Requirements related to current measurement period

X

Y

X

Y

Greater than or equal to R1 billion

7

5%

Greater than or equal to R300 million

3

5%

Greater than or equal to R500 million

5

5%

Greater than or equal to R300 million

4

5%

Greater than or equal to R100 million

2

5%

Greater than or equal to R35 million

2

5%

Less than a R100 million

1

5%

Less than R35 million

1

5%

Notes on Calculation

1)

Position the measured entity in the highest applicable turnover category on the basis of its total annual turnover over the current measurement period/financial year

2)

Apply the following calculation methodology:

 

a)

A = The number of DO's that participated in an ED program compliant with paragraph 2 and 3 over the current measurement period divided by the appropriate target number in Colum X.

 

b)

B = (The sum of the annual turnovers of the DO's counted in A divided by the annual turnover of the measured entity for the current measurement period) X 100 (Use the DO's latest 12 months turnover at the time of EO's measurement)

 

c)

C= B/5 (5% is the turnover ratio requirement in Column Y)

 

d)

D = A x C

 

e)

Score = 5 (weighting) X D - The score cannot exceed 5; D cannot be > than 1

3)

Turnover parameters can be adjusted by the Charter Council

 

5) Process of verification related to the Enterprise Development Program:

 

a) Verification Agents will:
i) Ensure that all the pre-requisites for an Enterprise Development Relationship have been met over the period of measurement in order to recognize the Enterprise Development Program.
ii) Ensure that the Enterprise Development Program complies with the requirements.
iii) Interview the DO owner and selected staff to verify Enterprise Development Program claims.

 

6) Focus on Developing Organisations:

 

a) The focus on ED should be on the development of entities in the construction sector and periphery. Examples are as follows (but not limited to):
i) Suppliers - suppliers of construction equipment, construction materials, hired plant/machinery and formwork and other suppliers related to the core business.
ii) Professional service providers which must relate to core business - financial and legal services, services in the built environment professionals (architects, environmental consultants, engineering consultants, quantity surveyors, town planners, land surveyors, geologists and material testing laboratories) and other specialist consultants etc.
iii) Built environment service providers - contractors, (building, interior decorators, painting, civil, mechanical, electrical and electronic) specialist sub contractors (Geotech, piling, asphalt, landscaping, fencing, road marking).

 

7) Notes on Calculation related to paragraph 1.2

 

a) Code 2600 shall adhere to all other principles, definitions and measurement methodologies contained in Code 600, Annexes and related Statements as been published in the Government Gazette no. 29617 and where there are any conflicts, the requirements of code 2600 shall take precedence over Code 600 as published in the Government Gazette No 29617.
b) Clause 1.2 is applicable as it appears in Code 600, P65-71 with the attached Annexes, measurement methodologies and principles.
c) Category A and Category B contributions as referred to in Code 600 must be adjusted using the Benefit Factor, Annexe 600(A), P70. With reference to: 'Black Women Owned" in Category A and B beneficiaries, the minimum shareholding is 30%.
d) The contributions related to this indicator is not limited to entities that are official recipients of Enterprise Development as per the requirements of the Enterprise Development Program prescribed in paragraph 1.1, though if no points are scored on paragraph 1.1: Enterprise Development Program, and contributions were made during the last measurement period, only 50% of these contributions will be allowed for calculation purposes after the benefit factor stipulated in the Benefit Factor Matrix (Annexe 600(A), p70 DTI Codes) has been calculated. This impact will be carried forward for the purpose of cumulative calculations, but will not impact on contributions made before the commencement of this Statement.