The Committee heard comments and input from the public, specifically the South African National Accreditation System, Vodacom, South African Women in Construction, Casino Association of South Africa and the Construction Sector Charter Council on the Broad-Based Black Economic Empowerment (B-BBEE) Amendment Bill.
The submission by the South African National Accreditation System (SANAS) said that the B-BBEE Amendment Bill in its current form presented two challenges. These related to the definitions of ‘B-BBEE verification Professional’ and ‘B-BBEE Verification Professional Regulator’ contained in Section 1 (A) of the Bill. If the definitions were not changed, then Verification Professionals could only work for rating agencies that were accredited by SANAS. This would prevent registered auditors from issuing B-BBEE status level certificates and render the B-BBEE status level certificates previously issued by the registered auditors questionable. SANAS proposed deletion of sections of the Bill that contained the definitions of ‘B-BBEE verification Professional’ and ‘B-BBEE Verification Professional Regulator’ in order to ensure the continued validity of the B-BBEE status level certificates issued by registered auditors.
The Construction Sector Charter Council (CSCC) submission fully supported the process of reviewing and amending the B-BBEE Bill to the extent that it would enhance government’s ability to drive transformation, in addition to creating an enabling environment for industry participants to be able to contribute to various sector interventions. The CSCC’s proposed submissions said that the definition of verification professions in Section 1 of the Bill should include someone who has received a certificate of conformity by a sector charter council gazetted in terms of Section 9(1) of the B-BBEE Act. This would preserve the competence and quality of Verification Certificates for Verification Professionals that issued certificates in terms of gazetted sector codes. Any B-BBEE Commission created must have teeth and a Competition Commission style approach to initiate, investigate, and receive complaints.
South African Women in Construction (SAWIC)’s primary aim was to build, empower and grow the emancipation of women in the South African economy through capacity-building, access to finance, and networks in the relevant fields. Black women were marginalised and commercially oppressed in South Africa, especially in the construction sector which was male dominated. SAWIC pointed out that there was still no promotion of B-BBEE status in relation to business that were wholly (100 percent) owned by black women. They highlighted problems with the 10 percent target for exercisable voting rights which were to be allocated to black women and ensuring that dividends were declared in companies that had a black shareholder on board.
The Casino Association of South Africa (CASA) submission highlighted the concern that certain provisions in the Amendment Bill did not support the objective of aligning the B-BBEE Act with other legislation impacting on B-BBEE and with the codes of good practice. The Amendment Bill in its current form would do away with CASA’s ‘achieve overall’ rating. The system in the gambling industry was overly complicated and CASA members holding gambling licences could be faced with the prospect of 10 (nine provinces and one national regulator) different sets of requirements which gambling licence holders in different provinces would be required to comply with.
Vodafone B-BBEE was however hard to plan into the investment cycle due to uncertainties of B-BBEE regime as it applied to the economic sector. What made it hard were the three generic codes such as the B-BBEE legislation, the draft ICT sector code and then a separate set of provisions in the Electronic Communications Act. Satisfying the requirements required alignment of all legislation on B-BBEE to a primary Act and a single regulator. Any B-BBEE Amendment had to bring about certainty to boost investor confidence in South Africa.
Members of the Committee raised questions and concerns about the South African National Accreditation System’s capacity to fulfil functions of accreditation without delay and its geographical coverage in South Africa; the abuse of the verification of co-operatives in the rural areas; whether there was a database of companies; and if there was an evaluation of work done by individual companies and the effects of section 9(6) of the Amendment Bill on casino licence holders. There were further questions on the appointment of a Commissioner from within the Department of Trade and Industry and Vodacom’s role in the area of promoting skills and capacity in South Africa and the rest of the continent.
Apologies were listed from the DA Committee Members, Mr G Hill-Lewis and Dr W James, who had a political engagement in
Submission by the South African National Accreditation System (SANAS)
Mr Ron Josias, Chief Executive Officer, South African National Accreditation System (SANAS), who was accompanied by Mr Dawood Petersen, Company Secretary, Legal Affairs, said in his introduction that SANAS was established by an Act No. 19 of 2006. In 2004, SANAS was asked by the Department of Trade and Industry (DTI) to handle the accreditation of entities in terms of the Broad-Based Black Economic Empowerment (B-BBEE), a responsibility that SANAS was not ready to handle at that time. SANAS nevertheless set up a system and an interpretive guide was finalised. Six B-BBEE accreditation verification agencies received verification in 2006 and as of
Mr Josias said that the B-BBEE Amendment Bill in its current form presented two challenges. These related to the definitions of ‘B-BBEE verification Professional’ and ‘B-BBEE Verification Professional Regulator’ contained in Section 1 (A) of the Bill. If the definitions were not changed, then Verification Professionals could only work for rating agencies that were accredited by SANAS. This would prevent registered auditors from issuing B-BBEE status level certificates and render the B-BBEE status level certificates previously issued by the registered auditors questionable.
Mr Petersen said that SANAS proposed deletion of Section 1 (A) of the Bill that contained the definitions of ‘B-BBEE verification Professional’ and ‘B-BBEE Verification Professional Regulator’. The rationale for the deletion was to ensure the continued validity of the B-BBEE status level certificates issued by registered auditors, as well as ensuring that the registered auditors continued issuing B-BBEE status level certificates.
Mr Petersen said that Section 1(a) of the Bill assigned responsibilities to SANAS that were in conflict with the Accreditation Act and that the Section would result in the scrutiny of the status of the B-BBEE status level certificates issued by the registered auditors. In terms of the challenges posed by the ‘B-BBEE Verification Professional Regulator’ definition, he said that SANAS did not fulfil the function as a regulator or supervisor of industries and/or businesses. It provided accreditation and it did not have the mandate or the capacity to fulfil the additional function as a registrar of persons. There were concerns about the legitimacy of the B-BBEE status level certificates issued by the registered auditor. This was in light of the fact that the legislation governing the activities of the registered auditors had not been amended to enable the registered auditors to issue B-BBEE status level certificates.
Mr Petersen said that SANAS’s proposal was that the term ‘B-BBEE verification professional’ be replaced with the term ‘B-BBEE rating agency’, as defined in Section 1 of the Accreditation Act as ‘an organisation that rates the status of enterprises in terms of Broad-Based Black Economic Empowerment compliance.’ The proposed wording would be ‘B-BBEE rating agency’, which would be defined as ‘an organisation which performs any work in connection with rating the status of enterprise in terms of broad-based black empowerment compliance.’ The effect of the proposed wording would ensure consistency between the Accreditation Act and the Bill and also enable registered auditors to continue issuing B-BBEE status level certificates as empowered by Government Gazette No. 34612 of
Mr Petersen said that ‘B-BBEE Verification Professional Regulator’ should be changed to ‘B-BBEE Accreditation Body’ which would be aligned with SANAS’ mandate as an accreditor of facilities and/or organisations, as defined in Section 4 of the Accreditation Act and Section 1 of Government Gazette No. 34612 of 23 September 2011. He added that the definition ‘B-BBEE Accreditation Body’ be expanded to allow SANAS to be assigned with derogatory powers. This would ensure the continued validity of B-BBEE status level certificates issued by the registered auditors.
The proposed wording for the meaning of ‘B-BBEE Accreditation Body’ would be – ‘the South African National Accreditation System established by the Accreditation for Conformity Assessment, Calibration and Good Laboratory Practice Act, 2006 (Act No. 19 of 2006) and may delegate any power conferred or any duty assigned to him or her under this Act (the Bill) and the Accreditation for Conformity Assessment, Calibration and Good Laboratory Practice Act, 2006 (Act No. 19 of 2006), to any other person and/or body with appropriate knowledge to assist it in the carrying out of its functions with the issuing of B-BBEE status level certificates’.
The effect of the proposed wording above was that the changes to the title of the definition would ensure that there was consistency between the definition of ‘Accreditation Body’ as contained under Statement 005 in Section 1 of Government Gazette No. 34845 of 09 December 2011 and Section 9(1) of the Codes of Good Practice Schedule published in Government Schedule No. 29617 of 09 February 2007 and the Bill. The changes would also ensure a degree of alignment between the approaches adopted between SANAS and the registered auditors in the manner in which Black Economic Empowerment (BEE) status level certificates were issued until such time that the legislation governing the registered auditors would be amended to allow registered auditors to verify BEE status level compliance and SANAS could be relieved from accrediting BEE rating agencies.
The Chairperson sought clarification from the Department of Trade and Industry (DTI) following a debate on who was to do the verification. As she understood it, the DTI had said that because auditors were expensive it would try to broaden the scope of registered auditors. This was one of the reasons that SANAS was given the obligation. Was this the proper understanding of what the DTI had said?
Mr Sipho Zikode, Deputy Director-General, Department of Trade and Industry (DTI), said in response that SANAS was chosen by DTI to do the accreditation of the verification agencies because, out of the various organs of the DTI, SANAS was the one that was closest to the task at hand. This was despite the fact that SANAS’ main function was to accredit laboratories. The verification function was more of an auditing function and so the DTI had decided that SANAS could not accredit a lot of verification agencies because of its capacity. As the market was being stifled by the small number of accreditation agencies the function of accrediting verification agencies was to be opened up to the auditors, hence the DTI’s efforts to bring in the Independent Regulatory Board for Auditors (IRBA). Use of the auditors would see IRBA regulate the accreditation of the verification agencies. With the regulator governed by the Auditor’s Act the National Treasury would have to amend the Auditors Profession Act to include in IRBA’s functions the accreditation of verification agencies.
Mr G McIntosh (COPE) said that he was not impressed that the DTI had not foreseen the problems as raised by the presentation. The National Treasury had to step in on the law concerning auditors. He was concerned that the DTI had tasked SANAS to do a task that it was not mandated to do. He pointed out that the Bill did not have a section 130.
The Chairperson said that the National Treasury would be invited to address some of the issues relating to alignment.
Mr X Mabasa (ANC) asked if SANAS had the capacity to fulfil the functions of accreditation without delay and how long it would take to accredit or approve? How was SANAS placed geographically? How would short-comings be addressed?
Mr Josias responded that although verification was not part of SANAS’s mandate as suggested in the current Amendment Bill, SANAS had sufficient capacity to accredit verification agencies. In terms of the delays, he said that verification was a process that included a number of steps. Delays would occur if documentation was incomplete. It would take about two months for accreditation to be completed assuming that everything was in order.
Mr Zikode added that to reduce the delays, exempted companies were not required to go through the verification process. Raising the threshold to R10 million from R5 million would help companies as they would pay less to auditors.
In terms of the placement of SANAS, Mr Josias said that SANAS had one office at the DTI but added that it had assessors in areas where the demand already existed and these were working as part-timers. Concerning short-comings, he said that SANAS had set up training courses to assist companies in ensuring that they had everything in order when applying for accreditation.
Mr B Radebe (ANC) said that the verification of co-operatives had been abused in the rural areas. How was the DTI ensuring that information provided to Parliament was reaching the rural areas?
Mr Zikode responded that abuse of verification was indeed a challenge for the DTI but it had been proposed that a procurement officer be incorporated into the DTI budget.
Construction Sector Charter Council’s Comments on the Broad-Based Black Economic Empowerment Amendment Bill
Mr Thabo Masombuka, Chief Executive Officer, Construction Sector Charter Council (
The provision in the Construction Codes of Good Practice said that in view of the fact that the empowerment instrument could not be a ‘one-size-fits-all’, it became critical for the Codes of Good Practice to consider a ‘specific sector intervention’. Based on this, the
As an overseeing body, the Charter was empowered to act with executive capacity and provided the necessary links to the relevant government institutions, together with providing annual reports to the B-BBEE Advisory Council and the relevant government department. The Charter Council was also the custodian of the ‘baseline data’ for the monitoring and evaluation of progress of economic transformation and empowerment. This would make the
In terms of the priorities of the Construction Charter, there was a noticeable absence of black women, disabled persons and black youth in the construction sector. The justification for this was that the nature of the projects which were mostly ‘state-of-the-art’ and therefore required importing the required skills from
Reporting and monitoring, under Section 13 (g) of the Amendment Bill, should include the responsibility and obligation of Verification Professionals to report the information compiled as part of the verification process to the executive authority (the Department of Trade and Industry and the charter council). This would ensure accountability of information, reliability of data and ease of access to reporting and monitoring.
It was also proposed that in terms of fronting, Section 1 (e) (iii) of the Amendment Bill should include an additional definition covering instances where black-owned enterprises willingly allowed their status or empowerment credentials to be used by another BEE non-compliant enterprises in return for compensation. This would clamp down on the practice that was common and widespread in the Construction Sector and although the black-owned enterprises received financial compensation, this would have the effect of diluting the true impact and progress of empowerment.
With regard to the funding model under Section 8 of the Amendment Bill, it was proposed that the funding of empowerment reporting should include the funding of operations of councils to be made compulsory by all signatories to the charters and line ministries. He said that this would help to ensure that the capacity of sector charter councils was enhanced and increased.
There should be an introduction of norms and standards that sought to enhance the implementation of targets set out in the gazetted sector codes, including the implementation of different measurement targets and indicators that were specific to that Sector. This would be to allow sector and industry empowerment bodies, such as sector charter councils, to introduce and put in place measures to enhance transformation targets that were relevant to their sector, and to also introduce initiatives without being challenged and constrained by the minimums imposed by the Act.
In terms of delegation and consultation under Section 13 (h) of the Amendment Bill,
In terms of compulsory provisions under Section 10 of the Amendment Bill, the sector charter councils collectively welcomed and emphasised the importance of making it compulsory for the implementation of B-BBEE in the exercise of state procurement. Making it compulsory would create legal consequences for the non-implementation of B-BBEE.
The trumping provisions under Section 10 must be such that only those economic industries that do not have gazetted sector codes were affected and should comply with the generic codes. This was based on the understanding that any further gazetting and/or alignment of the sector codes in line with the new B-BBEE codes would be preceded by a vigorous process.
In summing up, Mr Masombuka joined the media’s collective voice that any B-BBEE Commission created must have teeth and a Competition Commission style approach to initiate, investigate, and receive complaints. The complaints received should be dealt with in a timely and decisive manner because some matters required urgent intervention without having to go through bureaucracy.
There was a forum of engagement of common and overlapping issues that the DTI was aware of. CSCC was a proper communication channel and engagement with DTI and that it was available for further engagement on any of the issues that would impact on the sector specific transformation.
South African Women in Construction (SAWIC) Submissions
Ms Mphumi Pakadi, President, and Ms Vuyiswa Ndakana Mabucwana, National Membership Chair, represented South African Women in Construction (SAWIC). Ms Pakadi applauded the government on making women emancipation a priority that had formed part of the basis for the revision of the codes. She related an incident in the
Ms Pakadi said that it was a serious matter in
SAWIC was a national association of entrepreneurs that had its footprints throughout all the nine provinces of
SAWIC’s primary aim was to build, empower and grow the emancipation of women in the South African economy through capacity-building, access to finance, and networks in the relevant fields. Black women were marginalised and commercially oppressed in
SAWIC generally welcomed and supported the proposed amendments of the B-BBEE Amendment Bill with a number of comments. Women constituted the majority of the population and the majority of households were dependent on them as bread winners. Most households were headed by previously disadvantaged women. SAWIC’s proposal was that the B-BBEE Codes should be more inclusive with regard to black women in
From inception, the B-BBEE Act had been a vehicle that allowed black people to participate in the mainstream, which was partly responsible for the steady growth of women in the industry. However; there was still room for more improvement as women were only benefiting from a fraction of the economy.
SAWIC accepted the change regarding the recognition of percentage ownership (black-exempted micro enterprises) however there was still no promotion of B-BBEE status in relation to business that were wholly (100 percent) owned by black women and as such, level one status should be awarded to companies that were 100 percent owned by black women. This would entice businesses to utilise these black-owned enterprises for business and as result, improve their economic status.
Ms Mabucwana commented on the ownership scorecard. The 10 percent target for exercisable voting rights which were to be allocated to black women and the 10 percent for economic interest had to be improved because the captains of the construction industry always did away with these percentages. The proposal was to increase these to 20 percent so that they were not bypassed.
Measures had to be taken to ensure that dividends were declared in companies that had a black shareholder on board. The practice was that once black shareholders got on board, suddenly a company that was declaring dividends ceased to do that. There should be a Commission to monitor the implementation of this aspect.
In terms of the enterprise and supplier and development element the question was: how was the DTI going to ensure that companies were not side-lined based on trade experiences? This would unfairly eliminate some of the companies in terms of compliance and, more specifically, when it came to procurement. Eskom was a good example in that it had set aside 30 per cent to be procured for women-owned enterprises – this should be applied across the board for government enterprises as well.
Black enterprises were exploited, especially in the construction sector. For example, businesses would accept services from a black enterprise at a far lower rate than would be charged by another service provider. It was as result of this that SAWIC was supporting the trumping provision in the Amendment Bill. Empowering women would result in empowering the nation.
Mr McIntosh asked if SAWIC had any white, coloured or Indian members or was SAWIC more concerned about blacks only? He also asked for figures in terms of the steady growth of women entrepreneurs. He further asked for the areas of success in the
Ms Pakadi said that SAWIC was very inclusive with 60 per cent of its membership black and 40 per cent covering other races.
Mr Masumbuko agreed with Mr McIntosh that the areas of success in the sector had to be paraded to show if the sector was going forward or backwards.
Mr Radebe said that SAWIC should be called in April for a further presentation before the Committee. He noted that there was nothing in the presentation on persons with disabilities. He added that if
Ms Pakadi responded that there was a 10 per cent discretionary budget to address concerns on disabilities.
Mr Radebe asked for the status of the
Mr Masumbuko responded that B-BBEE was about money and that there was a specific fund to deal with non-compliance in terms of the 10-percent-over policy.
Ms Pakadi also added that the black people should stop signing deals without reading them to try and combat exploitation.
Mr N Gcwabaza (ANC) asked
Casino Association of South Africa (CASA) Submissions
Mr Themba Ngobese, Chief Executive Officer, Casino Association of South Africa (CASA) speaking on the Amendment Bill, said that the CASA members had actively pursued BEE even prior to the promulgation of the B-BBEE legislation in 2003 and that they had made commitments as part of the casino licensing process in 1994 and 1995 – by then it was limited to procurement and ownership.
In terms of Section 9(6) of the Amendment Bill, this proposed subsection empowered the Minister, if requested to do so, to permit organs of the state or public entities ‘to specify qualification criteria for procurement and other economic activities’ which exceed those that appeared in any Codes published by the Minister in terms of Section 9(1). In the gambling industry, this implied that each of the nine provincial licensing authorities (PLAs) and the National Gambling Board (NGB) in their capacity as public entities would request the Minister to permit them to specify any criteria in relation to B-BBEE that were more onerous than the requirements of the Codes of Good Practice on B-BBEE.
The consequence of the above was that
With regard to Section 10(2) and (3) the PLAs were construing Section 10 of the Act (the same in the Amendment Bill) as conferring upon them the authority to impose conditions on the casino licences issued by them to the effect that all licence holders should attain defined B-BBEE Contributor Level Status within fixed periods of time. He said that the difficulty with conditions of this nature was that casino licences would be suspended or even revoked entirely if the specified B-BBEE-related targets were not met within the stipulated timeframes.This would in most cases occur as a result of factors entirely beyond the control of the licence holder such as transfer of shareholding (for instance where the licence holder was a subsidiary of a listed company).
PLAs had seen fit to impose additional B-BBEE-related licence conditions over and above the requirements of the Codes. For instance, in the context of preferential procurement, the gambling licence holder was required to procure a certain specified percentage of its goods and services. This should be procured from entities within the relevant province or entities in which shareholding by PDIs equalled or exceeded a stipulated minimum.
The difficulty with the above condition was that if
The on-going imposition of mutually irreconcilable conditions in relation to B-BBEE by PLAs materially undermined the ability of
In conjunction with their licensed casinos,
In the event that the tourism components of the relevant businesses were required to be separated from the casino components for the purposes of B-BBEE compliance,
Mr G Selau (ANC) wanted clarification on the problems of supporting the B-BBEE in the local or PDI owned businesses.
Mr Mgobese said that B-BBEE in its current form was creating three masters and this would pose significant challenges to
Mr Radebe asked how DTI was hoping to address challenges raised by
Mr Masombuka said that the DTI would be sending a response in writing to the Committee.
Mr McIntosh, joined by the Chairperson, was concerned about Section 9(6) of the Amendment Bill and the possible requirements that it would create for casino licence holders.
The Vodacom team was led by Mr Nkateko Nyoka, Chief Officer, Legal and Regulatory; Lynda Marthinus, Executive Head, B-BBEE and Transformation; and Mr Matthew Kirk, Group External Affairs Director, Vodafone Group.
Mr Kirk said that Vodafone had been an investor in
As investor, Vodafone understood the rationale for B-BBEE in
B-BBEE was however hard to plan into the investment cycle due to uncertainties of B-BBEE regime as it applied to the economic sector. What made it hard were the three generic codes such as the B-BBEE legislation, the draft ICT sector code and then a separate set of provisions in the Electronic Communications Act. Satisfying the requirements required alignment of all legislation on B-BBEE to a primary Act and a single regulator. Any B-BBEE Amendment had to bring about certainty to boost investor confidence in
The B-BBEE amendment did not speak to purpose because of its inconsistency in provisions on application. He added that a removal of trumping provisions would weaken alignment and that there were conflicting provisions. There was need for policy stability because this would build commitment to sustainable initiatives and would also enable stakeholders to plan for longer-term and systematic initiatives.
The amendment did not pass the policy stability litmus test because the implementation rules were different between the private and public sector. It was particularly Section 9(6), read together with Section 10(2), that were in conflict with each other. The conflict was a concern as it would be open to abuse by public entities if justification for higher targets not based on sound economic principles, sectoral characteristics or empirical research.
There would be uncertainty in key economic sectors under jurisdiction of an organ of state and this would negatively affect investment. There would also be a conflict with the binding provisions of Sector Codes both public and private entities within the applicable sector.
As a way forward, alignment was key in calling for a substantial degree of consistency between empowerment requirements of other laws and the B-BBEE Act in terms of the certainty of the rules of the game and evenness in implementation. He added that B-BBEE ought to be the official South African ‘Bible’ on B-BBEE Act must be amended and aligned to the Act. Clarity could only be achieved through explicit approach.
With regard to the B-BBEE Commission, Mr Nyoka said that Vodacom was of the view that this was not required but instead, preference was in strengthening powers and capabilities of the B-BBEE Division of DTI. This would lessen the financial burden on government, limit the number of bodies with B-BBEE responsibility and as such less confusion on the scope and powers of different authorities. He added that DTI could increase resources both financial and human capital in this effort.
In the event that a Commission was established, the Commissioner should be appointed by Parliament to ensure impartiality and accountability to Parliament.
Mr Radebe asked if the DTI had consulted the Independent Communications Authority of South Africa. With regard to doing away with the B-BBEE Commission, he said that Vodacom should instead provide ideas on how to improve it. He further said that
The Chairperson added that in the event that no consultation had been done with ICASA, the DTI should make it a point to do so.
Mr McIntosh said that Vodacom’s input was important in so far as the telecom sector was all private; something he said was evidence of free enterprise. He added that the idea of a Commissioner from within the DTI being appointed by Parliament should be considered.
Mr Mabasa asked what Vodacom was doing in the area of skills and capacity development not only in
Ms Marthinus responded that Vodacom had assigned black employees in Vodacom to its foreign companies in
Mr Kirk added that a number of projects were running on how communications could promote literacy and growth, an example of which was mobile money transfer. Amendments should promote simplicity and not uncertainty.
The meeting was adjourned.
- We don't have attendance info for this committee meeting