THE EMPOWERDEX RATING PROCESS

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THE EMPOWERDEX RATING PROCESS
Why is there a need for Black Economic
Empowerment?
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BEE Status Verification and Affirmative
Procurement
Background to the DTI Strategy Document
DTI Strategy Document Score Thresholds
How does EmpowerDEX Measure and Verify BEE Status
The Impact of Fronting Practices
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Equitable Economic Opportunities
Broad Based BEE Strategy
Ownership And Management
The Opportunity Barrier
Affirmative Procurement
Enterprise Development
The Business Barrier
Skills Development
The Skills Barrier
Employment Equity/Job creation
Corporate Social Investment
The Poverty Barrier
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AGENDA
Background to the DTI Strategy Document
DTI Strategy Document Score Thresholds
How Does EmpowerDEX Measure and Verify BEE Status
The Impact of Fronting Practices
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DTI Scoring Thresholds

• Total Score of 80 above Excellent Broad
  Based BEE Contributor
• Total Score of 65 to 79 Good Broad Based BEE
  Contributor
• Total Score of 45 to 65 Satisfactory Broad
  Based BEE Contributor
• Total Score of less than 45 Unsatisfactory
  Broad Based BEE Contributor

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AGENDA
Background to the DTI Strategy Document
DTI Strategy Document Score Thresholds
How Does EmpowerDEX Measure and Verify BEE Status
The Impact of Fronting Practices
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KEY INDICATORS CONSIDERED IN BEE VERIFICATION
Ownership
Operational Capacity/ Fronting Risks

• Broad-based BEE Act (Signed
  January 2004)
• Broad-based BEE Strategy
• (March 2003)
• Codes of Practice
• (December 2005)
• The methodology is in line with the BEE strategy
  of Government and includes all seven factors of
  the Broad-based BEE strategy.
• The methodology also include a factor to detect
  fronting risk.

Direct Empowerment
Management
Employment Equity
Human Resources Development
Skills Development
Preferential Procurement
Indirect Empowerment
Enterprise Development
CSI/Residual
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Ownership

• Key Principle
• Economic substance over legal form
• Key Measurement criteria
• Flow of economic benefits/Capital Vesting
• Voting Rights
• Key considerations
• Shareholders Agreement/Trust Deeds
• Evaluation of restrictions and unusual provisions
• Financing Mechanisms
• Targets

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Management

• Key Principle
• Effective control over economic activities and
  resources
• Key Measures
• Board of Directors
• Executive vs non-executive director
• Executive Management
• Divisional Excos
• Key Decision-makers (CEO, CFO, COO)
• Key considerations
• Executive involvement of Black People is key
• Succession plans to fast-track Black People
• Targets
• 40 Weighted Black Management Representation

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Employment Equity

• Key Principles
• Equitable representation across employment levels
• Key Measurement Criteria
• Current EE Profile and Skills Level
• Validation Interviews
• Key Considerations
• Plans to improve EE Profile
• E.g. Graduate Trainee Programme
• Rising Stars Programs
• Targets
• To be announced in code 300

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Skills Development

• Key Principles
• Investment in skills and human resources
• Key Measurement Criteria
• Skills dev. as of Payroll spent on black people
• Systematic Programme in place
• Training and Development Plan
• Key Considerations
• Verifiable amounts spent
• learnerships
• Targets
• Spend 3 of payroll
• Learnerships 3 of employees

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Affirmative Procurement

• Key Principle
• Providing business opportunities to black
  suppliers
• Key measurement criteria
• Discretionary
• Non-discretionary
• Key considerations
• Acceptable BEE Status of suppliers
• Verification Mechanisms
• Targets
• 50 of Discretionary procurement

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Enterprise Development

• Key principle
• Support provided to and Investment in BEE
  enterprises
• Key Measurement Criteria
• Investment in BEE Companies, Joint Ventures and
  Associates
• Key Considerations
• Joint Tendering
• Quantifiable Skills Transfer
• Risks
• Other initiatives
• Supplier Development Programme
• Fast tracking of BEE suppliers
• Price differentials for BEE Suppliers (Premium)
• Special Payment Terms
• Targets
• TBA

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Social Development

• Key Principle
• Provision of support for social development
• Key Measurement Criteria
• Financial Contribution
• Areas of contribution
• Education
• Health
• Poverty Alleviation
• Job creation and community development
• Key Considerations
• Quantification of time commitment
• Targets
• 3 of NPAT

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Operational Capacity

• Key Principles
• Identification of potential fronting risk
• Key measurement criteria
• Capacity to perform core business
• Key Considerations
• Extent of reliance on the following
• Private Sector affirmative procurement programs
• Public Sector

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AGENDA
Background to the DTI Strategy Document
DTI Strategy Document Score Thresholds
How does EmpowerDEX Measure and Verify BEE Status
The Impact of Fronting Practices
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The Impact of Fronting on Affirmative Procurement
More Transformation
Growth in Local Economy
Enlarged local market for Corporate SA
Transformation in Traditional Suppliers
Corporate Buyers
More BEE suppliers
Affirmative Procurement
More local Jobs
New BEE Suppliers
More competitiveness
Affirmative Procurement
Corporate Buyers
Fronting Entities
Dwindling Local Economy
Smaller Market For Corporate SA
Traditional Suppliers
Disillusioned Market Exit
New BEE Suppliers
Fronting Barrier