SECTOR CODE 08 March 2017 Background B-BBEE Fronting Practices - - PowerPoint PPT Presentation
PERSPECTIVE OF THE B-BBEE COMMISSION ON THE FINANCIAL SECTOR CODE 08 March 2017 Background B-BBEE Fronting Practices Commission Misalignment s13B Inconsistent interpretation Constitution B-BBEE 1 May 2015 24 October 24 October of
2 Constitution
Africa 1996 Bill of Rights B-BBEE Act 53 of 2003 B-BBEE Amendment Act 46 of 2013 24 October 2014 Amendment 1 May 2015 Codes of Good Practice 24 October 2015 Trumping Provision 6 June 2016 Regulations
Redress = Equity – Equality – Inclusive Economy Fronting Practices Misalignment Inconsistent interpretation B-BBEE Commission s13B
Once Emp Empow
ered ed, Alw Always ays Empowe Empowere red principle principle cre create ates reg regressi ression
transform sformati tion Must not be allowed in any of the sector codes
tor Codes that are not not finali lise sed create ate confu fusio sion in in the markets kets Some entities denied benefits arising from revised generic codes
Access ss to to fun funding co continue tinues to to be be a ch challe lenge for for bla lack ck people le cre creati ting a fertil fertile ground nd for fronting nting Most vendor-financed deals impact net value realisation/economic benefits
ack of
implementatio ementation by by Gove Governm rnmen ent and and its its en entities tities affects affects pa pace ce of
transform sformati tion
BEE Arrange angeme ments nts and and Concep epts ts in in the implemen mentatio tation Such a definition of black person, modified flow through principle, and collective ownership schemes
rity in in the verifi ifica catio tion process ss and and conduct ct of
fessi ssionals ls Recognition process mired with flaws resulting in invalid certificates
for finalisa isatio tion of
sary – Confusion created in the market as old codes are still applicable
iscon
nect ct bet etwe ween en th the tr transf nsfor
matio ion cha hall llen enges ges in in th the sect sector
and th the interv rventi ention
in the the sector
– Lack of progress report from previous implementation and link to how revised targets in sector code will advance B-BBEE
stency ncy in in the the approach ch and and draftin ting of
– Loopholes, regulatory nightmare and open for litigation
for deviatio tions ns not not substa tantia ntial enough enough to to warrant nt a sector code – High barriers, lack of competition, no black suppliers
4
ducin cing new new principl iples es contra rary ry to to State teme ment nt 003 003 – Exemptions, automatic approvals to deviate, equity equivalent
pplic licati ation
ector cod
es to to or
ns of
stat ate and nd publi blic entiti ntities es co contr ntrary ry to to sectio ions ns 10 10(2) and and 9(6) – Organs of state and public entities must set high targets in relevant areas
archi hing ng and and confusi using ng role of
ls – Ultra vires powers to exempt, revise thresholds
ition of
ry course transa sactio ctions ns or
vitie ties – Points awarded for ordinary business, bonus points allocated
5
6
7
8
Despite worrying ownership patterns in the sector, target of 25+1% set in generic code is retained Further diluted by introduction of equity equivalent through empowerment financing and access to financial services in lieu
Bonus points for exceeding already low and diluted targets based on black industrialist funding and empowerment financing Multiple application of modified flow through, meaning 51% black owned entity can be recognised more than once
9
10
11
Deviates downwards with 75% (not 80%) all procurement spend from empowering suppliers, 14% (not 15%) from empowering suppliers that are QSEs, 8% (not 15%) from empowering suppliers that are EMEs, 20% (not 40%) from suppliers that are at least 51% black owned, and 9% (not 30%) from suppliers that are black women owned. Further deviation from skills transfer and multiplying recognisable spend resulting in multiple dipping with rights for entities to claim
Recognition is made for attempts to empower black stockbrokers, fund managers and intermediaries.
12
Financial sector code in its current form does not advance radical economic transformation, but rather regresses it Additional elements referred to are Empowerment Finance and Access to Financial Services, but not expressed provisions are
for this sector Sector code appears to compromise the incentive for financial sector players to compete by subjecting products on which they should compete on to transformational interventions Financial sector impacts a number of sectors from the perspective of financing, and if lending is to be recognised for points, it must be at seriously preferential rates or conditions for black people Concerns raised must be addressed before the sector code can be approved for gazetting, failing which generic codes must apply
13
14