BBBEE GUIDELINES

 

3. CODE 100 – OWNERSHIP

  • This refers to ownership of shares or similar instruments or interests by black people in the Company. In some instances, indirect ownership, for example, by way of the pension fund, is considered.
  • Broad-based black ownership refers to the composition of the acquirers of the shares. It is intended that not only the race but also the number of beneficiary individuals, households or communities should be taken into account.
  • It is preferable that ownership be spread to include specifically previously disadvantaged individuals.

Implementation guidelines

  • Decisions in regard to ownership at all levels of Altron remain the prerogative of the shareholders, the board and senior top management of the group.
  • In these instances, compliance points shall accrue to the holding company or seller by way of the CoGP provision relating to qualifying transactions.
  • Each subholding group CEO, working with the subholding board, is required to empower the business in accordance with the Company BBBEE strategy and the requirements of the CoGP.
  • Empowerment partners will need to conform closely with the requirements of the CoGP. In this regard a target score for ownership should be negotiated in advance of any transaction being concluded and valid rating verification certificates must be included as transaction documentation to be provided.
  • Agreements will need to incorporate the various requirements of the CoGP, including ownership fulfilment criteria and the requirement to maintain and retain the rating.
  • All decision-makers in the Group must be mindful of the fact that the ownership status of the subsidiaries may differ on an annual basis due to the fact that the formula for calculating ownership for qualifying transactions takes into account the annual value of the Group as well as the value of the equity/asset sold.
  • In the event that the ownership compliance points drop due to a discrepancy in values between the Group and the asset sold, immediate action at the highest level within the Group will be taken. The subholding group CEO will determine the relevant strategy which will commence with the subholding group EXCO determining the way forward.
  • The ownership status of the subholding group entity, as well as other subsidiaries, shall at all times be calculated in accordance with the qualifying transactions formula in order to ensure that the necessary ownership status is maintained.
  • On an annual basis, the ownership status of the Group subsidiaries shall be verified in accordance with the qualifying transactions formula.
  • In the event that it is resolved at subholding group board/EXCO level that an entity wishes to not comply with the ownership code selling equity in some form, this must be approved at the highest level within the Altron Group as it may have an impact on the remainder of the Group.
  • In the event that any person wishes to make a recommendation to shareholders and senior top management regarding ownership, this should be done through the subholding CEO and EXCO, who will carry the matter forward if deemed appropriate and necessary.
  • A detailed analysis of current and future ownership structure of the Group will be undertaken by the transformation committee and relevant recommendations will be made to the shareholder for approval.

4. CODE 200 – BOARD AND MANAGEMENT CONTROL

The South African economy is characterised by a general absence of black people and, more particularly, black women in the executive leadership of companies.

The reasons for this are mainly historical such as the black education system prior to 1994 and artificial barriers to entry which have resulted in a shortage of skilled black professionals, in particular in regard to business management and technical skills.

Implementation guidelines

  • This code measures the status of all directors (reflected on the Companies Act form CM29 and registered in the Company’s office as such), no matter at which level they are reflected in the EEA2 report. Divisional directors do not qualify as directors.
    • Examples of senior top management include:
      – Chief executive officer
      – Chief financial officer
      – Chief operating officer
      – Head of strategy.
    • Examples of other top management include:
      – Head: Transformation
      – Head: Marketing
      – Head: Public Relations
      – Head: Sales – Head: Human Resources
      – Head: Industrial Relations
      – Head: Information Technology.

    The above job titles are not a definitive list, but are examples of the types of position and responsibilities in the companies that are to be included in the code under top management.

  • This code measures the levels of top management as reflected in the job description and function of the relevant employee. The code encourages all entities to align their EEA2 reports with the types of job functionality as set out in the codes, and then use the data therein in compiling compliance reports for the codes. This means that all top management reflected in the EEA2 report as such must be reflected the same way in the code category for top management.
  • All entities within the Group will immediately endeavour to align the definitions of top management with the definitions contained in the CoGP, guided by the EEA9 and EEA10 definitions in the Employment Equity Act.
  • All entities which currently align EEA10 Occupational Category definitions with job functionality will continue to do so. The EEA9 semantic scale such as Paterson, Hay, etc, will be used as the guideline in determining the occupational levels of relevant employees. This will result in a uniform approach to the definitions of top management and categorisation of employees in the top management category of the EEA2 reports.
  • A further breakdown of employees into categories of senior top management and other top management will also be undertaken by relevant management and an alignment within the Group of which positions and employee levels comprise senior and other top management will take place.
  • The impact of the Adjustment for Gender (GAF) will always be borne in mind when filling director- and top-management-positions. The GAF is a secondary gender target inherent in every indicator in the management code, except for black, independent non-executive directors. The categories of executive and non-executive directors, and both categories of top management, require that half of the black people in each category have to be black women, otherwise only half of the points that would have been received are in fact allocated.
  • The transformation committee shall develop guidelines on how to approach matters such as succession planning and composition of boards at various Altron companies in order to meet requirements of this code.

5. CODE 300 – EMPLOYMENT EQUITY

Unless there are specific measures aimed at increasing the pool of available black skilled employees at management level, as well as at other employment levels, the current distorted statistics will take years to change. Altron is convinced that by implementing its policies of employment equity and skills development, the Group will be making a significant contribution to the urgent national imperatives in regard to employment and ultimately enhancing Altron’s profitability.

This aspect of BBBEE is largely regulated/supported by legislation and consequently must be considered in conjunction with the provision of the Employment Equity Act, No 55 of 1998, and the Skills Development Act, No 97 of 1998.

Implementation guidelines

  • Achievements in compliance with the code on employment equity are based on the premise that successful companies are those which embrace diversity at their core, and unlock the value that is inherent within a diverse workplace.
  • This code measures the numbers of black employees holding positions of senior, middle and junior management as well as the number of black disabled employees, indicated by the job description and function of the relevant employee. The code encourages all entities to align their EEA2 reports on senior, middle and junior management with the codes’ reports. This means that all senior, middle and junior management reflected in the EEA2 report as such, must be reflected the same way in the codes against senior, middle and junior management categories.
  • All entities within the Group will immediately endeavour to align the Occupational Category definitions of senior, middle and junior management throughout the Group with the definitions contained in the CoGP, guided by the EEA10 Occupational Category definitions in the Employment Equity Act. The EEA9 semantic scale such as Paterson, Hay etc, will be used as the guideline in determining the occupational levels of relevant employees. This will result in a uniform approach to determining the occupational levels and categories of employees in respect of the EEA2 reports.
  • The impact of the Adjustment for Gender (GAF) will always be borne in mind when filling senior, middle and junior management positions. The GAF is a secondary gender target inherent in every indicator in the employment equity code. The categories of senior, middle and junior management require that half of the black people in each category have to be black women, otherwise only half of the points that would have been received are in fact allocated.
  • Recognising that there is a current shortage of black women in certain categories, there is a preference for black women to be employed or promoted when filling vacant positions within the Group.

The way that this works is:

Indicator
 Target as
per code
40% subminimum – if this is not
achieved (after applying the GAF),
then score zero in this indicator
Black disabled
2% 0,8%
Black senior management
43% 17,2%
Black middle management
63% 25,2%
Black junior management 68% 27,2%
  • The employment of black people and black women in particular, into senior, middle and junior management positions is a priority and will be reflected more practically in a revised Group recruitment policy.
  • The employment of black disabled persons is a priority within the Group, and a guideline, to be applied uniformly across the Group, will be drawn up indicating a procedure to be followed regarding whether an employee is considered to be a black disabled person in terms of the Act, as well as the CoGP.
  • The codes have introduced a separate measurement criterion (subminimum) which states that if the measured entity has not achieved 40% of the target in a specific employment equity category, then that entity will score zero in that category.

6. CODE 400 – SKILLS DEVELOPMENT

Implementation guidelines

  • The Group recognises that in view of the challenges around the employment and retention of black people and black women throughout the Group, the focus on the code pertaining to skills development is critical to enable the Group to reach its employment equity targets as well as build a core base of skilled black people.
  • All entities within the Group will as a matter of priority ensure that they are fully compliant with the Skills Development Act, as well as the Skills Development Levies Act.
  • All entities within the Group must plan adequately for the training and retention of core skills, particularly of black employees and black women employees. The skills development training category matrix is set out below, for ease of reference.
  Narrative description Delivery mode Learning achievement

A

 Institution-based theoretical instruction alone – formally assessed by the institution Institutional instruction – universities and colleges, schools, ABET providers Degree, diploma or certificate issued by institution of learning

B

 Institution-based theoretical instruction as well as some practical learning with an employer or in a simulated work environment – formally assessed through the institution Institutional instruction or workplace or workplace environment – universities and colleges, schools, ABET providers and workplace Degree, diploma or certificate issued by formal institution of learning

C

 Recognised or registered structured experiential learning in the workplace that is required after the achievement of a qualification – formally assessed by a statutory occupational or professional body Structured learning in the workplace with mentoring or coaching Occupational or professional knowledge and experience formally recognised through registration or licensing

D

 Occupationally-directed instructional and work-based learning programme that requires a formal contract – formally assessed by an accredited body Institutional instruction together with structured, supervised experiential learning in the workplace SAQA registered qualification, a certificate or other similar occupational or professional qualification issued by institution of learning

E

 Occupationally-directed instructional and work-based learning programme that does not require a formal contract – formally assessed by an accredited body Structured, supervised experiential learning in the workplace which may include some institutional instruction Credits awarded for registered unit standards

F

 Occupationally-directed informal instructional programmes Structured information sharing or direct instruction involving workshops, seminars and conferences and short courses Continuing professional development, attendance certificates and credits against registered unit standards (in some instances)

G

 Work-based informal programmes Informal training in workplace Increased understanding of job or work context or improved performance or skills
       
  • Each entity will ensure that a plan is drawn up on an annual basis, providing for an amount to be allocated to skills development based on the required score in terms of the leviable amount (100% target prescribed by code, 3% of leviable amount) in each entity to be spent on skills development/learning programmes for black people. This will be in line with relevant business and individual needs and will be aligned to the annual Workplace Skills plan (WSP).
  • The adjustment for gender will be taken into account in planning for this spend, and it should be planned that as much of the agreed percentage in any year of the leviable amount will be spent on learning programmes for black women as is feasible, noting that the codes require half of the spend to be spent on black women, in order to gain the requisite points.
  • It must be noted that the amount allocated to skills development is over and above the1% paid in respect of the skills development levy. Claims will continue to be made for reimbursement of training spend as provided for under the skills development legislation.
  • All spend, including the cost of the training and development department (T&D) and all other permitted costs, as well as the cost of on-the-job training will be accurately recorded and monitored by the skills development facilitator/training department in each entity. This will allow accurate recording, and appropriate allocation of costs associated with skills development.
  • The permitted costs as set out in the CoGP include:
    – Costs of training materials
    – Costs of trainers
    – Costs of training facilities including catering
    – Scholarships and bursaries
    – Course fees
    – Accommodation and travel
    – Administration costs such as the organisation of training including, where appropriate, the cost to the measured entity of employing a skills development facilitator or a training manager. These costs will include, but are not limited to:
    • cost of employment of all T&D staff;
    • annual/monthly T&D licence fees;
    • cost of T&D office space;
    • T&D telephone costs;
    • T&D subscriptions;
    • maintenance of T&D office equipment and facilities;
    • data-processing hardware;
    • courier/postage costs;
    • service fees for consultants;
    • depreciation costs of T&D equipment, furniture, etc.
  • The CoGP place a key focus on learnerships, and it is desired for the Group to similarly reflect this focus. All entities will endeavour to engage as many learnerships as is feasible, in relation to the target of 5% of the workforce as learners, on an annual basis.
  • The mechanism of engaging and maximising learnership opportunities will be as required by the SETA.
  • The CoGP places another core focus on the skills development of black disabled employees. Operational management must be aware of this provision and must endeavour to spend a portion of the leviable amount, where feasible, on the skills development of black disabled employees (the code target is 0,3% of amount allocated to skills development). Initially it is envisaged that this will be spent on, where feasible, black disabled learnerships but, as those learners are absorbed into the Company, every endeavour must be made to maintain their skills development path.

When costing learnership time for categories B, C and D learners, Empowerment has approved that the average hourly cost of employment rate per occupational category is used. This will ensure the confidentiality of salaries and wages. This costing methodology applies equally to the costing of trainer time, where the trainers are also employees of the Company. When costing learnership time for categories B, C, and D employees Empowerdex requires actual salaries and will require copies of payslips. The costing methodology applies equally to the costing of trainer time, where the trainers are also employees of the Company.

7. CODE 500 – PREFERENTIAL PROCUREMENT

This section is aimed at supporting a vibrant black small medium and micro-enterprises (SMME) sector, as well as encouraging the procurement from enterprises that are BBBEE compliant.

The systems used for recording spend in general and the approaches to measuring or targeting BBBEE suppliers have not been as effective across the Group as they could be and, as a consequence, not many supplier companies within the supply chain have their BBBEE status recorded accurately. This has the negative effect of possibly underscoring the actual preferential procurement spend by the measured entity and the Group.

Implementation guidelines

  • The first task is to define accurately the spend that falls within the definition of total measured procurement spend (TMPS). This will exclude:
    — all revenue generated outside of South Africa (for determination of value-adding supplier status); — all spend on imported products where there is no local equivalent product as defined by the CoGP; and
    — all intergroup procurement, ie procurement that takes place between the group entities which are being verified together, will be excluded if the measured entity is measured at some form of a consolidated level.
  • All suppliers will be required to demonstrate their compliance with the BBBEE regulatory framework by submitting up-to-date verification certificates, issued by an accredited verification agency, to the group which record the supplier’s BBBEE status in accordance with the CoGP. In the event that the particular supplier is subject to a gazetted sector code, the supplier will be permitted to submit its BBBEE status in accordance with that sector code.
  • Empowerdex and, consequently, the Altron group, does not accept selfassessments. • In the case of all other suppliers, verifications will be encouraged. However, self-assessments will be accepted, but only if they are in the prescribed form, which is set out in the group preferential procurement policy.
  • In the event that there is no acceptable demonstration of compliance, then the supplier will receive a zero BBBEE compliance score.
  • An immediate priority is to record accurately the BBBEE status of all suppliers within the supply chain.
  • With regard to existing suppliers, an analysis of suppliers comprising 80% of the annual procurement spend of each entity will immediately be undertaken by each procurement department within the Group. These suppliers will be requested to inform the Group of their latest BBBEE status in accordance with the gazetted CoGP.
  • With regard to new suppliers, the BBBEE status will be requested of all new suppliers in accordance with the gazetted CoGP. This status will be reflected on the relevant database, and procurement officers will be encouraged to procure from suppliers whose compliance levels are level 5 and above.
  • In addition to the BBBEE status levels, suppliers will be requested to provide information pertaining to whether they are:
    — black-owned or black womenowned;
    — whether they are value-adding suppliers; and**
    — whether they are QSEs or EMEs.
  • Preference shall be given, as set out in the preferential procurement policy, to suppliers who are black or black women-owned, value-adding suppliers and QSEs.
  • In the event that core suppliers are not level 5 or above, these suppliers will be requested to update the Group twice per annum of the improvement on their compliance levels.
  • Altron will, with immediate effect, adopt a preferential procurement policy rooted in improved supplier management that aligns purchasing requirements with the codes and which will assist Altron to substantially increase its preferential procurement spend.
  • All purchasing must align with the proposed policy and the BBBEE imperatives in this strategy, in a consistent manner across all divisions and subsidiaries.
  • Companies with a turnover of R5 million or less are not required to have or submit a BBBEE status. However, they will need to indicate to the Company and the rating agency that the turnover is below the R5 million threshold.
  • Subholding CEOs and EXCOs will, as an immediate priority, formulate a comprehensive strategy on enterprise development following a collaborative approach which cuts across procurement, skills development and CSI.

8. CODE 600 – ENTERPRISE DEVELOPMENT

  • All entities within the Altron Group will immediately budget to spend as much of the target (ie 3% of NPAT per annum) as is feasible within their business and own BBBEE strategic environment. This spend may be achieved in a variety of ways in accordance with the provisions of the CoGP.
  • The enhancement of existing suppliers through enterprise development will be a priority.
  • Each entity will elect an inception date from which to measure all its enterprise development contributions, which must be averaged annually. Verifications will be done annually.
  • In the event that new black suppliers are identified that are able to be brought into the Group supply chain but possibly do not meet the required criteria, a process to manage these suppliers fom now on to ensure maximum compliance with the CoGP is:
    — Part of the ED spend can comprise dedicated internal enterprise development resources within each entity, and records of actual costs incurred should be maintained.
    — A dedicated internal resource within each entity is to take responsibility for the measurement and reporting on the number of black QSEs supported, the sustainability of those QSEs and the monetary and non-monetary contributions to be made to them. The impact of this on funding available for the enterprise development budget will be determined and will be the responsibility of the management to whom this function is allocated.
    — Core competence assessments should be carried out for each identified beneficiary enterprise and progression levels discussed with that identified beneficiary.
    — For each enterprise development beneficiary, the entity should ensure accessibility of procurement opportunities and that mechanisms are in place to support the beneficiary. These may include early payment or setting aside certain products or services for identified enterprises.
    — All enterprise development initiatives must be documented between the parties, clearly identifying the area of development and assistance offered.

In Code 600, other common examples of enterprise development spend are:

  • Grants or contributions made;
  • Investments made in beneficiary entities;
  • Guarantees given or security provided for beneficiary entities;
  • Loans made to beneficiary entities;
  • Credit facilities made available to beneficiary entities;
  • Direct costs incurred by measured entity in assisting beneficiaries in hastening development of the beneficiary entity;
  • Overhead costs directly attributable to enterprise development contributions;
  • Preferential credit terms granted;
  • Enterprise development or development capital granted;
  • Preferential terms granted for the supply of goods or services to beneficiary entities;
  • Payments made to third parties to perform enterprise development on the measured enterprise’s behalf;
  • Contributions made to settling service costs relating to the operational or financial capacity or efficiency levels of the beneficiary entity;
  • Discounts given to beneficiary entities in relation to the acquisition and maintenance costs associated with the grant to those beneficiary entities of franchise, licence, agency, distribution or other similar rights;
  • The creation or development of capacity and expertise for beneficiary entities needed to manufacture or produce goods or services not previously manufactured or produced in the RSA;
  • Provision of training or mentoring to beneficiary communities (quantifying the cost of time spent by employees);
  • Maintaining an enterprise development unit including cost of employment of staff and other expenses involved in operating the unit, provided that the unit focuses only on the support of beneficiaries and beneficiary communities. Costs are allocated on a pro rata basis;
  • New projects promoting beneficiation may constitute enterprise development contributions;
  • Provision of finance to beneficiary entities at lower than commercial rates of interest;
  • Relaxed security requirements or absence of security requirements for beneficiary entities unable to provide security for loans; and
  • Settlements of accounts over a shortened period of time, provided the shortened period is no longer than 10 days.

9. CODE 700 – CORPORATE SOCIAL INVESTMENT OR SOCIO-ECONOMIC DEVELOPMENT (SED)

The scorecard provides a section which is left to the discretion of sectors or enterprises and which should be “tailored to their circumstances”.

Guidelines which are recommended for this section include:

  • infrastructural support of enterprises in the same area or community; and
  • investment and support of enterprises operating in rural communities and the geographic areas identified in government’s integrated sustainable rural development programme and urban renewal programme.

A decision has been taken by Altron to view this section of the codes within the context of its Corporate Social Investment (CSI) Policy as it is aligned to SED. This will avoid duplication in the policy development.

However, it must be noted that the relationship between CSI and BBBEE is not an easy one since BBBEE requires black people to constitute 75% of the beneficiaries in order to achieve full recognition and on a pro rata sliding scale for reducing percentages of black beneficiaries. The Company is answerable to the entire community (as stakeholders), it cannot advocate a “corporate citizenship” policy that addresses only the needs of the previously disadvantaged section of the South African society. Accordingly, CSI projects need to be selected that reflect all our communities within our broad transformation mandate.

Implementation guidelines

  • Socio-economic development is referred to elsewhere in the Altron Group as Corporate Social Investment (CSI).
  • All entities within the Group will adhere to the CSI policy drawn up by the CSI committee from time to time.
  • All entities within the Altron Group will immediately budget to spend as much of the target (ie 1% of NPAT per annum) as is feasible within their business and own BBBEE strategic environment. This spend will be achieved in a variety of ways in accordance with the provisions of the CoGP
  • Each entity will measure all its CSI/SED contributions in line with the company’s financial year.
  • Identification and evaluation of potential CSI/SED initiatives undertaken in terms of the CoGP must target projects where at least 75% of the beneficiaries are black people. In the event that less than 75% of the beneficiaries are black people, there will be a pro rata reduction of the spend recognised. If 75% of beneficiaries are black, 100% of spend is counted, if less than 75% are black, then that percentage of spend will be allowed.
  • Care should be taken to appreciate that the CoGP count contributions made only within the South African context. All entities will endeavour to allocate CSI/ SED funds to South African beneficiaries.
  • Altron entities shall continue to donate funds following various initiatives in accordance with the CSI policy. Effort shall be made to fully brief beneficiary organisations beforehand about the CoGP, and require these beneficiary organisations to account correctly for the donation which, in turn, will enable the Group to obtain verification of the CSI/SED spend in each instance. This could be done by way of a letter of acknowledgement of the donation from the donor organisation, which must state as far as possible the make-up of the beneficiaries, ie that a minimum of 75% of the members of the beneficiary group are black South Africans. Any such statement must be capable of substantiation.
  • An annual CSI/SED budget should be drawn up by each entity, based on the forecast NPAT for the next financial year, with an indication of the type of allocations to be made during that year and how the spend will occur.
  • A comprehensive record of all CSI/ SED spend must be maintained by each entity during the year, with at least one employee per entity being tasked with the maintenance of all records, which task will be recorded in his/her formal job description.
  • All costs claimed for employees’ personal time to be actual costs, and a rating agency such as Empowerdex requests details which include copies of payslips to verify the time and expenditure. Companies can maintain a socio-economic development unit which forms part of corporate CSI/SED spend.
  • In order to maximise the impact of its CSI spend, companies must seek partnerships with oher companies within and outside the Altron Group.
  • Companies shall seek collaboration with communications and marketing departments to highlight the work that they carry out in various communities

** The definition of a value-adding supplier is an entity where the net profit taxation summed together with the total payroll is greater than 25% of the total revenue of the entity.