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July : Encouraging report on Sector Charter Councils Forum Workshop 2 July 2013

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18 July, 2013

Encouraging report on Sector Charter Councils Forum Workshop 2 July 2013

Dear industry members of the Forest Sector Charter Council and FSA EXCO members

The DTI convened the Sector Charter Councils Forum Workshop 2 July 2013, to discuss both the BBBEE Amendment Bill and the New Codes issued by the DTI.

The purpose of the meeting was to try to gain consensus among the various sectors which already have Charters, on the alignment of Sector Codes with the new legislation and codes. There were over 500 submissions received on the Bill and new codes and there was a final stakeholder engagement in February of this year, to assess where Govt was prepared to concede on some issues and where they would not deviate from what was in the Bill or new codes. Notwithstanding this there was still widespread confusion among stakeholders and Councils, so the DTI had published Guidelines (attached herewith) and convened Tuesday's meeting to discuss them further.

Below are the most important points from the meeting which must be read in conjunction with the attached guideline:
  • The amendment Bill was passed in the National Assembly, it must still go through the NCOP (which probably won't delay it), after which the President will assent to it as an Act. It is expected that this will happen before October of this year.
  • While the timetable which the DTI had published for alignment of the codes (in the attached Guideline) had planned for the process of alignment to start in June of this year, the timetable will only come into effect once the Bill becomes an Act. This means that sectors will have one year from when the Act comes into effect, to align their Sector Codes with the New Codes and Act.
  • While the New Codes are said to "trump" Sector Codes and are a minimum requirement, discussions on Tuesday suggested that other than the principles in the attached guideline, which are mandatory, most of the issues are still up for discussion and amendment through the sector charter councils. These include:
    • The new thresholds for EMEs, QSEs and Large Enterprises. While the higher thresholds mean that many smaller enterprises will no longer have to comply with the Charter, the DTI indicated that BEE was never really targeted at smaller, family owned businesses.  The new thresholds would help to achieve greater transformation in the larger companies in the economy, which were the main focus of transformation. Notwithstanding this, should sectors wish to lower the thresholds (which may be unlikely and undesirable for our sector, given the prevailing economic conditions) they could motivate this to the DTI.
    • Similarly the new codes have reduced the number of elements in the scorecard from seven to five, combining for example enterprise development and supplier development into one element (ESD). Again in our sector, this is probably a welcome change, as forestry previously could not be credited both for enterprise development and supplier development in areas like outgrower and contractor support, whereas this is now possible as they are now one element. For the Chartered Accountants Charter however, their sector has very little procurement, so they were not happy with this change and again the DTI said that this could be worked out through their Councils and through further submissions to the DTI.
  • We pointed out to the meeting that while the intention of the amendment Act and new codes sought to improve transformation and growth in laggard industries, ours one was of the best performing sectors. We therefore asked what measures were being put in place to address laggard departments like DAFF, who had put no funding into meeting its Charter commitments, as this was probably the largest obstacle for further transformation and growth in our industry. The DTI said that they had read our article in last week's Business Day and that government was indeed guilty, not just in DAFF but in several other departments too. They said that they were developing a specialised scorecard for government. Non-compliance would then lead to things like qualified audits and naming and shaming to put pressure on political principals and officials. They were planning to make two more press releases on public service and multinational charter compliance. This was an important point, as I have previously reported on the DAFF Minister's complete lack of interest and response to our appeals for support for BBBEE and this was echoed again in her Budget Speech, which made no reference to BBBEE in our sector nor in agriculture or fisheries.
  • The new reporting requirements for Councils will contain both quantitative and qualitative reporting. This was again encouraging for our sector as in the last Council meeting we had already submitted a first attempt at providing a qualitative report on some elements of the Charter.
  • The DTI expect each Sector Council to lead on the alignment process. Our FSCC Executive Director informed the meeting that the FSCC is planning a workshop in August to start the process of alignment and this proactive approach was greatly welcomed by the DTI. The DTI also invited Councils to hold closed sessions with the DTI, so it is advisable for our FSCC to invite the DTI to the August workshop.
  • There were serious allegations of misconduct levelled at verification agencies and audit companies. One example was given in the construction industry (not really surprising given recent media reports) where a ratings agency had issued a BEE certificate at level 7 to a company and the company's own auditors issued a different one at level 4. While this sort of thing has not been seen in our industry, the DTI indicated that changes were being proposed to the Auditing Professionals Act, which could see firms losing their professional licences, should they be found guilty of irregularities in the issuing of BEE certificates.

Lastly it was encouraging to note that the senior DTI officials who led the workshop, commented to me over lunch, that they wished that other sectors were as progressive as the forestry sector!

Download the PDF document: Guideline Alignment charters to Codes

Michael Peter
Executive Director
Tel:  +27 (0)11 - 803 3403
Fax: +27 (0)11 - 803 6708