07 December 2010 © 2010,BEE Institute, All Rights Reserved FINANCIAL SECTOR CODE Presented by Leila Moonda 07 December 2010 © 2010,BEE Institute, All Rights Reserved FSC The Financial Sector Code commits all participants to actively promoting a transformed, vibrant and globally competitive financial sector that reflects the demographics of South Africa, which contributes to the establishment of an equitable society by providing accessible financial services to black people and by directing investment into targeted sectors of the economy. 07 December 2010 © 2010,BEE Institute, All Rights Reserved Gazetting and Implementation Gazetted as a Sector Code on the 26th November 2012. Implementation applicable from measurement periods ending after the 01st January 2012 Transitional period ended on 30th June 2013 (automatic exemption from Access to Financial Services and Empowerment Financing) 07 December 2010 © 2010,BEE Institute, All Rights Reserved 51 million Contributing Economy .. 6.9 million 30.5 million Non- Contributing Economy .. 07 December 2010 © 2010,BEE Institute, All Rights Reserved >=R100 000 p.a. R50 000 - R100 000 p.a. R7 200 – R50 000 p.a. <=R7 200 p.a. 07 December 2010 © 2010,BEE Institute, All Rights Reserved >=R100 000 p.a. R50 000 - R100 000 p.a. R7 200 – R50 000 p.a. <=R7 200 p.a. 07 December 2010 © 2010,BEE Institute, All Rights Reserved B-BBEE Goal 2020 R200 000 p.a. R100 000 – R200 000 p.a. R50 000 - R100 000 p.a. R50 000 p.a. 07 December 2010 © 2010,BEE Institute, All Rights Reserved Black Economic Empowerment 07 December 2010 © 2010,BEE Institute, All Rights Reserved What is BEE Black Economic Empowerment: Furthering the economic interests of Black people Black = African, Coloured , Chinese or Indian persons, born in SA, a citizen by descent or became a citizen before 27 April ’94 or can demonstrate that they were unable to obtain citizenship by naturalisation under Apartheid 07 December 2010 © 2010,BEE Institute, All Rights Reserved BEE Act Establish BEE Advisory Council Codes of Good Practice for BEE Transformation Charters / Sector Codes 07 December 2010 © 2010,BEE Institute, All Rights Reserved How is BEE Enforced? Supplier BEE Scorecard Supplier Government Supply Supplier 07 December 2010 © 2010,BEE Institute, All Rights Reserved How is BEE Enforced? Verification Agency BEE Verification – score – Score is broken into levels: • Level 1: 100 or higher • Level 8 : 30 points • Non compliant: <30 Measured every 12 months 07 December 2010 © 2010,BEE Institute, All Rights Reserved How is BEE Enforced? Public Sector: – BEE score incorporated in tender score – Minimum tender requirement – Licences – Sale of state owned assets – Public Private Partnerships 07 December 2010 © 2010,BEE Institute, All Rights Reserved How is BEE Enforced? Private Sector: – Your score counts towards your customer’s score – Your supplier’s score counts towards your score 07 December 2010 © 2010,BEE Institute, All Rights Reserved How is BEE Enforced? Most likely choice Price Supplier A Supplier B Supplier C R40/ream R35/ream R35/ream Quality Service BEE Score Same brand of paper 5 days delivery Non-compliant 2 days delivery 2 days delivery High Low Differentiating Factor 07 December 2010 © 2010,BEE Institute, All Rights Reserved How is BEE Enforced? BEE not a compliance issue…… ……..it is a competitiveness issue. 07 December 2010 © 2010,BEE Institute, All Rights Reserved FSC Overview 07 December 2010 © 2010,BEE Institute, All Rights Reserved Who falls within the scope of the FSC? The FS Code applies to – – – – – – – – – – Banking; Long-term insurance; Short-term insurance; Re-insurance; The management of retirement, pension and collective investment scheme assets; Managers of formal collective investment schemes; Financial Services Intermediation and Brokerage Underwriting Management Agents Private equity fund managers Members of any exchange licensed to trade equities or financial instruments 07 December 2010 © 2010,BEE Institute, All Rights Reserved Scorecard Overview Scorecard varies by entity size – Generic • More than R35 million turnover per annum – Qualifying Small Financial Enterprises (QSFI) • R5 million to R35 million per annum + designated investments less than R50 million • Measured as per DTI Qualifying Small Entities (QSE) scorecard – Exempted Micro Enterprises (EME) • Less than R5 million • NO SCORECARD! 07 December 2010 © 2010,BEE Institute, All Rights Reserved FSC vs DTI Scorecards Element FSC Points DTI Points Ownership 14 20 Management Control 8 10 Employment Equity 15 15 Skills Development 10 15 Preferential Procurement 16 20 15 + 5 15 14 0 3 5 100 100 Empowerment Financing and Enterprise Development Access to Financial Services / Consumer Education Socio-Economic Development Total 07 December 2010 © 2010,BEE Institute, All Rights Reserved FSC Broker Scorecard Element FSC Points Ownership 14 Management Control 8 Employment Equity 15 Skills Development 10 Preferential Procurement 16 Empowerment Financing and Enterprise Development Access to Financial Services / Consumer Education 15 (exempted from Empowerment Financing) 2 (exempted from Access) Socio-Economic Development 3 Total 83 07 December 2010 © 2010,BEE Institute, All Rights Reserved Recognition Levels B-BBEE Status Qualification Level One Contributor ≥ 100% on the FSC Scorecard 135% Level Two Contributor ≥ 85% but < 100% on the FSC Scorecard 125% Level Three Contributor ≥ 75% but < 85 % on the FSC Scorecard 110% Level Four Contributor ≥ 65% but < 75% on the FSC Scorecard 100% Level Five Contributor ≥ 55% but < 65% on the FSC Scorecard 80% Level Six Contributor ≥ 45% but < 55% on the FSC Scorecard 60% Level Seven Contributor ≥ 40% but < 45% on the FSC Scorecard 50% Level Eight Contributor ≥ 30% but < 40% on the FSC Scorecard 10% Non Compliant Contributor < 30% on the FSC Scorecard 0% 07 December 2010 © 2010,BEE Institute, All Rights Reserved B-BBEE recognition level Ownership Ownership Total Points Targets 2.1. Voti ng Ri ghts of Bl a ck Peopl e 3 25% + 1 Vote 2.2. Voti ng Ri ghts of Bl a ck Women 1 10% + 1 Vote 2.3. Economi c Interes t of Bl a ck Peopl e 3 25%+ 1 Sha re 2.4. Economi c Interes t of Bl a ck Women 1 10%+ 1 Sha re 2.5. Economi c Interes t of Bl a ck Des i gna ted Groups , Bl a ck Pa rti ci pa nts i n Empl oyee Sha re Owners hi p Schemes , Bl a ck Pa rti ci pa nts i n Broa d Ba s ed Owners hi p Schemes a nd/or Bl a ck Pa rti ci pa nts i n Co-ops 1 2.5% 2.6. Net Equi ty Va l ue (Formul a A a nd B a s per pa ra . 4 of Annexe 100 (C) 3 A/B 2.7. Di rect or Indi rect Owners hi p i n Exces s of 15% 2 10% Ownership Fulfilment Total 14 Bonus Points 2.9. Owners hi p by Bl a ck New Entra nts 2 10% 2.10. Owners hi p by ESOPs , Broa d Ba s ed Schemes a nd Co-ops 1 10% Total Including Bonus Points 07 December 2010 17 © 2010,BEE Institute, All Rights Reserved Ownership Exemption Local subsidiaries of Multi-nationals are exempted from Ownership. Does not apply to branches of foreign banks who are required to do additional Empowerment Financing to achieve Ownership points. Code FS000, Statement 000, 2.9 07 December 2010 © 2010,BEE Institute, All Rights Reserved Management Control, Employment Equity and Skills Development No adjusted recognition for gender. Separate targets for Black Women 07 December 2010 © 2010,BEE Institute, All Rights Reserved Management Control Management Control – Measurement Criteria Weighting Target 2.1 Board Participation 2.1.1 Voting rights of Black board members as a percentage of voting rights of all board members 2.1.2 Voting rights of Black women board members as a percentage of voting rights of all board members 2.1.3 Black executive members of the Board as a percentage of all executive members of the board 2.1.4 Black women executive members of the Board as a percentage of all executive members of the board 0.5 0.5 1.0 1.0 50% 25% 50% 25% 2.2 Top Management 2.2.1 Black Senior Top Management as a percentage of all Senior Top Management 2.2.2 Black women Senior Top Management as a percentage of all Senior Top Management 2.2.3 Black Other Top Management as a percentage of all Other Top Management 2.2.4 Black women Other Top Management as a percentage of all Other Top Management Total 1.5 1.5 40% 1.0 1.0 40% 20% 20% 8 2.3 Bonus Points 2.3.1 Black Independent Non-Executive Board Members as a percentage of all Independent Non-Executive Board Members* 07 December 2010 © 2010,BEE Institute, All Rights Reserved 1.0 40% Exclusion of Expats If there is a Global Policy imposing board members, executive or senior managers they can be excluded from the calculations. Limited to 20% of category, sub-minimum of 1 If Black South African staff are seconded to overseas operations, the maximum number of expats excluded can be increased 07 December 2010 © 2010,BEE Institute, All Rights Reserved Employment Equity Employment Equity – Measurement Criteria 2.1 Black disabled employees as a percentage of all employees 2.2 Black women disabled employees as a percentage of all employees 2.3 Black Senior Management as a percentage of all Senior Management 2.4 Black women senior management as a percentage of all senior management Weighting 0.5 0.5 3.0 Target 3.0% 1.5% 60.0% 2.0 30.0% 2.5 Black Middle Management as a percentage of all Middle Management 2.6 Black women Middle Management as a percentage of all Middle Management 2.7 Black junior management as a percentage of all Junior Management 2.8 Black women junior management as a percentage of all Junior Management Total 2.9 Bonus points for meeting or Exceeding EAP target for Senior Management 2.10 Bonus points for meeting or Exceeding EAP target for Middle Management 2.11 Bonus points for meeting or Exceeding EAP target for Junior Management 3.0 75.0% 2.0 37.5% 2.0 80.0% 2.0 40.0% 1 87.5% 1 87.5% 1 87.5% 07 December 2010 © 2010,BEE Institute, All Rights Reserved Skills Development Skills Development – Measurement Criteria Skills Development Expenditure on Learning Programmes specified in the Learning Programmes Matrix for Black employees as a percentage of the financial institution’s leviable amount Skills Development Expenditure on Learning Programmes specified in the Learning Programmes Matrix for Black women employees as a percentage of the financial institution’s leviable amount Skills Development Expenditure on Learning Programmes specified in the Learning Programmes Matrix for disabled Black employees as a percentage of the financial institution’s leviable amount Skills Development Expenditure on Learning Programmes specified in the Learning Programmes Matrix for disabled black women employees as a percentage of the financial institution’s leviable amount Skills Development – Learnerships Number of Black employees participating in Learnerships or Category B, C and D Programmes as a percentage of total employees Number of Black women employees participating in Learnerships or Category B, C and D Programmes as a percentage of total employees 07 December 2010 © 2010,BEE Institute, All Rights Reserved Weighting Target 3.0 3.0% 1.5 1.5% 0.5 0.3% 0.5 0.15% Weighting Target 3.0 5% 1.5 2.5% Preferential Procurement Preferential Procurement – Measurement Criteria B-BBEE Procurement Spend from all Suppliers based on their B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend B-BBEE Procurement Spend from all Suppliers that are QSEs or EMEs based on their B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend Procurement Spend on any of the following Suppliers as a percentage of Total Measured Procurement Spend: Suppliers that are 50% Black owned Suppliers that are 30% Black women owned 07 December 2010 © 2010,BEE Institute, All Rights Reserved Weighting Target 8 70% 3 15% 2.5 2.5 12% 8% Total Measured Procurement Spend Included spend – Operational expenses, cost of sales and capital expenditure – Labour brokers and independent contractors – Costs related to facilitating BEE contributions – Enterprise & Socio-economic Development – discretionary stock-brokering spend procured by investment managers on behalf of clients, regardless of whether this spend is recorded in the financial statements of the investment manager 07 December 2010 © 2010,BEE Institute, All Rights Reserved Preferential Procurement Exclusions – Taxes or levies – Organ of state or public entity with regulated monopoly – Bodies listed in Schedule 1 of PFMA – Salaries and wages – Pass through third party procurement where it is not recorded in your books – Investments in or loans to an Associated Enterprise 07 December 2010 © 2010,BEE Institute, All Rights Reserved Preferential Procurement Exclusions – Enterprise Development and Socioeconomic Development – Imports: • Capital goods or components for valueadding in South Africa provided that there is no existing locally produced equivalent • Or one can differentiate local from imported on the basis of brand or technical specifications 07 December 2010 © 2010,BEE Institute, All Rights Reserved Preferential Procurement Exclusions – Property expenditure, where the property is held as an investment – Broker commissions and commissions paid to insurance intermediaries; – Reinsurance premiums; – Any items of procurement where the supplier is imposed in terms of a Global Policy for technical reasons 07 December 2010 © 2010,BEE Institute, All Rights Reserved Preferential Procurement Due to the Sector specific exclusions, financial institutions must at all times include within their portfolio of enterprise development programmes, initiatives targeting Black Owned property, brokerage and insurance intermediary businesses 07 December 2010 © 2010,BEE Institute, All Rights Reserved Enterprise Development Measures the monetary and non-monetary contributions, recoverable and non-recoverable contributions Objective of contributing to the development, sustainability and financial and operational independence of the beneficiary entities Options in terms of the target – 3% of Net Profit After Tax (NPAT) – 3% x “indicative profit margin” x Turnover (where “indicative profit margin” is NPAT/turnover) 07 December 2010 © 2010,BEE Institute, All Rights Reserved Enterprise Development for enterprises exempt from Empowerment Financing Weighting Points Target Criteria Qualifying ED contributions made by the measured entity as a percentage of the target 15 07 December 2010 © 2010,BEE Institute, All Rights Reserved 3% of Cumulative NPAT Access Target market The target market for long-term and shortterm insurance products will be based on income = tax threshold for individuals= R60,000 per annum and double the tax threshold for families = R120,000 07 December 2010 © 2010,BEE Institute, All Rights Reserved Brokers and Access • Short-term and long-term insurers will have Access targets • Distribution will be key to ensuring they meet their targets • Products must be affordable • Will brokers be able to distribute products within an affordability framework • Alternative distribution channels 07 December 2010 © 2010,BEE Institute, All Rights Reserved Consumer Education Consumer Education: transferring knowledge and skills to consumers, future consumers and potential consumers for individual well-being and the public good development of consumer’s knowledge and understanding of the financial sector and its products and services. empowering consumers with knowledge to enable them to make more informed decisions about their finances and lifestyles 07 December 2010 © 2010,BEE Institute, All Rights Reserved Consumer Education Measurement Criteria Weighting Target Consumer Education 07 December 2010 2 Year 2012: 0.25% Year 2013: 0.30% Year 2014: 0.40% © 2010,BEE Institute, All Rights Reserved SED Socio- Economic Development – Measurement Criteria Cumulative value of all Socio-Economic Development Contributions made by a financial institution as a percentage of the cumulative net profit after tax * 07 December 2010 © 2010,BEE Institute, All Rights Reserved Weighting Target 3 2012 = 0.75% of NPAT; 2013 = 0.7% of NPAT; 2014 = 0.6% of NPAT Socio-Economic Development Qualifying Beneficiaries: – Black people – Organisations where 75% or more of benefit flows to black people = 100% counts – Where the benefit is less than 75% it counts pro-rata 07 December 2010 © 2010,BEE Institute, All Rights Reserved