The document discusses proposed changes to the Financial Sector Code (FSC) scorecard elements and compliance requirements. Key points include:
1) The scorecard elements have been reduced from 7 to 5 by merging some elements, and compliance requirements have increased for companies with annual turnover below R50 million.
2) Minimum requirements have been introduced for priority elements of Ownership, Skills Development, and Enterprise and Supplier Development.
3) Procurement targets have been increased, and only spend with "Empowering Suppliers" will count towards procurement points.
4) Thresholds for exempted micro enterprises and qualifying small enterprises have been increased.
The document discusses proposed changes to the Financial Sector Code (FSC) scorecard elements and compliance requirements. Key points include:
1) The scorecard elements have been reduced from 7 to 5 by merging some elements, and compliance requirements have increased for companies with annual turnover below R50 million.
2) Minimum requirements have been introduced for priority elements of Ownership, Skills Development, and Enterprise and Supplier Development.
3) Procurement targets have been increased, and only spend with "Empowering Suppliers" will count towards procurement points.
4) Thresholds for exempted micro enterprises and qualifying small enterprises have been increased.
The document discusses proposed changes to the Financial Sector Code (FSC) scorecard elements and compliance requirements. Key points include:
1) The scorecard elements have been reduced from 7 to 5 by merging some elements, and compliance requirements have increased for companies with annual turnover below R50 million.
2) Minimum requirements have been introduced for priority elements of Ownership, Skills Development, and Enterprise and Supplier Development.
3) Procurement targets have been increased, and only spend with "Empowering Suppliers" will count towards procurement points.
4) Thresholds for exempted micro enterprises and qualifying small enterprises have been increased.
7 to 5 (Management Control and Employment Equity have been merged and so have Procurement and Enterprise Development) All companies except Exempted Micro Enterprises to comply with all elements
None, elements have simply been combines
We can agree to this
Previously medium sized businesses only needed
to comply with 4 elements, greater compliance requirements for companies with an annual turnover below R50 mil Effectively dropping all companies scorecard by an average of 3 levels.
Non-negotiable, the FSC needs to incorporate
change
Companies are required to do spend a minimum of
2.4% of payroll on training black people, need to meet 40% of the increased procurement targets and spend 1.4% of NPAT supporting small black owned businesses. If the minimum requirements are not met, companies will be penalised by having their overall BEE levels reduced by 1 level.
Priority elements are non-negotiable. We will need
to introduce Skills Development and Enterprise and Supplier Development as priority elements.
More procurement points can be claimed by
buying from these suppliers
Non-negotiable, the FSC needs to incorporate
change
Scorecard points & Qualification criteria for
awarding of B-BBEE status levels adjusted downward Introduced minimum requirements for priority elements: Ownership, Skills Development, and Enterprise and Supplier Development
Entities who do not meet the minimum
requirements in priority elements, their overall score will be discounted by 1 BEE level Enhanced the recognition status of black owned EMEs and QSEs: An EME / QSE that is 100% owned by black people qualifies as a level 1 contributor and An EME / QSE that is more than 51% owned by black people qualifies as a level 2
Non-negotiable, the FSC needs to incorporate
change
Ownership as a priority element is not going to be
acceptable. ASISA and BASA will probably be proposing Empowerment Financing as the 3rd priority element. This raises a challenge for shortterm insurers who are exempted from Empowerment Financing. SAIA will therefore, need to propose another element as our 3rd priority element. National Treasury will expect this to be Access. Non-negotiable, the FSC needs to incorporate change
FSC ALIGNMENT ISSUES
contributor
FSC ALIGNMENT ISSUES
The thresholds for EMEs and QSEs have been adjusted as follows: EME increased from R5 million to R10 million
QSE: increased to from R35 million to R50
million Large entities: R50 million and above EMEs & QSEs that have more than 51% black ownership only have to obtain a sworn affidavit every year confirming revenue and ownership Introduced a formula to split targets for black staff and training spend on black staff, into separate targets for African, Coloured and Indian using the EAP targets.
Increased the Skills Development target from 3%
of payroll to 6%
Mandatory sectoral training does not quality as
skills development contribution Introduced the concept of an Empowering Supplier and only procurement spend with companies that are Empowering Suppliers would count towards procurement points
Greater number of companies will be exempted
from BEE compliance
Non-negotiable, the FSC needs to incorporate
change
Makes it easier for black owned business to
receive BEE recognition. This however, creates a risk of fronting. This is problematic as it effectively creates a quota system for each of the race groups. In addition, the current formula is incorrect.
Non-negotiable, the FSC needs to incorporate
change
Companies will need to double their training
budgets. However, as the spend is not only applicable to staff, external training can also be counted (bursaries etc.) As Skills Development is a priority element the minimum spend requirement is 2.4% of payroll. AS most of the sectors training is mandatory, this is unacceptable. The definition of Empowering Supplier is problematic as it caters for manufacturing companies and not service companies. If a company is 100% black owned and is not an empowering supplier, their BEE certificate cannot be used for procurement purposes.
The Department of Labour is currently considering
removing the EAP provision for Employment Equity purposes, because of a recent Supreme Court ruling that quotas are illegal. The DTI is awaiting the decision from the Department of Labour, and may review this provision. The DTI will probably not be willing to consider a lower target.
The sector cannot accept this change.
The DTI has indicated that they will be comfortable with the FSC tweaking the formula to accommodate service companies Non-negotiable, the FSC needs to incorporate change as it applies to suppliers.
FSC ALIGNMENT ISSUES
FSC ALIGNMENT ISSUES
Increased procurement targets
Split Enterprise Development into Supplier
Development and Enterprise Development
This will make procurement compliance more
difficult, particularly in view of the Empowering Supplier definition.
Creates a requirement for companies to focus their
enterprise development support on companies in their supply chain.
SAIA members have proposed a phase-in of the
targets, as was originally done in the DTI Codes with lower targets applicable in the first 5 years and the increased targets applicable from year 6. The FSC Reporting Working Committee supports this recommendation. This change is good for the industry, particularly in view of the industrys challenges with the MBR industry and raising challenges with contractors.