Cablegate: South Africa: Bee Codes of Good Practice
VZCZCXRO2872
PP RUEHDU RUEHJO
DE RUEHSA #4856/01 3461446
ZNR UUUUU ZZH
P 121446Z DEC 05
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC PRIORITY 0448
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
RUEHJO/AMCONSUL JOHANNESBURG 3581
RUEHDU/AMCONSUL DURBAN 7272
RUEHTN/AMCONSUL CAPE TOWN 2145
UNCLAS SECTION 01 OF 02 PRETORIA 004856
SIPDIS
DEPT FOR AF/S; AF/EPS; EB/TPP/MTA
USDOC FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND
DEPT PASS USTR FOR PCOLEMAN, FLISER AND WJACKSON
TREASURY FOR BCUSHMAN
SIPDIS
E.O. 12958: N/A
TAGS: EINV ETRD EFIN ECON USTR SF
SUBJECT: SOUTH AFRICA: BEE CODES OF GOOD PRACTICE
CODE 200: MANAGEMENT
REF: (A) PRETORIA 4854
(B) PRETORIA 4855
1. (U) Summary. On November 1, the Department of Trade
and Industry released the final version of the Broad-
based Black Economic Empowerment (BEE) Code on Management
and Control, i.e., Code 200. One of ten codes, Code 200
sets forth the criteria and methodology for scoring a
firm's contribution to BEE objectives in the management
of an entity. This portion of the BEE Generic Scorecard
accounts for 10% of a firm's total score. In each
instance, the actual number of points awarded is
calculated by multiplying the fraction of a compliance
target (there are seven) achieved by the number of
possible points allotted for each BEE target. No excess
scoring for exceeding any of the BEE targets is possible.
However, a full point may be earned for meeting a bonus
target. End Summary.
2. (U) This is the third in a series of cables reporting
on the final criteria and methodology for scoring BEE
contribution, as embodied in the government's BEE Codes
of Good Practice. After nine months of consultations,
the Department of Trade and Industry released its final
version of the Broad-based Black Economic Empowerment
(BEE) Code on Management and Control (Code 200) on
November 1. The stated goal of Code 200 is to provide an
incentive for installment blacks on the board of
directors, as senior managers, and as top managers. All
BEE Codes of Good Practice, including this one, may be
found at the following Internet website:
http://www.dti.gov.za/bee/CODESOFGOODPRACTICE 2005.htm
The Management Score
--------------------
3. (U) The portion of the BEE generic scorecard covered
by Code 200 accounts for 10% of a firm's total score.
Firms may earn a bonus of one percentage point for taking
on independent non-executive board members. For a
complete understanding as to how this portion of the
generic scorecard factors into the rest of the scorecard,
please refer to ref A.
4. (U) The management section of the BEE generic score
card is divided into two parts: BEE participation on the
board of directors, and BEE participation in management.
When it comes to participation on the board, a maximum of
three percentage points is awarded if 50% of the voting
rights are in black hands. A maximum of one point is
awarded if 50% of executive board members are black. A
maximum of one point is awarded if 25% of board members
are black women.
5. (U) When it comes to participation in management, a
maximum of two points is awarded if 40% of senior
management (defined as those who have responsibility for
the overall direction of the entity) are black. One
point is awarded if 20% of senior management are black
women. One point is awarded if 40% of top management
(defined as those who have responsibility for a portion
of the entity's activities) are black. Another point is
awarded if 20% of top management is black women. A full
bonus point may be awarded if 40% of the independent non-
executive board members are black.
6. (U) The following table spells out the maximum
possible points and BEE targets to be achieved for
deriving a score under the management and control section
of the BEE generic scorecard:
BEE
Criteria Points Target
-------- ------ ------
Board Member Voting Rights: 3 50%
Black people 1 50%
Black women 1 25%
Management:
Senior Top Management:
Black People 2 40%
PRETORIA 00004856 002 OF 002
Black Women 1 20%
Other Top Management:
Black people 1 40%
Black women 1 20%
Bonus:
Independent Non-executive 1 40%
Black Board Members
Scoring
-------
7. (U) In each case, the actual number of points awarded
is calculated by multiplying the fraction of the
compliance target achieved by the number of possible
points in each category. For example, if 25% of the
voting rights of a firm are in black hands, then 25% is
divided by the compliance target of 50% and, instead of
scoring the maximum three points, the firm scores only
1.5 points for that category. Anything over 50% still
results in a maximum of 3 points. For example, if blacks
hold 75% of the voting rights of a firm, the firm would
still only score 3 points as opposed to 4.5 points for
that category.
Definitions
-----------
8. (U) Black is defined as black (i.e., African),
"coloured," and Indian South Africa citizens (or those
who could have applied for South African citizenship, if
permitted) who suffered discrimination under the
apartheid regime and their descendents.
9. (U) According to Code 200 a "senior top manager" is a
person in a key financial and overall management position
such as a Chief Executive Officer, Chief Operating
officer, or Chief Financial Officer. The term "other top
manager" denotes a person who is actively involved in the
development and/or implementation of the firm's strategy
in their particular area of responsibility, such as a
Human Resource Director or Marketing Director. Any
employee classified under the management control segment
of the generic scorecard cannot also be counted under
employment equity segment on the generic scorecard (also
worth 10 points) and vice versa. The draft Code of Good
Practice on Employment Equity (Code 300, whose goal is to
encourage an equitable representation of blacks in all
occupations and organizations) is scheduled to be
released for comment in December of 2005.
TEITELBAUM