B-BBEE — B-BBEE Sector Code: Defence Sector Code (GG 42391, 12 April 2019) (source: https://www.gov.za/sites/default/files/gcis_document/201904/42391gon567.pdf)
GENERAL NOTICE
STAATSKOERANT,
NOTICE, 12 APRIL
OF2019
2019 No. 42391 21
Defence and Military Veterans, Department of/ Verdediging en Militêre Veterane, Departement van
DEPARTMENT OF DEFENCE
DEPARTMENT AND MILITARY
OF TRADE AN 11; VETERANS
INDUSTRY
NO. 567 12 APRIL 2019
567 Broad-Based Black Economic Empowerment Act (53/2003), as amended by the B-BBEE Act No. 46 of 2013: Codes of Good Practice on Broad Based Black Economic Empowerment 42391
CODES OF GOOD PRACTICE ON BROAD BASED BLACK
ECONOMIC EMPOWERMENT
I, Dr Rob Davies, Minister of Trade and Industry, hereby:
a) Issue the Defence Sector Code in terms of section 9(1) of the Broad-Based
Black Economic Empowerment Act, (Act No. 53 of 2003) as amended by the
B-BBEE Act 46 of 2013.
b) Confirm that this is a replacement of Government Gazette No.42021, General
Notice 1223 published on 9 November 2018.
c) Determine that these Codes come into effect on the date of this publication.
Dr Rob Davies, ilitP
Minister of Trade and Industry
February 2019
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22 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
BROAD-BASED BLACK ECONOMIC EMPOWERMENT DEFENCE
SECTOR CODE OF GOOD PRACTICE IN TERMS OF SECTION 9 (1)
OF THE BROAD-BASED BLACK ECONOMIC EMPOWERMENT ACT
NO. 53 OF 2003 AS AMENDED BY ACT NO. 46 OF 2013
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STAATSKOERANT, 12 APRIL 2019 No. 42391 23
Table of Contents
1. PREAMBLE ………………………………………………………………. 4
2. VISION …………………………………………………………………… 5
3. MISSION ………………………………………………………………… 5
4. INTERPRETATIONS AND DEFINITIONS …………………………... 5
5. OBJECTIVES …………………………………………………………… 18
6. CHALLENGES FACING THE SADI ………………………………….. 19
7. COMMITMENT. ………………………………………………………… 20
8. APPLICATION …………………………………………………………. 21
9. KEY PRINCIPLES …………………………………………………….. 21
10. PRIORITY ELEMENTS, SUB-MINIMUM AND DISCOUNTING 22
PRINCIPLE
11. ELIGIBILITY AS AN EXEMPTED MICRO-ENTERPRISE ………… 24
12. ELIGIBILITY AS A QUALIFYING SMALL ENTERPRISE ………….. 25
13. START-UP ENTERPRISES …………………………………………… 26
14. THE DEFENCE SECTOR SCORECARD ……………………………. 27
15. B-BBEE RECOGNITION LEVELS ……………………………………. 28
16. ELEMENTS OF THE DEFENCE SECTOR: LARGE ENTITIES 30
SCORECARD
17. ELEMENTS OF THE DEFENCE SECTOR: SPECIALISED 58
DEFENCE SECTOR SCORECARD FOR ORGANS OF STATE,
PUBLIC ENTITIES AND NOT FOR PROFIT COMPANIES
18. ELEMENTS OF THE DEFENCE SECTOR: THE QUALIFYING 65
SMALL ENTERPRISES DEFENCE SCORECARD
19. DEFENCE SECTOR CHARTER COUNCIL …………………… 70
20. MONITORING AND EVALUATION ………………………………….. 72
21. REVIEW OF THE SECTOR ……………………………………………. 72
22. EFFECTIVE DATE ………………………………………………………. 72
SCHEDULE 1 ……………………………………………………………. 73
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24 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
1. PREAMBLE
Colonialist and apartheid policies and practices in South Africa excluded Black People
from the economy and deprived them of equal educational opportunities and equal
access to the economy of the country. This resulted in a myriad of socio-economic
problems which have resulted in high levels of poverty and inequality, significant
shortage of skills, the reliance of the economy on a small number of people and the
continued exclusion of Black People from the South African economy, resulting in an
economy that performs below its potential.
To help deal with the inherited problems, South Africa adopted a Constitution which
aimed to establish a society based on democratic values, social justice and
fundamental human rights, improve the quality of life of all citizens and free the
potential of each person, build a united and democratic South Africa able to take its
rightful place as a sovereign state in the family of nations; and to promote the
achievement of equality through legislative and other measures designed to protect or
advance persons, or categories of persons, disadvantaged by unfair discrimination.
Section 9 of the Bill of Rights as set out in Chapter 2 of the Constitution states:
“Equality includes the full and equal enjoyment of all rights and freedoms.” This
right to equality includes the right of all South Africans to participate fully in the
economy of the country. The Broad – Based Black Economic Empowerment Act no
53 of 2003 and the amended Codes of Good Practice seek to give effect to this right.
The South African Defence Industry, like other industries in South Africa, is negatively
affected by problems of the past and needs a framework which finds solutions that will
address the negative impact of past racially skewed rule and development and which
will grow the Defence Industry in order for it to make a sustainable and meaningful
contribution to the economy. A strong economy in which all citizens have an equal
opportunity to participate, will contribute towards the strengthening of South Africa as
a democratic developmental state. In this regard, the need for effective and significant
economic transformation is essential. Such transformation must include access to
economic opportunities and productive resources for previously excluded groups, the
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STAATSKOERANT, 12 APRIL 2019 No. 42391 25
promotion of local businesses and entrepreneurship, manufacturing, the development
of skills for a knowledge-based economy and the development of innovative
indigenous technology and Intellectual Property.
The Defence Sector Code aims, within the South African Defence Industry, to give
effect to the constitutionally enshrined right to equality by addressing the effects of
systemic past exclusion of Black people from participating in the economy, which
remain firmly in place.
2. VISION
A fully transformed, revitalized Defence Industry with effective and sustainable
economic participation by Black people as employees, managers, entrepreneurs,
industrialists, developers, and shareholders.
3. MISSION
To create a framework for the meaningful and sustainable transformation and growth
of the South African Defence Industry through ownership, management, skills
development, and enterprise and supplier development programmes.
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26 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
4. INTERPRETATIONS AND DEFINITIONS
4.1. "The Act" means the Broad-Based Black Economic Empowerment Act No. 53
of 2003 as amended from time to time;
4.2. “Armscor” means the Armaments Corporation of South Africa Limited
established by the Armaments Corporation of South Africa Act No. 51 of 2003;
4.3. "B-BBEE Enterprises" means enterprises whose B-BBEE score, in terms of
a sector scorecard which has been issued as a sector code of good practice
or in terms of the dti’s Generic Scorecard, has been verified by an accredited
B-BBEE verification agency or in the case of Exempt Micro Enterprises or
Qualifying Small Enterprise that are at least 51% Black Owned, produced an
affidavit verifying their status;
4.4. "B-BBEE Facilitator Status" means Organs of State or Public Entities or
State-Owned Enterprises that have been designated as B-BBEE Facilitators
by the Minister of Trade and Industry by notice in the Government Gazette. In
calculating their Ownership score, Measured Entities must treat B-BBEE
Facilitators as having rights of Ownership held:
4.4.1. 100% by Black people;
4.4.2. 40% by Black women;
4.4.3. 20% by Black Designated Groups;
4.4.4. without any acquisition of debts; and
4.4.5. without any third party rights;
4.5. "Black Designated Groups" means:
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STAATSKOERANT, 12 APRIL 2019 No. 42391 27
4.5.1. Unemployed Black people not attending and not required by law to attend an
educational institution and not awaiting admission to an educational institution;
4.5.2. Black people who are youth as defined in the National Youth Commission Act
of 1996;
4.5.3. Black people who are persons with disabilities as defined in the Code of Good
Practice on employment of people with disabilities issued under the
Employment Equity Act;
4.5.4. Black people living in rural and under developed areas;
4.6. "Black Military Veterans" means for the purpose of this Sector Code, any
Black South African citizen who:
4.6.1. rendered military service to any of the Non-Statutory Military Organizations,
which were involved in South Africa's Liberation War from 1960 to 1994;
4.6.2. served in the Union Defence Force before 1961;
4.6.3. became a member of the new South African National Defence Force after
1994; and
4.6.4. has completed his or her military training and no longer performs military
service, and has not been dishonourably discharged from that military
organization or force, provided that this definition does not exclude any person
referred to in paragraph 4.5.1 or 4.5.2 who could not complete his or her
military training due to an injury sustained during military training or a disease
contracted or associated with military training;
4.7. "Black Owned Entity Company " means a juristic person, having
shareholding or similar members’ interest, that is Black controlled, in which
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Black Participants enjoy a right to an Economic Interest that is at least 51% of
the total such rights measured using the Flow Through Principle;
4.8. “Black Controlled Entity” means a juristic person, having shareholding or
similar members interest, that is Black controlled, in which Black Participants
enjoy a right to Exercisable Voting Rights that is at least 51% of the total such
rights measured using the Flow Through Principle;
4.9. “B-BBEE Recognition Level” means the percentage B-BBEE Recognition
Levels as determined:
4.9.1. for Entities that are neither Qualifying Small Enterprises nor Exempted Micro-
Enterprises, using statement 000 of the Codes;
4.9.2. for Qualifying Small Enterprises, using statement 000 of the Codes; and
4.9.3. for Exempted Micro-Enterprises, the applicable deemed B-BBEE Recognition
under statement 000 of the Codes.
4.10. "Black People" is a generic word which means Africans, Coloured and
Indians:
4.10.1. who are citizens of the Republic of South Africa by birth or descent; or
4.10.2. who became citizens of the Republic of South Africa by naturalisation:
4.10.2.1. before 27 April 1994; or
4.10.2.2. on or after 27 April 1994 and who would have been entitled to
acquire citizenship by naturalisation prior to that date.
4.11. "Broad-Based Black Economic Empowerment" means the viable economic
empowerment of all Black people, in particular women, workers, youth, people
with disabilities, and people living in rural and underdeveloped areas, through
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STAATSKOERANT, 12 APRIL 2019 No. 42391 29
diverse but integrated socio-economic strategies that include, but are not
limited to:
4.11.1. increasing the number of Black people that manage, own and control
enterprises and productive assets;
4.11.2. facilitating ownership and management of enterprises and productive
assets by communities, workers, co-operatives and other collective
enterprises;
4.11.3. human resources and skills development;
4.11.4. achieving equitable representation in all occupational categories and levels
in the workforce; and
4.11.5. preferential procurement from enterprises that are owned or managed by
Black people;
4.11.6. investment in enterprises that are owned or managed by Black people.
4.12. "Broad-Based Ownership Scheme" means an ownership scheme which
meets the rules set out in Annexure 100(B) of the Codes;
4.13. "Charter Council" means the Defence Sector Charter Council established in
terms of paragraph 17 of this Sector Code;
4.14. “Codes” means the Codes of Good Practice as amended from time to time
including all the statements issued under Section 9 of the Act;
4.15. "Defence Industrial Participation" (DIP) means a government-initiated
process whereby defence acquisitions and purchases are used as a leverage
to oblige a foreign seller of Category 1 Matériel to reciprocate defence-related
business in South Africa on a reciprocal basis in order to advance military
strategic and defence-related industrial participation imperatives;
4.16. “51% Black Owned” means an Entity in which:
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30 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
4.16.1. Black people hold at least 51% of the exercisable voting rights as
determined under Code series 100;
4.16.2. Black people hold at least 51% of the economic interest as determined under
Code series 100;
4.16.3. It has earned all the points for Net Value under statement 100;
4.17. “51% Black Women Owned” means an Entity in which:
4.17.1. Black women hold at least 51% of the exercisable voting rights as determined
under Code series 100;
4.17.2. Black women hold at least 51% of the economic interest as determined under
Code series 100; and
4.17.3. It has earned all the points for Net Value under statement 100.
4.18. “30% Black Women Owned” means an Entity in which:
4.18.1. Black women hold more that 30% of the exercisable voting rights as
determined under Code series 100;
4.18.2. Black people hold at least 30% of the economic interest as determined under
Code series 100;
4.18.3. It has earned all the points for Net Value under statement 100.
4.19. “Defence Matériel” means any Matériel whether raw or processed, including
equipment, facilities, weapons, munitions, pyrotechnics, systems and services
used principally for military purposes;
4.20. "DoD" means the Department of Defence and Military Veterans;
4.21. “the dti” means the Department of Trade and Industry;
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STAATSKOERANT, 12 APRIL 2019 No. 42391 31
4.22. “EAP” means Economically Active Population as determined and published
by Statistics South Africa. The operative EAP for the purposes of any
calculation under the Codes will be the most recently published EAP;
4.23. "Economic Interest" means a claim against the Entity representing a return
on ownership of the Entity, similar in nature to a dividend right, measured using
the Flow-Through and where applicable, the Modified Flow-Through
principles;
4.24. "Elements" means the measurable quantitative or qualitative elements of B-
BBEE compliance in the Codes;
4.25. “Empowering Supplier” means subject to any Notices that may be issued by
the “the dti”, within the context of B-BBEE, is a B-BBEE compliant entity,
which is a good South African corporate citizen, complying with all material
regulatory requirements of the country such as employment equity and
taxation and should meet at least 3 (three) if it is a Large Enterprise or 1 (one)
if it is a Qualifying Small Enterprise on the following criteria:
4.25.1. at least 25% of cost of sales excluding labour cost and depreciation must
be procured from local producers or local suppliers in SA. For the service
industry, labour costs are included but capped at 15%;
4.25.2. job creation – 50% of jobs created are for Black people provided that the
number of Black employees since the immediate period prior verified B-
BBEE measurement is maintained;
4.25.3. at least 25% transformation of raw material/beneficiation which include
local manufacturing, production and/or assembly, and/or packaging;
4.25.4. skills transfer – at least spend 12 days per annum of productivity deployed
in assisting Black Owned EMEs and QSEs to increase their operation or
financial capacity;
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32 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
4.25.5. labour costs – at least 85% of labour costs are paid to South African
employees of Entities in the service industry;
Exempted Micro Enterprises and Start-Ups are automatically recognized as
Empowering Suppliers;
4.26. “Entity” means a legal entity or a natural or a juristic person conducting a
business, trade or profession in the Republic of South Africa;
4.27. “Enterprise Development Contributions” means monetary or non-monetary
contributions to Exempted Micro Enterprises or Qualifying Small Enterprises
which are at least 51% Black Owned or at least 51% Black Women Owned
with the objective of contributing to the development, sustainability and
financial and operational independence of those beneficiaries;
4.28. "Equity Equivalent Investment Programme" means a public programme or
scheme of any government department, provincial or local government in the
Republic of South Africa or any other programme approved by the Minister of
Trade and Industry as an Equity Equivalent Investment Programme;
4.29. “Exempted Micro-Enterprise” means an entity with an annual turnover of
R5,000,000 (five million Rand) or less;
4.30. "Flow-through Principle" means as a general principle when measuring the
rights of ownership of any category of Black People in a Measured Entity, only
rights held by natural persons are relevant. If the rights of ownership of Black
People pass through a juristic person then the rights of ownership of Black
People in that juristic person is measurable. These principles apply through
every tier of ownership in a multi-tiered chain of ownership until that chain
ends with a natural Black person holding rights of ownership;
4.30.1. The method of applying the Flow Through Principle across one or more
intervening juristic persons is as follows:
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STAATSKOERANT, 12 APRIL 2019 No. 42391 33
4.30.1.1. Multiply the percentage of the Participants’ rights in the juristic
persons through which those rights pass, by the percentage
rights of ownership of each of those juristic persons successively
to the Measured Entity; and
4.30.1.2. The result of this calculation represents the percentage of rights
of ownership held by the Participant.
4.31. “Foreign Enterprise” means an Entity that is incorporated outside the
borders of South Africa whether or not it carries on business in South Africa;
4.32. "Fronting practice" means a transaction, arrangement, or other act or
conduct that directly or indirectly undermines or frustrates the achievement of
the objectives of the Act or the implementation of any of the provisions of the
Act, including but not limited to practices in connection with a B-BBEE
initiative:
4.32.1. in terms of which black persons who are appointed to an enterprise are
discouraged or inhibited from substantially participating in the core activities
of that enterprise;
4.32.2. in terms of which the economic benefits received as a result of the broad-
based black economic empowerment status of an enterprise do not flow to
Black people in the ratio specified in the relevant legal documentation;
4.32.3. involving the conclusion of a legal relationship with a Black person for the
purpose of that enterprise achieving a certain level of B-BBEE compliance
without granting that black person the economic benefits that would
reasonably be expected to be associated with the status or position held by
that Black person; or involving the conclusion of an agreement with another
enterprise in order to achieve or enhance B-BBEE status in circumstances
in which:
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34 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
4.32.3.1. there are significant limitations, whether implicit or explicit, on the
identity of suppliers, service providers, clients or customers;
4.32.3.2. the maintenance of business operations is reasonably
considered to be improbable, having regard to the resources
available;
4.32.3.3. the terms and conditions were not negotiated at arm’s length and
on a fair and reasonable basis;
4.33. "Generic Scorecard" means the balanced B-BBEE scorecard as contained
in statement 000 of the Codes;
4.34. "Global Practice" means a globally and uniformly applied practice of a
Multinational, restricting alienation of equity in or the sale of business in its
regional operations. The practice must have existed before the promulgation
of the Act;
4.35. "Local Enterprise” means an enterprise with 51% or more equity ownership
by South African citizens, registered in the Republic of South Africa and paying
tax to South African Revenue Service;
4.36. “Large Enterprise” means an entity that qualifies for measurement under the
Generic Scorecard, with an annual turnover of more than R50,000,000 (fifty
million Rand);
4.37. “Local content” means that portion of the tender price which is not included
in the imported content, provided that local manufacture does take place;
4.38. "Management" means:
4.38.1. Executive management, which includes the Chief Executive Officer,
Managing Director, Chief Financial Officer, Executive Directors and those
managers who have a significant leadership role in the enterprise, have
control over the day to day operations, have decision-making powers and
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STAATSKOERANT, 12 APRIL 2019 No. 42391 35
report directly to the Chief Executive Officer, Managing Director and/or the
Board of Directors;
4.38.2. Senior management means an employee who is a member of the
occupational category of “Senior Management” as determined using the
Employment Equity regulations, issued by the Department of Labour in
terms of the Employment Equity Act 55 of 1998, as amended;
4.38.3. Middle management means an employee of the Measured Entity who is a
member of the occupational category of “Middle Management” as
determined using the Employment Equity regulations, issued by the
Department of Labour in terms of the Employment Equity Act 55 of 1998,
as amended; and
4.38.4. Junior management means an employee of the “Measured Entity” who is a
member of the occupational category of “Junior Management” as
determined using the Employment Equity regulations, issued by the
Department of Labour in terms of the Employment Equity Act 55 of 1998,
as amended.
4.39. "Measured Entity" means an Entity or Enterprise as well as an organ of state
or public entity subject to measurement under the Codes;
4.40. “Minister” means the Minister of Trade and Industry;
4.41. "Multinational Enterprise" means a Measured Entity with a business in the
Republic of South Africa and elsewhere which maintains its international
headquarters outside the Republic;
4.42. "National Development Plan" “The National Development Plan (NDP) is an
economic policy framework that aims to eliminate poverty and reduce
inequality by 2030 through strategies that draw on the energies of its people,
growing an inclusive economy, building capabilities, enhancing the capacity
of the state, and promoting leadership and partnerships throughout society;
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36 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
4.43. "Net Profit after Tax" means the operating profit of a Measured Entity after
tax. It incorporates both profit / loss figures and abnormal items, but excludes
extraordinary items as determined by (International Financial Reporting
Standards (IFRS);
4.44. “NDIC” means The National Defence Industry Council;
4.45. “Non-Statutory Military Organisations” means the Azanian People’s
Liberation Army (APLA), Azanian National Liberation Army (Azanla) and
Umkhonto we Sizwe (Umkhonto);
4.46. "Ownership" means ownership of an Economic Interest in an enterprise;
4.47. "Organs of State" means:
4.47.1. A national or provincial department as defined in the Public Finance
Management Act No. 1 of 1999;
4.47.2. a municipality contemplated in the Constitution;
4.47.3. a provincial legislature; and
4.47.4. a constitutional institution listed in Schedule 1 of the Public Finance
Management Act 1999 (Act No. 1 of 1999);
4.48. "Participant" means a natural person holding rights of ownership in a
Measured Entity;
4.49. "Procurement" means all expenditure for goods, products, equipment and
services, including capital expenditure and excluding where the expenditure is
on municipal rates and taxes or part of payroll as well as in the context of
procurement in the SADI, the complete process of acquiring or obtaining
personnel, matériel, services, or property from outside the Defence Force (by
means authorized in pertinent directives) in support of operational
requirements and includes negotiating, contracting and purchasing;
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STAATSKOERANT, 12 APRIL 2019 No. 42391 37
4.50. “Qualifying Small Enterprise” means an Entity that qualifies for
measurement under the Qualifying Small Enterprise Scorecard with a turnover
of R5,000,000 (five million Rand) or more but less than R50,000,000( fifty
million Rand);
4.51. “SADI" means the South African Defence Industry which is a collective term
for South African Defence Related Industries and means those Entities in the
public and private sector, including commercial companies and business units
of such Entities, which are directly or indirectly active in the design, research,
development, manufacture and marketing of Defence Matériel;
4.52. “Scarce Skills” means skills required in the SADI which shall contribute
towards establishment or maintenance of Sovereign Capability;
4.53. "SMME" means small, medium and micro enterprises namely Exempted Micro
Enterprises and Qualifying Small Enterprises;
4.54. "Sovereign Capability “means the ability to ensure, full national control,
without reliance on any direct foreign assistance, of certain capabilities
identified as vital to national security, including but not limited to, command
and control, secure communications, aspects of precision-guided munitions,
elements of electronic warfare, relevant algorithms and relevant software;
4.55. "Stakeholders" means Measured Entities, Organs of state, Public Entities,
State-Owned Enterprises and suppliers who are involved in the SADI;
4.56. "Start-Up Enterprise" means a recently formed or incorporated Entity that
has been in operation for less than 1 year. A start–up enterprise does not
include any newly constituted enterprise with merely a continuation of a pre-
existing enterprise;
4.57. "Public Entity" means an enterprise that is listed as a public entity in Schedule
2 or 3 of the Public Finance Management Act, 1999 (Act No. 1 of 1999);
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38 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
4.58. "Supplier" means any supplier or service provider to a Measured Entity if any
portion of the supply or service provision falls within the definition of Total
Measured Procurement Spend;
4.59. “Supplier Development Contributions” means monetary or non-monetary
contributions carried out for the benefit of value adding Suppliers to the
Measured Entity that are Exempted Micro-Enterprises or Qualifying Small
Enterprises which are at least 51% Black owned or at least 51% Black Women
Owned, with the objective of contributing to the development, sustainability
and financial and operational independence of such suppliers;
4.60. “Strategic Enterprise” means a public or private South African owned
company which provides one or more of the capabilities identified as vital to
national security and deemed sovereign;
4.61. “Targeted-Procurement” means a policy or programme of an Entity that
reserves a percentage of procurement exclusively for certain categories of
enterprises;
4.62. "Voting Right" means a voting right attached to an Entity Instrument owned
by or held for a participant measured using the Flow Through Principle or the
Control Principle, provided that:
4.62.1. to the extent that the provisions of the Codes of Good Practice Issued by
“the dti” on 11 October 2013 and as amended from time to time provide
further definition as to the nature of voting rights in an enterprise other than
a company having share capital, those provisions should be read in
conjunction with this definition in relation to such enterprises; and
4.62.2. voting rights exercised on behalf of a Black participant, by another natural
person who acts in a fiduciary capacity or in terms of specific mandate or
proxy, shall be deemed to be exercised by that participant;
4.63. "Weighting" means the weightings applied to the various Elements in the
Sector Code Scorecards.
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STAATSKOERANT, 12 APRIL 2019 No. 42391 39
5. OBJECTIVES
5.1. The Objectives of the Defence Sector Code are to provide the SADI with a
framework within which to implement B-BBEE and to give practical effect to
national policy imperatives as set out in The National Development Plan, the
Defence Industrial Participation Programme, the National Industrial Policy
Framework, the Industrial Policy Action Plan, the Black Industrialists Policy
and the South African Defence Review 2015;
5.2. More specifically, the Defence Sector Code aims to achieve the following
objectives:
5.2.1. to implement measures that will ensure the effective participation of Black
people in the SADI and in the broader economy;
5.2.2. to encourage the participation of and growth of SMME’s in the SADI;
5.2.3. to promote the growth of technical innovation within the SADI;
5.2.4. to promote the growth of the SADI as a profitable, sustainable industry;
5.2.5. to promote local manufacturing capability in the SADI for local and export
purposes;
5.2.6. to advance the acquisition, retention and transfer of critical, technical and
Scarce Skills in the SADI;
5.2.7. to protect South Africa’s Sovereign Capability in the SADI;
5.2.8. to actively promote entrepreneurship especially among the Black
Designated Groups;
5.2.9. to promote entrepreneurship and new enterprises in the SADI; and
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40 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
5.2.10. to contribute to job creation.
6. CHALLENGES FACING THE SADI
6.1. Declining local spending;
6.2. A South African economy that is growing at a slow rate;
6.3. The rising threat of socio-political instability as a result of economic exclusion,
and income inequality;
6.4. The exclusion of Black Military Veterans from the economy;
6.5. The inability of South African businesses in the SADI to meaningfully expand
into the rest of the African continent’s defence industry;
6.6. Continued over-reliance of the SADI on monopolies, oligopolies and Foreign-
Enterprises;
6.7. Lack of adequate protection and preferential access for local Defence
manufacturers over international competition; and
6.8. Regulatory constraints.
7. COMMITMENT
7.1. The Stakeholders acknowledge that the SADI is vital for the maintenance of
South Africa’s strategic capability and it plays a critical role in the country’s
economic growth, through manufacturing and technological innovation.
7.2. The Stakeholders further acknowledge that B-BBEE is a business imperative
which is essential for the sustainability and growth of the industry.
7.3. The Stakeholders therefore commit themselves fully:
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STAATSKOERANT, 12 APRIL 2019 No. 42391 41
7.3.1. to implementing the provisions of this Sector Code and the provisions of the
Act in both substance and in form;
7.3.2. to creating an enabling environment for the proper implementation of the
measures in this Sector Code;
7.3.3. to displaying the highest degree of good faith in all matters relating to the
implementation of the Defence Sector Code and neither do anything nor
refrain from doing anything that has the effect either directly or indirectly of
hampering the implementation of this Sector Code; and
7.3.4. to complying fully with the provisions of the Act especially and without
limitation to avoid practices that frustrate the implementation of the Act and
Defence Sector Code including fronting.
8. APPLICATION
8.1. This Sector Code is legally binding on all Entities in the SADI, in its entirety,
including national or provincial departments, Organs of State, Public Entities,
private enterprises providing Defence Matériel and/or any other supplies,
products and services to the DoD or its agencies – whether they are procured
from Local or Foreign Enterprises, as well as any role-player and stakeholder
that might opt in.
8.2. Notwithstanding any other Sector Code that the Entities in paragraph 8.1. may
be subject to at the date of the gazetting of this Sector Code, such Entities
shall be obliged, to be measured in terms of this Sector Code if they derive
more than 50% (fifty) per cent of their annual turnover from the SADI.
9. KEY PRINCIPLES
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42 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
9.1. The fundamental principle for measuring B-BBEE compliance is that
substance takes precedence over legal form.
9.2. In interpreting the provisions of this Sector Code, any reasonable
interpretation consistent with the objectives of the Act as amended must take
precedence.
9.3. In the event of this Sector Code of Good Practice not providing specifically for
a particular aspect relating to its applicability or any other related matter or in
the event of a lack of clarity, such aspects or matters must be dealt with in
accordance with the Codes as amended from time to time. In addition, the
interpretation of the provisions of this Sector Code shall be made having
regard to the Preamble, the Objectives, Key Principles and Commitments as
the case may be.
9.4. The basis for measuring B-BBEE initiatives under this Sector Code is the B-
BBEE compliance of the Measured Entity at the date of Measurement.
9.5. Any misrepresentation or attempt to misrepresent a Measured Entity’s true B-
BBEE status will be dealt with in accordance with the provisions as set out in
the Act as amended, and they may lead to the disqualification of the entire
scorecard of the Entity concerned.
9.6. The optimization of local intellectual property, research and development, as
well as manufacturing capacity must be encouraged.
9.7. All measures taken in terms of this Sector Code shall be implemented in a
manner that promotes local manufacturing and the stimulation of indigenous
technology and products and must be underpinned by a firm commitment to
promote South Africa, its interests and its economy.
10. PRIORITY ELEMENTS, SUB- MINIMUM AND DISCOUNTING PRINCIPLE
10.1. The Priority Elements are as follows –
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STAATSKOERANT, 12 APRIL 2019 No. 42391 43
10.1.1. OWNERSHIP
The Sub-minimum requirement for Ownership is 40% of net value points.
10.1.2. SKILLS DEVELOPMENT
The sub-minimum requirement for Skills Development is 40% of the
total weighting points for Skills Development.
10.1.3. ENTERPRISE AND SUPPLIER DEVELOPMENT
The sub-minimum requirement for Enterprise and Supplier Development
is 40% for each of the three categories, within the Enterprise and Supplier
Development element, namely Preferential Procurement; Supplier and
Enterprise Development.
10.2. COMPLIANCE WITH PRIORITY ELEMENTS
10.2.1. A Large Enterprise is required to comply with all the Priority Elements;
10.2.2. A QSE is required to comply with Ownership as a compulsory element and
either Skills Development or Enterprise and Supplier Development.
10.3. DISCOUNTING PRINCIPLE EFFECT
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44 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
10.3.1. Non-compliance with the 40% sub-minimum requirements of any of the
priority elements, as per paragraphs 10.2.1 and 10.2.2. above, will result
in the following outcomes for both Large Enterprises and QSEs;
10.3.2. The actual points scored by the Measured Entity and the consequent level
that the Measured Entity would have achieved were it not for non-
compliance with 40% sub-minimum requirements will be recognized by the
Verification Agency (“the Recognition Level”);
10.3.3. Notwithstanding the recognition in 10.3.2. above, the Measured Entity’s B-
BBEE status level will be discounted by one level down until the next
applicable verification period in which the Measured Entity can demonstrate
compliance with the 40% sub-minimum requirements, at which point the
Recorded Level will become the applicable ratings level for that Measured
Entity in that verification period; and
10.3.4. The requirement to submit data to the Department of Labour under the
Employment Equity Act 55 of 1998 is only applicable to ‘designated
employers’ who employ 50 or more employees. However, for the purpose
of measurement in terms of this Sector Code, both Large Enterprises and
QSEs that employ less than 50 employees are required to submit sufficient
evidence for verification purposes.
11. ELIGIBILITY AS AN EXEMPTED MICRO-ENTERPRISE
11.1. Any Enterprise with an annual Total Revenue of R5, 000.000 (five million
Rand) or less qualifies as an Exempted Micro-Enterprise.
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STAATSKOERANT, 12 APRIL 2019 No. 42391 45
11.2. An Exempted Micro-Enterprise is deemed to have a B-BBEE Status of “Level
Four Contributor” having a B-BBEE recognition level of 100%.
11.3. Enhanced B-BBEE recognition level for an Exempted Micro-Enterprise:
11.3.1. despite paragraph 11.2 an EME which is 100% Black Owned qualifies for
elevation to “Level One Contributor” having a B-BBEE recognition level of
135%;
11.3.2. despite paragraphs 11.2 and 11.3.1, an EME which is at least 51% Black
owned qualifies for elevation to “Level Two Contributor” having a B-BBEE
recognition level of 125%; and
11.3.3. despite paragraphs 11.2 and 11.3, an EME is allowed to be measured in
terms of the QSE scorecard should they wish to maximize their points and
move to a higher B-BBEE recognition level.
11.4. An EME is only required to obtain a sworn affidavit or Companies and
Intellectual Property Commission (CIPC) issued certificate confirming the
following:
11.4.1. annual total Revenue/Allocated Budget/Gross Receipts of R5,000,000 (five
million Rand) or less; and
11.4.2. level of Black Ownership.
11.5. Any misrepresentation in terms of Paragraph 11.3 above constitutes a criminal
offence as set out in the Act as amended from time to time.
12. ELIGIBILITY AS A QUALIFYING SMALL ENTERPRISE
12.1. Any Measured Entity with a Total Annual Revenue of between R5,000,000
(five million Rand) and R50,000,000 (fifty million Rand) qualifies as a QSE
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46 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
provided its qualification does not arise as a result of circumvention of the
relevant Scorecard;
12.2. Entities that are QSEs must use the Qualifying Small Enterprises Scorecard
in this Sector Code;
12.3. Enhanced B-BBEE recognition level for QSE:
12.3.1. A Qualifying Small Enterprise which is 100% Black owned qualifies for a
Level One B-BBEE recognition;
12.3.2. Despite paragraph 12.2, a Qualifying Small Enterprise which is at least 51%
Black owned qualifies for a Level Two B-BBEE recognition level of 125%;
and
12.3.3. Despite paragraph 12.2, a Qualifying Small Enterprise that is at least 51%
Black owned is only required to obtain a sworn affidavit of CIPC issued
certificate on an annual basis, confirming the following: -
12.3.3.1. Annual Total Revenue/Allocated Budget/Gross Receipts of R50,000,000
(fifty million Rand) or less, but not less than R5,000,000; and
12.3.3.2. Level of Black Ownership.
12.4. Any misrepresentation in terms of paragraph 12.3 above constitutes a criminal
offence as set out in the B-BBEE Act, as amended.
12.5. Any matter concerning the application of the Qualifying Small Enterprise
Scorecard that is not dealt with explicitly in this Sector Code must be dealt
with in terms of Codes 100-500 of the Codes.
13. START-UP ENTERPRISES
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13.1. A Start-up Enterprise must be measured as an EME under this statement for
the first year following its formation or incorporation. This provision applies
regardless of the expected annual total revenue of the Start-up enterprise.
13.2. A Start-up Enterprise is deemed to have the qualifying B-BBEE status in
accordance with the principles of paragraph 11 of this Sector Code.
13.3. In order to qualify as a Start-up Enterprise, the enterprise must provide an
independent confirmation of its status.
13.4. Despite paragraphs 13.1 and 13.2, a Start-Up Enterprise must submit a QSE
scorecard when tendering for any contract or seeking any other economic
activity covered by Section 10 of the Act, with a value higher than R5,000,000
(five million Rand) but less than R50,000,000 (fifty million Rand). For contracts
or any other economic activity referred to in this paragraph 13.4, of R50,
000,000 (fifty million Rand) or more, they should submit a Defence Sector
Scorecard. The preparation of such scorecards must use annualized data.
14. THE DEFENCE SECTOR SCORECARD
14.1. The Ownership Element, measures effective ownership of Entities by Black
people.
14.2. The Management Control Element measures the effective control of Entities
by Black people.
14.3. The Skills Development Element measures the extent to which employers
carry initiatives designed to develop the competencies of Black employees
and Black people internally and externally.
14.4. The Enterprise and Supplier Development Element, measures the extent to
which Entity buys goods and services from Empowering Suppliers preferably
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48 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
between level 1 and level 4 B-BBEE recognition levels. This element also
measures the extent to which Enterprises carry out supplier development and
enterprise development initiatives intended to assist and accelerate the growth
and sustainability of Black enterprises.
14.5. The Socio-Economic Development and Sector Specific Contributions
Element, measures the extent to which Entities carry out initiatives that
contribute towards Socio-Economic Development or Sector Specific initiatives
that promote access to the economy for Black people.
14.6. The Localisation Element measures the extent to which Entities procure
Defence Matériel from Local Enterprises that contribute to the development of
manufacturing and new locally developed technology.
14.7. Organs of State and State-Owned Enterprises shall be measured using the
Specialised Defence Scorecard but shall otherwise comply with all the
provisions of this Sector Code unless expressly excluded there from.
THE DEFENCE SCORECARD
ELEMENT WEIGHTING SECTOR CODE
REFERENCE
Ownership 25 Points Paragraph 16.1
Management Control 15 Points Paragraph 16.2
Skills Development 20 Points Paragraph 16.3
Enterprise and Supplier Development 40 Points Paragraph 16.4
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STAATSKOERANT, 12 APRIL 2019 No. 42391 49
Localisation 10 Points Paragraph 16.5
Socio-Economic Development 5 Points Paragraph 16.6
Total 115
15. B-BBEE RECOGNITION LEVELS
Based on the overall performance of a Measured Entity using the Defence Sector
Scorecard the Measured Entity will receive one of the following B-BBEE Status level
with the corresponding B-BBEE recognition level.
B-BBEE Status Qualification B-BBEE recognition
level
≥100 points on the
Level One Contributor Defence Sector 135%
Scorecard
≥95 but <100 points on
Level Two Contributor the Defence Sector 125%
Scorecard
≥90 but <95 points on the
Level Three Contributor Defence Sector 110%
Scorecard
≥80 but <90 points of the
Level Four Contributor Defence Sector 100%
Scorecard
≥75 but <80 points on the
Level Five Contributor Defence Sector 80%
Scorecard
≥70 but <75 points on the
Level Six Contributor Defence Sector 60%
Scorecard
≥55 but <70 points on the
Level Seven Contributor Defence Sector 50%
Scorecard
≥40 but <55 points on the
Level Eight Contributor Defence Sector 10%
Scorecard
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50 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
<40 points on the
Non-Compliant
Defence Sector 0%
Contributor
Scorecard
16. ELEMENTS OF THE DEFENCE SECTOR CODE: LARGE ENTITIES
SCORECARD
16.1. OWNERSHIP
16.1.1. One of the most effective tools for promoting sustainable economic
transformation and growth in the SADI is meaningful ownership by Black
people of an Economic Interest in Enterprises. Stakeholders therefore
commit to achieving the following ownership targets within a period of 3
(three) years from the date of the promulgation of this Sector Code: -
16.1.1.1. a minimum target of 25% (twenty-five per cent) of Economic
Interests held by Black people in Enterprises in the SADI in the
first year after promulgation of this Sector Code, 30% (thirty per
cent) in the second year and in the third year 35% (thirty-five per
cent);
16.1.1.2. a minimum of 10% (ten) per cent of an Economic Interest held
by Black women in Enterprises in the SADI in the first year and
15% (fifteen) per cent in the second and third year; and
16.1.1.3. any ownership target, as with other elements of this Sector
Code, shall include a minimum threshold for Black Designated
Groups.
16.1.2. Black people who have an Economic Interest in an Enterprise must have
exercisable Voting Rights and be entitled to receive economic benefits
arising from such Economic Interest subject to any liabilities they may have
incurred in the course of acquiring an economic interest.
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STAATSKOERANT, 12 APRIL 2019 No. 42391 51
16.1.3. All Measured Entities are bound by the ownership targets set out herein
except where specifically exempted in this Sector Code.
16.1.4. Multinational Enterprises shall comply with the ownership element of the
Sector Code unless they are subject to a Global Practice prohibiting such
enterprises from selling shares outside their country.
16.1.5. In the event paragraph 16.1.4 applies, the Multinational Enterprise shall: -
16.1.5.1. produce satisfactory evidence of the such Global Practice; and
16.1.5.2. evidence of an Equity Equivalent Programme approved by the
Minister.
16.1.6. Black People holding rights of ownership in a Measured Entity through
Employee Share Ownership Schemes may contribute a maximum of 40%
of the total points on the ownership scorecard provided that such Employee
Share Ownership Scheme meet the following qualification criteria: –
16.1.6.1. the constitution of the scheme must define the participants and
the proportion of their claim to receive distributions;
16.1.6.2. not less than 85% of the value of benefits allocated by the
scheme must accrue to Black people;
16.1.6.3. not less than 50% of the fiduciaries of the Scheme must be Black
people and at least 25% must be Black women;
16.1.6.4. participants may be named or referred to as a defined class of
natural persons and their claim to receive distributions may be in
fixed percentages or determined in terms of a formula and the
fiduciaries of the scheme have no discretion in this regard;
16.1.6.5. the constitution of the Scheme and any other information
affecting the scheme including such information of the Measured
Entity that a shareholder in a company having shareholding
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52 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
would be entitled to be available on request to any participant in
an official language in which that person is familiar;
16.1.6.6. the fiduciaries of the Scheme must present the financial reports
of the scheme to participants yearly at an annual general
meeting of the scheme;
16.1.6.7. the participants must take part in appointing at least 50% of the
fiduciaries and must have a role in the management of the
scheme similar to the role of a shareholder in a company having
shareholding;
16.1.6.8. all accumulated Economic Interest in the scheme is payable to
the participants at the earlier of a date specified in the
constitution or on termination or winding up of the scheme;
16.1.6.9. no onerous or punitive measures exist in the constitution or
management of the Scheme that in any manner whatsoever
deprive the participants of any rights to the benefits of the
scheme including when they cease to be employees of the
Measured Entities;
16.1.6.10. the chairperson of the scheme must be independent; and
16.1.6.11. the Scheme should have representation on the board of
directors of the Measured Entity.
16.1.7. Black Participants in a Trust holding rights of ownership in a Measured
Entity may contribute a maximum of 40% of the total points on the
Ownership Scorecard of the Measured Entity if the Trust meets the
qualification criteria for Trusts set out in paragraphs 16.1.8 and 16.1.9
herein.
16.1.8. The qualification criteria for the recognition of Trusts are as follows:
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STAATSKOERANT, 12 APRIL 2019 No. 42391 53
16.1.8.1. the trust deed must define the beneficiaries and the proportion
of their entitlement to receive distributions;
16.1.8.2. a written record of the names of the beneficiaries or the use of
defined or natural person satisfies the requirement for
identification;
16.1.8.3. a written record or fixed percentage of entitlement or the use of
a formula for calculation entitlement satisfies the need for
defining proportion of benefit;
16.1.8.4. the trustees must have no discretion on the above-mentioned
terms;
16.1.8.5. on winding-up or termination of the trust, all accumulated
Economic Interest must be transferred to the beneficiaries or to
an entity representing the interest of the participants or class of
beneficiaries;
16.1.8.6. the trust must have been established for legitimate commercial
purposes which must be fully disclosed and its objects must
reflect;
16.1.8.7. the Trust must be entitled to nominate and appoint persons on
the board of directors of the Measured Entity commensurate with
its shareholding in such Measured Entity; and
16.1.8.8. the terms of the Trust do not directly or indirectly seek to
circumvent the provisions of the Defence Sector Code and the
Act.
16.1.9. The qualification criteria for the recognition of Family Trusts are as follows:
16.1.9.1. the trust deed must define the beneficiaries and the proportion
of their entitlement to receive distributions;
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54 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
16.1.9.2. a written record of the names of the beneficiaries or the use of a
defined class of natural persons satisfies the requirement of
defining beneficiaries;
16.1.9.3. a use of a formula for calculating entitlement satisfies the need
for defining proportion of benefit and only the trustee must have
discretion on the above-mentioned terms; and
16.1.9.4. on winding-up or termination of the trust, all accumulated
Economic Interest must be transferred to the beneficiaries or to
an entity representing the interest of the participants or class of
beneficiaries.
16.1.10. The provisions relating to Trusts do not apply to any Trusts registered prior
to the gazetting of the Defence Sector Code.
16.1.11. The decisions of Black owners of equity interests to sell, transfer, alienate
or otherwise dispose of their Equity Interest in any Enterprise shall not affect
the obligation of such Enterprise to at all times fully comply with the
ownership targets in this Sector Code.
16.1.12. When determining ownership in a Measured Entity, ownership held by
Organs of State or State-Owned Enterprises must be excluded.
16.1.13. Exclusion of Ownership held by the Organs of the State or State-Owned
Enterprises is to be effected before any other Ownership discounting
methods are to be applied.
16.1.14. In calculating the Ownership score, Measured Entities must apply the
Exclusion Principle to any portion of their Ownership held by Organs of
State or State-Owned Entities.
16.1.15. The provisions of paragraphs 16.1.8 to 16.1.10 shall not apply to Organs of
State or State-Owned Entities that are B-BBEE Facilitators during the
relevant period of measurement. Such exemption applies only to the
Ownership Element and such Organs of State and Public Entities who are
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STAATSKOERANT, 12 APRIL 2019 No. 42391 55
B-BBEE Facilitators must comply with all other provisions of this Sector
Code.
16.1.16. Notwithstanding any other provision in this Sector Code, Organs of State
and Public Entities may, taking into consideration the objectives of this
Sector Code, introduce restrictions on or exclude Measured Entities from
tendering or doing business with them if they do not comply with the
ownership targets set out in paragraph 16.1.1 hereof.
16.1.17. EQUITY EQUIVALENTS
16.1.17.1. Examples of Equity Equivalents shall include, but not be limited to: –
16.1.17.1.1. skills transfer programmes aimed at building the capacity
of Black people to participate in the defence industry;
16.1.17.1.2. technology transfer programmes intended to increase the
participation of Black people in the defence industry;
16.1.17.1.3. programmes that promote economic growth and
employment creation through the development of
technological innovation beyond the Multinational's core
business activities;
16.1.17.1.4. supplier-development and any other interventions targeted
at reducing the overreliance of the South African defence
industry on Foreign Enterprises;
16.1.17.1.5. programmes in line with applicable programmes in South
Africa that were initiated to increase the manufacturing
capacity of the economy;
16.1.17.1.6. programmes of the defence industry that are in place to
facilitate the skills and technology transfer to South African
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56 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
enterprises in general and black-owned enterprises in
particular; and
16.1.17.1.7. programmes aimed at building the capacity of Black
Designated Groups to participate meaningfully in the SADI
value chain.
OWNERSHIP SCORECARD
B-BBEE Indicator Description Weighting Compliance Target
Element Points
Year 1 Year 2 Year 3
1.1 Exercisable Voting
Rights in the
measured Entity 4 25% 30% 35%
in the hands of
1. Voting Black people.
Rights 1.2 Exercisable Voting
Rights in the
Measured Entity 2 10% 15% 15%
in the hands of
Black Women.
2.1 Economic Interest
in the Measured
Entity to which 4 25% 30% 35%
Black people are
entitled.
2.2 Economic Interest
in the Measured
Entity to which 2 10% 15% 15%
Black women are
Ownership 2. Economic entitled.
Interest Economic Interest of any of the following Black natural people in the
Measured Entity
2.3.1 Black Military 4 3%
Veterans.
2.3.2 Black people in
Broad-based
Ownership
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STAATSKOERANT, 12 APRIL 2019 No. 42391 57
2.3.3 Black New 1 2%
Entrants
3. Realisation Net Value 8
Points
TOTAL 25 points
16.2. MANAGEMENT CONTROL
16.2.1. The objective of Management Control is that Black people should be
actively involved in making strategic decisions, proportionate to their
Economic Interest in the board of directors of the Measured Entity and in
the various levels of management. This means participation at the following
levels:
16.2.1.1. Proportional representation at the non-executive and executive
board level that is geared to give strategic direction to the
Measured Entity, without restrictions that may be linked to the
indebtedness of the shareholders they represent, even if this
indebtedness arises out of financing the acquisition of the
shareholding that necessitated their board participation; and
16.2.1.2. Executive management – including key strategic positions that
could include Chief Executive Officer, Chief Operating Officer,
and Chief Financial Officer among others, that is accompanied
with the requisite executive powers to make decisions, including
budget allocation and deployment, staff appointment and such
powers as are ordinarily exercised within corporations by
persons occupying such positions.
16.2.2. These positions should not be subject to any restrictions that are out of the
ordinary nor token positions specifically created for Black executives.
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58 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
16.2.3. The gazetting of the Defence Sector Code shall not affect the obligation of
a designated employer’s obligation to comply with the Employment Equity
Act and Regulations as amended from time to time.
16.2.4. BOARDS
16.2.4.1. Large Measured Entities commit to achieve the following targets on their
boards of directors: –
16.2.4.1.1. 50% Black representation within the first year of the
promulgation of the Sector Code increasing to 60% (sixty)
per cent by the third anniversary of the promulgation; and
16.2.4.1.2. 25% Black female within the first year of the promulgation
of the Sector Code increasing to 30% (thirty) per cent by
the third anniversary of the promulgation and after the
promulgation of the Sector Code.
16.2.5. EXECUTIVE MANAGEMENT
16.2.5.1. Measured Entities commit to achieve the following targets:
16.2.5.1.1. 60% Black executive directors; and
16.2.5.1.2. 30% Black female executive directors.
16.2.6. The compliance target for senior, middle and junior management in the
Management Control Scorecard are based on the national and regional
demographic representation of Black people as defined in the Regulations
of the Employment Equity Act No. 55 of 1998 as amended from time to time.
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STAATSKOERANT, 12 APRIL 2019 No. 42391 59
16.2.7. In determining a Measured Entity’s Score, the targets should be further
broken down into specific criteria according to the different race sub -
groups within the definition of Black in accordance with the Employment
Equity Act on an equitable representation and weighted accordingly.
MANAGEMENT CONTROL SCORECARD
B-BBEE Indicator Description Weighting Compliance
Element Points Target
Year Year
1-2 3
1.1. Exercisable voting 2 50% 60%
rights of Black
board members as
a percentage of all
board members
1.2. Exercisable voting 1 30% 30%
rights of Black
Military Veterans
board members as
a percentage of all
board members
1.3. Exercisable voting 1 25% 30%
rights of Black
female board
1. Board
members as a
Participation
percentage of all
board members
Management 1.4. Black Executive 1 50% 60%
directors as a
Control
percentage of all
executive directors
1.5. Black female 1 25% 30%
Executive directors
as a percentage of
all executive
directors
2.1. Black Executive 2 60% 60%
Management as a
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60 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
2. Other percentage of all
Executive executive
Management management
2.2. Black female 1 30% 30%
Executive
Management as a
percentage of all
executive
management
3. Senior 3.1. Black employees in 2 60% 60%
Management Senior
Management as a
percentage of all
senior Management
3.2. Black female 1 30% 30%
employees in
Senior
Management
4. Middle 4.1. Black employees in 2 75% 80%
Management Middle
Management as a
percentage of all
Middle
Management
4.2. Black female 1 38% 40%
employees in
Middle
Management as a
percentage of all
Middle
Management
5. Junior 5.1. Black employees in 1 88% 90%
Management Junior Management
as a percentage of
all Junior
Management
5.2. Black female 1 44% 45%
employees in
Junior Management
as a percentage of
all junior
management
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STAATSKOERANT, 12 APRIL 2019 No. 42391 61
6. Employees Black employees with 2 2% 3%
with disabilities as a
disabilities percentage of all
employees
TOTAL 15 points
16.3. SKILLS DEVELOPMENT
16.3.1. The shortage of technical and critical skills is one of the major challenges
in the SADI which negatively impacts on the ability of the industry to grow.
This shortage is a direct result of the historical exclusion of Black people
from acquiring such skills. If the SADI is to play its vital role in the re-
industrialization of the South African economy, structured and strategic
interventions are needed for the acquiring of critical and Scarce Skills. Skills
Development initiatives must focus on Scarce Skills including those related
to the generation and development of new knowledge that could be
deployed to increase the participation of black persons in the expansion
and operation of Strategic Enterprises and retention of Sovereign
Capabilities in the SADI.
16.3.2. Every Measured Entity therefore commits to spend 6% (six) per cent of their
annual payroll on skills development programmes for Black persons.
16.3.3. Measured Entities must not count the same Black persons under more than
one category as contained in paragraphs 2.1, 2.2 and 2.3 of the Skills
Development Scorecard respectively, for the purpose of skills development.
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62 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
SKILLS DEVELOPMENT SCORECARD
B-BBEE Indicator Description Weighting Compliance
Element Points Target
1.1. Skills Development 5 6%
expenditure on
Learning
1. Skills Programmes for
Development Black people as a
Expenditure percentage of
Leviable Amount
on any
programme
1.2. Skills Development 2 0,3%
specified in
Expenditure on
the Learning
Learning
Programme
Programmes for
Matrix for
Black employees
Black people
with disabilities
as a
percentage of 1.3. Skills Development 3 1%
Skills
the Leviable Expenditure on
Development
Amount Learning
Programmes for
Black Military
Veterans
2.1. Number of people 3 3%
from Black
Designated Groups
participating in
Learnerships,
Apprenticeships and
Internships as a
percentage of
2. Learnerships,
number of
Apprenticeshi
employees
ps and
Internships
2.2. Number of Black 3 2.5%
people participating
in Learnerships,
Apprenticeships and
Internships as a
percentage of
number of
employees
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STAATSKOERANT, 12 APRIL 2019 No. 42391 63
2.3. Number of Black 4 2.5 %
unemployed people
or students
participating in
Learnerships,
Internships ad
Apprenticeships
participating in
training as a
percentage of
number of
employees
3. Bonus Points Number of previously
unemployed Black people
5 100%
absorbed by the Entity at
the end of the
Learnerships, Internships
and Apprenticeships
programme
TOTAL 20 Points
16.4. ENTERPRISE AND SUPPLIER DEVELOPMENT
16.4.1. The South African government focus areas for B-BBEE in the next 10 years
links to key government economic development strategies such as the
Defence Industry Strategy, Industrial Policy Action Plan (IPAP), the
Defence Industrial Participation Programme (DIPP), the National Industrial
Policy Framework (NIPF), the National Development Plan (NDP) and the
Black Industrialist Policy. Key aspects of all these strategies are the
promotion of entrepreneurship, focusing on businesses that result in job
creation, expanding business horizons by venturing into new fields,
operational excellence and risk taking. the dti’s Black Industrialists Policy
is also important in this regard. This emphasis is carried through to the
Generic Scorecard in which Enterprise and Supplier Development is a
priority element carrying the highest weighting. Most Black businesses are
SMME’s. Empowerment policies and practices should not only support
Exempted Micro Enterprises and Qualifying Small Enterprises but also
assist them to grow into Large Enterprises.
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64 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
16.4.2. The SADI is in a unique position to stimulate this growth and create new
businesses. Public Entities should take the lead in driving such changes.
The promotion of local content and stimulation of local manufacturing is also
to be encouraged through this Sector Code.
16.4.3. The aim of Enterprise and Supplier Development programmes is:
16.4.3.1. to strengthen local procurement in order to help build South
Africa’s industrial base in critical sectors of production and value
adding manufacturing, which are largely labour-intensive
industries;
16.4.3.2. to increase local procurement through capacity building
achieved by incentivising appropriate local supplier development
programmes by businesses supplying imported goods and
services; and
16.4.3.3. to actively support procurement from Black Owned QSEs and
EMEs by identifying opportunities to increase procurement from
local suppliers in order to support employment creation.
16.4.4. Stakeholders therefore commit themselves to the following:
16.4.4.1. ORGANS OF STATE AND PUBLIC ENTITIES
16.4.4.1.1. Public Entities and Organs of State shall be entitled to
implement Targeted Procurement for Black Owned
Enterprises.
16.4.4.1.2. Public Entities and Organs of State shall be entitled to require
that Measured Entities doing business with it, sub-contract a
minimum of 30 % (thirty) per cent of a contract to the following
entities that are at least 51% Black owned: –
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STAATSKOERANT, 12 APRIL 2019 No. 42391 65
• Exempted Micro Enterprises or Qualifying Small
Enterprises owned by Black females;
• Exempted Micro Enterprises or Qualifying Small
Enterprises owned by Black people;
• Exempted Micro Enterprises or Qualifying Small
Enterprises owned by Black Military Veterans;
• Exempted Micro Enterprises or Qualifying Small
Enterprises owned by Black youth; and
• Exempted Micro Enterprises or Qualifying Small
Enterprises by black people with disabilities.
16.4.4.1.3. Any Targeted Procurement shall not exceed 30% (thirty)
per cent of the total procurement budget of the Organ of
State or the Public Entity implementing such procurement
in the first year after the promulgation of the Defence
Sector Code, 35% (thirty-five) per cent in the second year
and 40% (forty) per cent in the third year.
16.4.4.2. PRIVATE SECTOR ENTERPRISES
16.4.4.2.1. Private sector enterprises must, in instances where it is feasible or where
it is required, sub-contract not less than 30% (thirty) per cent of any
contract exceeding an amount of R30,000,000 (thirty million Rand) to: –
• Exempted Micro - Enterprises or Qualifying Small Enterprises
owned by Black females;
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66 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
• Exempted Micro - Enterprises or Qualifying Small Enterprises
owned by Black people; and
• Exempted Micro - Enterprises or Qualifying Small Enterprises
owned by Black Military Veterans;
• Exempted Micro - Enterprises or Qualifying Small Enterprises
owned by young Black people.
All stakeholders undertake to use as a guide, the non-exhaustive list of Enterprise
Development and Supplier Development Contributions in Schedule 1 of this Sector
Code to meet the Enterprise and Supplier Development targets.
16.4.4.3. DEFENCE INDUSTRY ENTERPRISE AND SUPPLIER DEVELOPMENT
FUND
16.4.4.3.1. Stakeholders hereby agree to set up a Defence Industry Enterprise and
Supplier Development Fund. Such a Fund will be administered by the
Charter Council which may outsource the management of the Fund to
any entity with the requisite skills, experience and capacity subject to
such entity complying with the Charter Council’s directives and the aims
and objectives of this Sector Code.
16.4.4.3.2. The Defence Industry Enterprise and Supplier Development Fund shall
be utilised for Enterprise and Supplier Development Initiatives including
the following:
• To fund Black owned entities in the SADI;
• To engage in initiatives that promote manufacturing in the SADI;
• To fund innovative Black owned technology entities within the SADI
or whose products or services can be utilized by the SADI;
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STAATSKOERANT, 12 APRIL 2019 No. 42391 67
• To promote the development of intellectual property and
exploitation in the SADI by and in collaboration with Black people;
• To promote and fund the development and transfer of Sovereign
and Strategic capability and investing to ensure sustainability of
such capabilities in the SADI; and
• Through funding and other measures support the growth of Black
businesses within the SADI to compete internationally and promote
exports.
16.4.4.3.3. The Charter Council shall determine the method of operation of the
Enterprise and Supplier Development Fund and identify any additional
Enterprise and Supplier Development Initiatives to be funded by it.
16.4.4.3.4. All funding by the Enterprise and Supplier Development Fund shall be
by way of grants and related mechanisms.
16.4.4.3.5. The Charter Council shall ensure that costs for the administration and
management of the Enterprise and Supplier Development Fund does not
exceed 3% (three) per cent of the total income of the Fund in any
financial year.
16.4.4.3.6. All Measured Entities with the exception of Exempted Micro Enterprises
must contribute 1% (one) per cent of their Net Profit After Tax (NPAT) to
the Enterprise and Supplier Development Fund.
16.4.4.3.7. The Charter Council shall ensure that the Enterprise and Supplier
Development Fund shall be established not later that 12 (twelve) months
after the gazetting of this Sector Code.
16.4.4.3.8. Notwithstanding any provision to the contrary contained in this Sector
Code, no stakeholder shall be required to contribute to the Enterprise
and Supplier Development Fund in terms of paragraph 16.4.4.3.6 herein
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68 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
prior to the establishment of the Enterprise and Supplier Development
Fund.
16.4.4.3.9. Notwithstanding any provision to the contrary contained in this Sector
Code, in the period between the gazetting of this Sector Code and the
establishment of the Enterprise and Supplier Development Fund, the
annual value of Enterprise Development Contributions and Sector
Specific Programmes made by the Measured Entity shall be 2% (two)
per cent of NPAT. After the establishment of the Enterprise and Supplier
Development Fund, paragraph 4 of the Enterprise and Supplier
Development Scorecard dealing with contributions to the Enterprise and
Supplier Development Fund, shall be applicable.
16.4.4.4. FOREIGN ENTERPRISES
Foreign Enterprises shall place DIP contracts equivalent to seventy-five percent (75%)
of the total DIP obligation with local (South African) B-BBEE compliant suppliers
(Enterprises that are at least 25,1% owned by Black people and at least 25,1%
controlled by Black people) while at least twenty-five percent (25%) of this value shall
be placed with Enterprise and Supplier Development (ESD) beneficiaries.
ENTERPRISE AND SUPPLIER DEVELOPMENT SCORECARD
B-BBEE Indicator Description Weighting Compliance
Element Points Target
Enterprise 1. Preferential 1.1. B-BBEE 5 80%
and Supplier procurement Procurement
Development Spend from
all
Empowering
Suppliers
based on
the B-BBEE
Procurement
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STAATSKOERANT, 12 APRIL 2019 No. 42391 69
Recognition
Levels as a
percentage
of Total
Measured
Procurement
Spend.
1.2. B-BBEE 3 8%
Procurement
Spend from
all
Empowering
Suppliers
that are
Qualifying
Small
Enterprises
based on
the
applicable
BBBEE
Procurement
Recognition
Levels as
percentage
of Total
Measured
Procurement
Spend
1.3. B-B-BEE 4 15%
Procurement
Spend from
all
Exempted
Micro
Enterprises
based on
the
applicable
BBBEE
Procurement
Recognition
Levels as a
percentage
of Total
Measured
Procurement
Spend
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70 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
based on
the Total
Measured
Procurement
Spend
1.4. B-BBEE 9 40%
Procurement
Spend from
Empowering
Suppliers
that are at
least 51%
black owned
based on
the
applicable
BBBEE
Procurement
Recognition
Levels as a
percentage
of Total
Measured
Procurement
Spend
1.5. B-BBEE 4 12%
Procurement
Spend from
Empowering
Suppliers
that are at
least 30%
black
women
owned
based on
the
applicable
B-BBEE
Procurement
Recognition
Levels as a
percentage
of Total
Measured
Procurement
Spend
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STAATSKOERANT, 12 APRIL 2019 No. 42391 71
2. Bonus Points B-BBEE
Procurement Spend
from Designated
Group Suppliers 2 6%
that are at least
51% Black owned.
3. Supplier Annual value of all 6 1% NPAT
Development Supplier
Development
Contributions made
by the Measured
Entity as a
percentage of the
target
4. Enterprise Annual value of 4 1% NPAT
Development Enterprise
Development
Contributions and
Sector Specific
Programmes made
by the Measured
Entity as a
percentage of the
target
5. Enterprise & Annual 5 1% NPAT
Supplier Contributions to the
Development Enterprise and
Fund Supplier
Development Fund
6. Bonus Points 6.1 Bonus point for 1
graduation of
one or more
Enterprise
Development
beneficiaries to
graduate to the
Supplier
Development
level
6.2 Bonus point for 1
creating one or
more jobs
directly as a
result of
Supplier
Development
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72 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
and Enterprise
Development
initiatives by
the Measured
Entity.
6.3 Bonus points 2 75%
for discharging
DIP obligations
for benefit of
South African
Entities that are
25.1% Black
owned and
managed.
TOTAL
40 Points
16.5. LOCALISATION
16.5.1. One of the most important mechanisms for growing a sustainable defence
industry is the stimulation and expansion of South African enterprises and
improving their global competitiveness.
16.5.2. Stakeholders therefore commit to:
16.5.2.1. procure at least 60% of Defence Matériel from Local Enterprises;
16.5.2.2. provide support for and procurement from Local Enterprises that
manufacture Defence Matériel in South Africa; and
16.5.2.3. provide support for Local Enterprises that introduce new locally
developed technology that is not older than 24 (twenty-four) months in
the SADI.
16.5.3. In the event that it is not practically achievable to procure 60% of Defence
Matériel from Local Enterprises, Measured Entities doing business with
Organs of State and Public Entities must submit a written request for
exemption to Armscor or the Department of Defence as may be applicable
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STAATSKOERANT, 12 APRIL 2019 No. 42391 73
which may at their sole discretion exempt such Measured Entities from
compliance with this provision.
16.5.4. All Measured Entities that are granted an exemption must develop and
implement an Enterprise and Supplier Development plan in addition to any
other contributions in terms of the Enterprise and Supplier Scorecard in this
Sector Code.
16.5.5. Measured Entities that do not do business with Organs of State or Public
Entities may request such exemption from the dti which may at its sole
discretion exempt such Measured Entities from compliance with this
provision.
16.5.6. Any written request by a Measured Entity for exemption from compliance
with the provisions of paragraph 16.5.2.1 must be accompanied by the
following:
16.5.6.1. verifiable evidence that there is no existing local production of such
Defense Matériel;
16.5.6.2. evidence that importing Defense Matériel will further promote value-
added production within South Africa;
16.5.7. All Measured Entities that are granted an exemption must develop and
implement an Enterprise and Supplier Development plan in addition to any
other contributions in terms of the Enterprise and Supplier Scorecard in this
Sector Code.
16.5.8. Any Enterprise and Supplier Development plan that an exempted
Measured Entity develop in terms of paragraph 16.5.7, should include:
• Clear objectives
• Priority interventions
• Key performance indicators; and
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74 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
• A concise implementation plan with clearly articulated annual
milestones.
16.5.9. Measured Entities that are exempted in terms of this paragraph 16.5 and
are fully compliant with the Enterprise and Supplier Plan in terms of
paragraph 16.5.8 are deemed to have complied with the relevant provision
of the Localisation Scorecard and are therefore entitled to the 6 Weighting
Points.
LOCALISATION SCORECARD
B-BBEE Indicator Description Weighting Compliance
Element Points
Target
1. Procurement of Defence 6 60%
Matériel produced and/or
manufactured in South
Africa by Local
Enterprises.
Localisation
2. Procurement from Local 2 60%
Enterprises that
introduced new locally
developed technology in
the SADI that is not older
than 24 months.
3. Procurement of 2 60%
technologies that are
developed in South Africa
by Local Enterprises from
intellectual property
owned by such Local
Enterprises or
technologies that are
developed in South Africa
by Local Enterprises from
intellectual property
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STAATSKOERANT, 12 APRIL 2019 No. 42391 75
licensed thereto by Local
or Foreign Enterprises.
TOTAL 10 Points
16.6. SOCIO-ECONOMIC DEVELOPMENT
16.6.1. Measured Entities receive recognition for any Socio-Economic
Development Contributions that are quantifiable as a monetary value
using a Standard Valuation Method.
16.6.2. Socio-Economic Development Contributions of any Measured Entity are
recognizable annually.
16.6.3. No portion of the value of any Socio-Economic Development contribution
that is payable to the beneficiary after the date of measurement can form
part of any calculation under this statement.
16.6.4. Socio-Economic Development Contributions consist of monetary or non-
monetary contributions actually initiated and implemented in favour of
beneficiaries by a Measured Entity with the specific objective of
facilitating income generating activities for targeted beneficiaries.
16.6.5. The full value of Socio-Economic Development Contributions made to
beneficiaries is recognisable if at least 75% of the value directly benefits
Black people.
16.6.6. If less than 75% (seventy) per cent of the full value of Socio-Economic
Development Contributions directly benefits Black people, the value of
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76 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
the contribution made multiplied by the percentage that benefits people
are recognisable.
16.6.7. The following is a non-exhaustive list of Socio-Economic Development
Contributions:
16.6.7.1. grant contributions to beneficiaries of Socio-Economic Development
Contributions;
16.6.7.2. guarantees given or security provided for beneficiaries;
16.6.7.3. direct costs incurred by a Measured Entity in assisting beneficiaries;
16.6.7.4. overhead costs of a Measured Entity directly attributable to Socio
Economic Development Contributions; developmental capital
advanced to beneficiary communities;
16.6.7.5. preferential terms granted by a Measured Entity for its supply of goods
or services to beneficiary communities;
16.6.7.6. payments made by the Measured Entity to third parties to perform
socio-economic development on the Measured Entity’s behalf;
16.6.7.7. subject to paragraph 16.6.7.6. the maintenance by the Measured
Entity of a Socio-Economic development unit which focuses only on
support of beneficiaries and beneficiary communities;
16.6.7.8. providing training or mentoring of beneficiary communities by a
Measured Entity. Such contributions are measurable by quantifying
the cost of time (excluding travel or commuting time) spent by staff or
management of the Measured Entity in carrying out such initiatives. A
clear justification must support any claim costs incurred,
commensurate with the seniority and expertise of the trainer; and
16.6.7.9. maintaining a socio-economic development unit by the Measured
Entity. Only that portion of salaries and wage attributable to time spent
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STAATSKOERANT, 12 APRIL 2019 No. 42391 77
by the staff in, and the other expenses related to, promoting and
implementing socio-economic development constitute contributions.
SOCIO-ECONOMIC DEVELOPMENT SCORECARD
Criteria Weighting Compliance
Target
Points
1. Annual Value of all Socio-Economic
Contributions by the Measured Entity as 3 0.5% NPAT
a percentage of the target
2. Annual Value of all Socio-Economic
Contributions to Black Military/Veterans
2 0.5% NPAT
by the Measured Entity as a percentage
of the target
Total 5 points
16.6.8. MEASUREMENT OF SOCIO-ECONOMIC DEVELOPMENT
CONTRIBUTIONS
Socio- Economic Development Contributions are measured using the formula in the
Benefit Factor Matrix set out below.
BENEFIT FACTOR MATRIX
Qualifying Contribution type Contribution Amount Benefit
Factor
Grant and Related Contributions
Grant Contribution Full Grant Amount 100%
Direct Cost incurred in supporting Verifiable Cost (including 100%
socio-economic development, sector both monetary and non-
specific initiative or Qualifying Socio- monetary)
Economic Development
Contributions
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78 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
Discounts in addition to normal Discount Amount (in 100%
business practice supporting socio- addition to normal
economic development, sector business discount)
specific initiative or Qualifying Socio-
Economic Development
Contributions
Overhead Costs incurred in Verifiable Cost (including 80%
supporting socio-economic both monetary and non-
development, sector specific monetary)
initiative or Qualifying Socio-
Economic Contributions
Contributions made in the form of human resource capacity
Professionals services rendered at Commercial hourly rate of 80%
no cost supporting socio-economic professional
development, sector specific
initiatives or Qualifying Socio-
Economic Development
Contributions
Professional Services rendered at a Value of discount based 80%
discount supporting socio-economic on commercial hourly
development, sector specific rate of professional
initiatives or Qualifying Socio-
Economic Development
Contributions
Time of employees of Measured Monthly Salary divided by 80%
Entity productively deployed in 160
assisting beneficiaries and
supporting socio-economic
development, sector specific or
Qualifying Socio-Economic
Development Contributions
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STAATSKOERANT, 12 APRIL 2019 No. 42391 79
17. ELEMENTS OF THE DEFENCE SECTOR CODE: SPECIALISED DEFENCE
SECTOR SCORECARD FOR ORGANS OF STATE, PUBLIC ENTITIES
AND NOT FOR PROFIT COMPANIES
17.1. SPECIALISED SCORECARD
ELEMENT WEIGHTING CODE SERIES
REFERENCE
Management Control 20 points 200
Skills development 25 points 300
Enterprise and Supplier 50 points 400
Development
Socio-Economic Development 5 points 500
Localisation 10 points Paragraph 16.5 of
this Code
TOTAL 110 Points
17.2. MANAGEMENT CONTROL SPECIALISED SCORECARD
Measurement Category and Weighting Compliance targets
Criteria Points
Year Year Year
1 2 3
Board Participation
Exercisable voting rights of black board 2 50% 60% 70%
members as a percentage of all board
members
Exercisable voting rights of black female 1 25% 30% 40%
board members as a percentage of all
board members
Black Executive Directors as a 2 50% 60% 70%
percentage of all executive directors
Black female Executive directors as a 1 25% 30% 40%
percentage of all executive directors
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80 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
Other Executive Management
Black executive management as a 2 60% 65% 70%
percentage of all executive management
Black female executive management as 1 30% 40% 40%
a percentage of all executive
management
Senior Management
Black employees in senior management 2 60% 65% 70%
as a percentage of all senior
management
Black female employees in senior 1 30% 40% 40%
management as a percentage of all
senior management
Middle Management
Black employees in middle management 2 75% 80% 85%
as a percentage of all middle
management
Black female employees in senior 1 38% 40% 45%
management as a percentage of all
middle management
Junior Management
Black employees in junior management 2 88% 90% 90%
as a percentage of all junior
management
Black female employees in junior 1 44% 50% 55%
management as a percentage of all
junior management
Employees with Disabilities
Black employees with disabilities as a 2 2% 3% 5%
percentage of all employees
TOTAL 20 Points
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STAATSKOERANT, 12 APRIL 2019 No. 42391 81
17.3. SKILLS DEVELOPMENT SPECIALISED SCORECARD
Category Skills Development Weighting Compliance Target
Element points
Year Year Year
1 2 3
Skills Development Expenditure on any programme specified in the Learning
Programme Matrix for Black people as a percentage of the Leviable Amount
Skills Development Expenditure on
Learning Programmes specified in the 7 6% 6% 6%
Learning Programme Matrix for Black
people as a percentage of Leviable Amount
Skills Development Expenditure on
Learning Programmes specified in the 3 0.3% 0.3% 0.3%
Learning Programme Matrix for black
employees with disabilities as a percentage
of Leviable Amount
Skills Development Expenditure on
Learning Programmes for Black Military 2 2% 2% 3%
Veterans
Learnerships, apprenticeships and
internships
Number of Black people participating in
learnerships, apprenticeships and 6 2.5% 2.5% 2.5%
internships as a percentage of total
employees
Number of Black unemployed people or
students participating in training specified 7 2.5% 2.5% 2.5%
in the learning programme matrix as a
percentage of number of employees.
Bonus Points
Number of Black people absorbed by the
Measured Entity and Industry at the end of 5 100% 100% 100%
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82 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
the learnership/apprenticeship or internship
programme
TOTAL 25 Points
17.4. ENTERPRISE AND SUPPLIER DEVELOPMENT SPECIALISED
SCORECARD
Criteria Weighting Compliance targets
points
Year 1 Year 2 Year 3
PREFERENTIAL PROCUREMENT
B-BBEE Procurement
Spend from all
Empowering Suppliers
based on the B-BBEE
Procurement 5 80% 80% 85%
Recognition Level as a
percentage of Total
Measured
Procurement Spend
B-BBEE Procurement
Spend from all
Empowering Suppliers
that are Qualifying
Small Enterprises
based on the
4 15% 15% 20%
applicable B-BBEE
Procurement
Recognition Levels as
a percentage of Total
Measured
Procurement Spend
B-BBEE Procurement
Spend from all
Exempted Micro-
Enterprise based on
the applicable B-BBEE
5 15% 15% 20%
procurement
Recognition Levels as
a percentage of Total
Measured
Procurement Spend
B-BBEE Procurement
Spend from
Empowering Suppliers
that are at least 51% 11 40% 40% 45%
Black owned based on
the applicable B-BBEE
Procurement
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STAATSKOERANT, 12 APRIL 2019 No. 42391 83
Recognition Levels as
a percentage of Total
Measured
Procurement Spend
B-BBEE Procurement
Spend from
Empowering Suppliers
that are at least 30%
black women owned
based on the
5 12% 12% 12%
applicable B-BBEE
Procurement
Recognition Levels as
a percentage of Total
Measured
Procurement Spend
Bonus Points
B-BBEE Procurement
Spend from
Designated Group 2 2% 2% 2%
Suppliers that are at
least 51% black owned
SUPPLIER DEVELOPMENT
Annual value of all 2% of Net 2% of Net 2% of Net Profit
Supplier Development Profit After Tax Profit After Tax After Tax
Contribution made by (NPAT) or (NPAT) or (NPAT) or 0,2%
the Measured Entity as 0,2% Annual 0,2% Annual Annual
a percentage target 15 Revenue/ Revenue/Gros Revenue/Gross
Allocated s receipts/Discreti
budget/ Gross receipts/Discre onal spend
receipts/Discre tional spend
tional spend
ENTERPRISE DEVELOPMENT
Annual value of 1% of NPAT 1% of NPAT 1% of NPAT or
Enterprise or 0.1% or 0.1% 0.1% Annual
Development Annual Annual revenue/Allocat
Contributions and revenue/Alloca revenue/Alloca ed budget/
Sector Programmes 5 ted budget/ ted budget/ Gross receipts/
made by Measured Gross Gross Discretional
Entity as a percentage receipts/ receipts/ spend
of the target Discretional Discretional
spend spend
Bonus Points
Bonus point for
graduation of one or
more Enterprise
Development
beneficiaries to
graduate to the
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84 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
Supplier Development
level.
Bonus point for
creating one or more
jobs directly as a result
of Supplier
Development and 1
Enterprise
Development
initiatives by the
Measured Entity
TOTAL 50 Points
17.5. SOCIO-ECONOMIC DEVELOPMENT SPECIALISED SCORECARD
Weighting Compliance Target
Points
Year 1 Year2 Year3
Annual value of all Socio- 5 1% of NPAT 1% of NPAT 1% of NPAT
Economic Development OR 0,1% OR 0,1% OR 0,1%
contributions by the Annual Annual Annual
Measured Entity as a Revenue/ Revenue/ Revenue/
percentage of the target Allocated Allocated Allocated
budget/ Gross budget/ Gross budget/ Gross
receipts/ receipts/ receipts/
Discretional Discretional Discretional
spend spend spend
TOTAL 5 Points
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STAATSKOERANT, 12 APRIL 2019 No. 42391 85
17.6. LOCALISATION SPECIALISED SCORECARD
B-BBEE Description Weighting Compliance
Element Points
Target
Year Year Year
1 2 3
Localisation Procurement of Defence 6 60% 60% 60%
Matériel produced and/or
manufactured in South
Africa by Local Enterprises.
Procurement from local 2 60% 60% 60%
enterprises that introduce
new locally developed
technology in the SADI that
is not older than 24
months.
Procurement of 2 60% 60% 60%
technologies that are
developed in South Africa
by Local Enterprises from
intellectual property owned
by such Local Enterprises
or technologies that are
developed in South Africa
by Local Enterprises from
intellectual property
licensed thereto by Local or
Foreign Enterprises.
TOTAL 10 points
18. ELEMENTS OF THE DEFENCE SECTOR CODE: THE QUALIFYING SMALL
ENTERPRISES DEFENCE SCORECARD
18.1. QSE SCORECARD
The following table represents and contains the Elements of the scorecard and the
weighting for each element:
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86 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
ELEMENT WEIGHTING
Ownership 25 points
Management Control 15 points
Skills Development 25 points
Enterprise and Supplier Development 30 points
Localisation 10 points
Socio-Economic Development 5 points
TOTAL 110 Points
The Weighting in respect of any elements in the scorecard represents the maximum
number of points possible for each of the criteria
Any matter concerning the application of the QSE Scorecard that is not dealt with
explicitly in this Sector code must be dealt with in terms of the Codes.
18.2. THE QUALIFYING SMALL ENTERPRISES OWNERSHIP SCORECARD
Category and Ownership Weighting Compliance Table
Indicator Points Year 1 Year 2 Year 3
Voting rights
Exercisable Voting Rights in the
Enterprise in the hands of Black 5 25% 30% 35%
people
Exercisable Voting Rights in the
Enterprise in the hands black 2 10% 15% 15%
women
Economic Interest 25% 30% 35%
Economic Interest of Black people
5 25% 30% 35%
in the Enterprise
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STAATSKOERANT, 12 APRIL 2019 No. 42391 87
Economic Interest of black
2 10% 15% 15%
women in the Enterprise
New Entrants or Black
3 2% 3% 5%
Designated Groups
Realisation Points
Net Value 8 Refer to
Annexure
100 (E) of
the
Generic
Scorecard
TOTAL 25 Points
18.3. THE QUALIFYING SMALL ENTERPRISE MANAGEMENT CONTROL
SCORECARD
Criteria Weighting Compliance Target
points Year 1 Year 2 Year 3
Executive Management
Black representation at 5 50% 50% 60%
Executive Management
Black female representation at 2 25% 25% 30%
Executive Management
Senior, Middle and Junior
Management
Black representation at Senior, 6 60% 60% 70%
Middle and Junior
Management
Black female representation at 2 30% 30% 30%
Senior, Middle and Junior
Management
TOTAL 15 Points
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88 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
18.4. THE QUALIFYING SMALL ENTERPRISE SKILLS DEVELOPMENT
SCORECARD
Skills Development Element Weighting Compliance Target
points Year 1 Year 2 Year 3
Skills development expenditure on 16 3% 3% 4%
learning programs specified in the
learning programme matrix for Black
people as a percentage of leviable
amount
Skills development expenditure on 10 1% 1% 2%
learning programmes specified in
the learning programme matrix for
Black females as a percentage of
leviable amount
Skills development expenditure on 4 0.15% 0.15% 0.30%
learning programmes specified in
the learning programme matrix for
Black people with disabilities as a
percentage of leviable amount.
Bonus Points
Number of Black people absorbed 5 100% 100% 100%
by the measured entity and industry
at the end of the learning
TOTAL 30 Points
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STAATSKOERANT, 12 APRIL 2019 No. 42391 89
18.5 THE QUALIFYING SMALL ENTERPRISE AND SUPPLIER DEVELOPMENT
SCORECARD
Criteria Weighting Compliance targets
points Year 1 Year 2 Year 3
Preferential Procurement
B-BBEE Procurement Spend from 15 60% 60% 70%
all Empowering Suppliers based on
the B-BBEE Recognition Levels as a
percentage of Total Procurement
Spend
B-BBEE Procurement Spend from 4 15% 20% 30%
Empowering Suppliers that are at
least 51% black owned based
applicable B-BBEE Procurement
Recognition Levels as a percentage
of Total Measured Procurement
Bonus Points
B-BBEE Procurement Spend from 1 1% 1% 1%
Designated Group suppliers that are
at least 51% black owned based on
the B-BBEE Recognition Level
Supplier Development
Annual value of all Supplier 4 1% of
Development Contributions made by Net
the Measured Entity as a percentage Profit
of the target. After Tax
Enterprise development
Annual value of Enterprise 4 1%NPAT
Development Contribution and
Sector Specific Programmes made
by the Measured Entity as a
percentage of the target
Annual Contributions to the 3 1%NPAT
Enterprise and Development Fund
Bonus Points
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90 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
Bonus point for graduation of one or 1
more Enterprise Development
beneficiaries to graduate to the
Supplier Development level
Bonus point for creating one or more 1
jobs directly as a result of Supplier
Development and Enterprise
Development initiatives by the
Measured Entity
TOTAL 30 Points
18.6 THE QUALIFYING SMALL ENTERPRISE LOCALISATION SCORECARD
B-BBEE Indicator Description Weighting Compliance
Element Points Target
Defence Matériel
products and services
manufactured by 6 60%
procured from local
enterprises
Procurement from
local enterprises that
2 60%
introduce new locally
developed technology
in the SADI that is not
Localisation older than 24 months
Procurement of
technologies that are
developed in South
Africa by Local 2 60%
Enterprises from
intellectual property
owned by such Local
Enterprises or
technologies that are
developed in South
Africa by Local
Enterprises from
intellectual property
licensed thereto by
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STAATSKOERANT, 12 APRIL 2019 No. 42391 91
Local or Foreign
Enterprises.
TOTAL 10 Points
18.7. THE QUALIFYING SMALL ENTERPRISE SOCIO-ECONOMIC
DEVELOPMENT SCORECARD
Criteria Weighting Compliance Target
Points
Year Year Year
1 2 3
Annual value of all Socio-Economic
Development Contributions and Qualifying
Socio-Economic Development 1% 1% 1%
NPAT NPAT NPAT
Contributions made by the Measured
Entity as a percentage of the target
TOTAL 5 Points
19. DEFENCE SECTOR CHARTER COUNCIL
19.1. A Charter Council shall be established to oversee and monitor the
implementation of this Sector Code. The Charter Council shall be a
representative body comprising of stakeholders in the SADI and shall
comprise of not less than 5 members.
19.2. The Minister of Defence shall appoint the Charter Council after consulting with
the SADI Stakeholders.
19.3. The functions of the Charter Council shall include:
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92 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
19.3.1. providing guidance, clarification, support and assistance with
interpretation of this Sector Code;
19.3.2. liaising with all government departments, agencies and other relevant
Stakeholders for the purpose of facilitating the implementation of this
Sector Code and promote the SADI’s interests;
19.3.3. compiling an annual report on overall progress by the SADI with the
Defence Sector Code and submitting such report to any relevant
stakeholders including the Minister, the Minister of Defence, the B-BBEE
Commission and NDIC;
19.3.4. issuing implementation guidelines; and
19.3.5. initiating and supervising any revisions to this Sector Code.
19.4. The Charter Council shall have executive authority and shall be supported by
administrative staff.
19.5. The DOD shall be responsible for funding the operational expenses of the
Charter Council.
20. MONITORING AND EVALUATION
20.1. In order to ensure compliance with this Sector Code, all Measured Entities
shall annually provide a report to the Charter Council. The report must contain
a scorecard audited by an accredited verification agency where applicable and
a detailed report on progress with complying with the provisions of this Sector
Code.
20.2. The first annual report shall be filed not later than the first anniversary of the
promulgation of this Sector Code. The date for subsequent annual reports
shall be determined by the Charter Council.
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STAATSKOERANT, 12 APRIL 2019 No. 42391 93
21. REVIEW OF THE SECTOR CODE
This Sector Code may be reviewed in order to align it with any amendment to the Act
or the Codes or after the expiry of the 3rd anniversary of the promulgation of this Sector
Code or as when necessary.
22. EFFECTIVE DATE
The Sector Code shall come into effect on the date on which it is gazetted.
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94 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
SCHEDULE 1
1. LEGITIMATE ENTERPRISE AND SUPPLIER DEVELOPMENT
CONTRIBUTIONS
1.1. The following is a non-exhaustive list of Enterprise Development and Supplier
Development Contributions –
1.1.1. investment in beneficiary Entities;
1.1.2. loans made to beneficiary Entities; - guarantees given or security provided
on behalf beneficiaries; credit facilities made available to beneficiary
Entities grant Contributions to beneficiary Entities; direct costs incurred
by a measured Entity in assisting and hastening development of
beneficiary Entities; overhead costs of a Measured Entity directly
attributable to Enterprise Development and Supplier Development
Contributions preferential credit terms granted by a Measured Entity to
beneficiary Entities;
1.1.3. preferential terms granted by a Measured Entity in respect of its supply of
goods to beneficiary Entities;
1.1.4. contributions made to beneficiary to settling service costs relating to the
supply of goods or services to beneficiary Entities;
1.1.5. discounts given to beneficiary Entities in relation to the acquisition and
maintenance costs associated with the grant to those beneficiary Entities
of franchise, license, Agency, distribution or other similar business rights;
1.1.6. the creation or development of capacity and expertise for beneficiary
Entities needed to manufacture or produce goods or services previously not
manufactured, produces or provided in the Republic of South Africa is
provide for in Government’s economic growth and local supplier
development policies and initiatives ; facilitating access to credit for
beneficiary Entities without access to similar credit facilities through
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STAATSKOERANT, 12 APRIL 2019 No. 42391 95
traditional means owing to a lack of credit history, high-risk or lack of
collateral;
1.1.7. provision of training or mentoring by suitably qualified Entities or individuals
to beneficiary Entities which will assist the beneficiary Entities to increase
their operational or financial capacity;
1.1.8. the maintenance by the Measured Entity of an Enterprise Development and
Supplier Development unit which focuses exclusively on support of
beneficiary Entities or candidate beneficiary Entities;
1.1.9. provision of preferential credit facilities to a beneficiary by a Measured entity
may constitute an Enterprise Development and Supplier Development
Contribution. Examples of such contributions include without limitation;
1.1.10. provision of finance to beneficiary Entities at lower than commercial rates
of interest relaxed security requirement or absence of security requirements
for beneficiary Entities unable to provide security for loans; and settlement
of accounts with beneficiary Entities over a shorter period of time in relation
to the Measured Entity’s normal payment period, provided the shorter
period is no longer than 15 days.
1.1.11. providing training or mentoring to beneficiary communities by a Measured
Entity. Such contributions are measurable by quantifying the cost of time
(excluding travel or commuting time) spent by staff or management of the
Measured Entity in carrying out such initiatives. A clear justification,
commensurate with the seniority and expertise of the trainer or mentor,
must support any claim for time costs incurred). By the Measured Entity.
(only that portion of salaries and wages attributable to time spent by the
staff in, and the other expenses related to. Promoting or implementing
Enterprise Development and Supplier Development constitute
contributions; or
1.1.12. payments made by the Measured Entity to suitably qualified and
experienced third parties to perform Enterprise Development and Supplier
Development on the Measured Entity’s behalf.
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96 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
2. MONETARY AND NON-MONETARY CONTRIBUTIONS
2.1. Subject always to the definitions of qualifying Enterprise Development and
Supplier Development Contributions, the following monetary/non-monetary
contributions will, without limitation, be considered:
2.1.1. the provision of seed or development capital;
2.1.2. contributions made towards the settlement of the cost of services relating
to the operational or financial capacity and/or efficiency levels of a
Qualifying Enterprise Development and Supplier Development Beneficiary
including, without limitation;
2.1.3. professional and consulting services;
2.1.4. licensing and/or registration fees;
2.1.5. industry specific levies and/or other such fees;
2.1.6. IT services;
2.1.7. creation or development of capacity and expertise for Beneficiary Entities
to manufacture or produce goods and/or services previously not
manufactured, produced or provided in the Republic of South Africa;
2.1.8. facilitation of access to credit for Beneficiary Entities unable to access
similar credit facilities through traditional means owing to a lack of credit
history, high risk and/or lack of collateral;
2.1.9. provision of training and/or mentoring to Beneficiary Entities which will
assist the Beneficiary Entities to increase their operational and/or financial
capacity; and
2.1.10. the maintenance by the Measured Entity of an Enterprise Development and
Supplier Development unit which focuses exclusively on support of
Beneficiary Entities or candidate Beneficiary Entities or candidate
beneficiary Entities.
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STAATSKOERANT, 12 APRIL 2019 No. 42391 97
2.2. The creation and/or development of the capacity of Beneficiary Entities which
will enable them to manufacture and produce goods and/or provide services
previously not available in the Republic of South Africa, may constitutes a
Qualifying Enterprise development and Supplier Development contribution,
and will be measured as the rand value of monetary contributions made as
well as investments into, loans made to or guarantees given for a Beneficiary
Entity.
2.3. Provision of preferential credit facilities to a beneficiary Entity by a Measured
Entity may constitute a Qualifying Enterprise Development and Supplier
Development Contribution. Examples of such contributions include without
limitation–
2.3.1. provision of finance to Beneficiary Entities at rates of interest below the
applicable rate. Such contributions will be measured as the value of the
differential between the actual interest rate provided to the Beneficiary
Entity and the applicable rate;
2.3.2. relaxed security requirements or absence of security requirements for
Beneficiary Entities unable to provide security for loans. Such contributions
shall be measured as being 3% (three percent) of any positive differential
between the initial capital value of the loan and the value of security taken;
and
2.3.3. settlement of accounts with Beneficiary Entities over a shorter period of time
in relation to the Measured Entity’s normal payment period, provided that
the shorter period is no longer than 15 days. Preferential payment terms
which extend beyond 15 days will not qualify as Qualifying Enterprise
Development and Supplier Development Contributions. Provision of
training and/or mentoring to a Beneficiary Entity by a Measured Entity may
constitute a Qualifying Enterprise Development and Supplier Development
Contribution. Such contributions will be measured by quantifying the cost
of time spent by their staff or management of the Measured Entity in
carrying out such initiatives. Any travel or commuting time may not be
included in this cost. Furthermore, a clear justification must be supplied with
respect to the calculation of such time costs incurred, commensurate with
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98 No. 42391 GOVERNMENT GAZETTE, 12 APRIL 2019
the level of seniority and expertise of the trainer or mentor. Common forms
of such contribution include without limitation:
2.3.3.1. professional and consulting services;
2.3.3.2. IT services; and
2.3.3.3. any other services which help to increase the entity’s financial
and/or operational capacity and which have not also been
accounted for under skills development. The maintenance of an
Enterprise Development and Supplier Development unit by the
Measured Entity may constitute a Qualifying Enterprise
Development and Supplier Development Contribution. Common
examples of such contributions include without limitation the
salaries and wages of staff and other expenses involves in the
operation of such Enterprise Development and Supplier
Development unit. Notwithstanding the foregoing, only that portion
of salaries and wages which relate to time spent by the staff in the
other expenses related to the promotion and implementation of
Enterprise Development and Supplier Development in respect of
Beneficiary Entities or candidate Beneficiary Entities should be
taken into consideration under Enterprise Development and
Supplier Development contributions.
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Prohibition or Restriction of Certain Conventional Weapons Act, 2008
