Acts Online
GT Shield

Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Industry Charters

Financial Services  Charter

Code Series FS500: The Measurement of the Procurement Element of Broad-Based Black Economic Empowerment

3. Key Measurement Principles


3.1 Subject matter of this paragraph: This paragraph relates to the following statements within the CoGP:


3.1.1 Code 500 Statement 500; and


3.1.2 Code 800 Statement 805.


3.1.3 All goods and services procured by the Measured Entity, other than any portion specifically excluded under this statement, is measurable in calculating its Total Measured Procurement Spend.


3.1.4 If a Measured Entity procured goods and services from a supplier that is: A recipient of Enterprise Development contributions from the Measured Entity under Code series FS600, the recognisable B-BBEE Procurement spend that can be attributed to that supplier is multiplied by a factor of 1.25; and A Value-adding supplier, the recognisable B-BBEE Procurement spend, which can be attributed to that supplier, is multiplied by a factor of 1.20.


3.1.5 This statement applies to all areas of Procurement.


3.1.6 Black Owned Professional Service Providers and Black Owned Entrepreneurs: A key intention of this statement is to promote the use of Measured Entities, of these types of service providers as suppliers. Black Owned Professional Service Providers and Black Owned Entrepreneurs that comply with all the elements of the scorecard (i.e. score points in all elements of the scorecard):
Qualify for recognition in all three criteria in the Preferential Procurement scorecard; and
Qualify as Value-adding Suppliers.


3.2 Applicability of the CoGP: The provisions and principles contained in the relevant statements apply to all financial institutions, subject to the following variations:


3.2.1 The following procurement is measured within the Total Measured Procurement Spend: Cost of sales: all goods and services procured that comprise cost of sales. Operational expenditure: all goods and services procured that comprise operational expenditure. Capital expenditure: all capital expenditure. Discretionary Stock Brokering Spend: discretionary stock-brokering spend procured by investment managers on behalf of clients, regardless of whether this spend is recorded in the financial statements of the investment manager. Public Sector Procurement: all goods and services procured from organs of state and public entities listed in schedule 2 and 3 of the Public Finance Management Act, No. 1 of 1999. Third-party Procurement: all procurement for a third-party or client where the cost of that procurement is recorded in the measured entity's financial statements Labour brokers and independent contractors: any procurement that is outsourced labour expenditure. Pension and medical aid administration payments: payments paid to any post-retirement funding scheme or to a medical aid scheme or similar medical insurer, for its employees, excluding any portions of such contributions to a capital investment of the employee. Trade Commissions: any commission or similar payments payable to any other third-party pursuant to the business or trade of the Measured Entity. Insurance broker and intermediary commissions are excluded.


3.2.2 Empowerment-related expenditure: all goods and services procured in carrying out B-BBEE. The Total Measured Procurement spend does not include the actual contribution as specified in the Codes for Enterprise Development, Socio-economic Development and Empowerment Financing, but does include expenditure incurred in facilitating that expenditure. Imports: all goods and services that are imported or procured from a non-South African source; and Intra-group expenditure: except as provided for in Statement 002, all goods and services from subsidiaries or holding companies of the Measured Entity, except where the group is undertaking a consolidated scorecard.


3.3 Exclusions from Total Measured Procurement Spend:


3.3.1 Taxes and levies: any amount payable that represents a lawful tax or levy imposed by an organ of state authorised to impose such levy, including rates imposed by a municipality or other local government;


3.3.2 Property expenditure: Any amounts payable in consideration for property acquisitions or rentals where the financial institutions hold such property interests as an investment, on behalf of a third party, rather than for operational purposes;


3.3.3 Salaries, wages, remunerations and emoluments: Any amount payable to an employee as an element of their salary or wages or similar payment made to a director of a Measured Entity;


3.3.4 Pass-through third-party procurement: all procurement for a third-party or a client, where the cost of that procurement is recorded in the third-party or client's annual financial statements, but is not recorded in the Measured Entity's annual financials.


3.3.5 Empowerment related procurement: Investments in or loans to an Associated Enterprise;


3.3.6 Imported capital goods or components for value-added production in South Africa provided that: There is no existing local production of such capital goods or components; and Importing such capital goods or components promotes further value-added production within South Africa.


3.3.7 Imported goods and services if there is no local production of such goods or services. The following can be grounds, but not the sole grounds, for exclusion of imported goods and services from Total Procurement Spend: Where the imported goods or services carry a brand different from the locally produced goods or services; or Where the imported goods or services have different technical specifications from the locally produced goods or services;


3.3.8 Broker commissions and commissions paid to insurance intermediaries;


3.3.9 Reinsurance premiums;


3.3.10 Any items of procurement where the supplier is imposed in terms of a Global Policy for technical (but specifically not commercial) reasons;


3.3.11 Inter-entity charges for services rendered by other members of the group that are not measured separately in terms of this Code.


3.4 Financial institutions acknowledge that the specific exclusions referred to in paragraphs to are specific benefits included in this Code to the advantage of the financial sector only. Accordingly, financial institutions must at all times include within their portfolio of Enterprise Development programmes, initiatives targeting Black Owned property, brokerage and insurance intermediary businesses.