Forest Sector B-BBEE Progress: 2015 Report to Portfolio Committee

1. FOREST SECTOR CHARTER COUNCIL B-BBEE Progress Report to the Portfolio Committee of Agriculture, Forestry and Fisheries 23 JUNE 2015 Mr Simangaliso Mkhwanazi (Executive Director)

2. PRESENTATION OUTLINE • Purpose • Forest Sector Profile • Forest Sector Charter • Forest Sector Charter Council • B-BBEE Transformation Status report • Medium & Large Enterprises (MLE) analysis • Qualifying & Small Enterprises (QSE) analysis • Exempted Micro Enterprises (EME) analysis • Challenges • Conclusion

3. PURPOSE • The presentation provides information on the progress and performance towards the implementation of B-BBEE (Broad based Black Economic Empowerment) in the Forestry sector and related industries. • The presentation also provides challenges in the implementation of B-BBEE in the Forestry sector and related industries.

4. Forest Sector Profile • Uses 1% of total land (1 273 357ha) • Employs about 146 000 in sawmilling, pulp & paper, timber boards, mining timber etc., (22.5% employment in Agriculture) • Provides about 850 000 livelihood support • Contributes 1% National GDP & 7.7% of manufacturing GDP • Production mainly on pulp & paper and sawmilling products • Derives 70%of revenue from exports (Reference: FSA Facts 2011/12)

5. Forest Sector Charter • Originates from the B-BBEE Act, No 53 of 2003 (now Amendment Act) • Launched in 2005, established a Steering Committee • 2005-2008 draft Charter developed by working groups & Steering Committee • FB-BBEE draft Charter gazetted for public comments in May 2008 • Published as a Sector Code in June 2009 • Revised in 2014, still awaiting gazetting

6. Forest Sector Charter (Continuation) • Main objective: “To extend the economic opportunities and benefits of the Forest Sector to the previously disadvantaged black groups”. • Scope of application • Growers • Contracting • Fibre • Sawmilling • Pole & • Charcoal

7. Forest Sector Charter Council (FSCC) • FSCC known as “Council”, launched in May 2008 & operating as a section 21 Company. • Main responsibilities: - To facilitate, oversee, encourage implementation of Charter - To monitor & report on the Charter Undertakings - To monitor & report on the Transformation Status - To publicize the Charter & • Participates in Government, Industry & Council forums & member of the Joint Technical Team (Dti initiative)

8. Forest Sector Charter Council (Continuation) • 3 strategic sessions, highlighting strategic objectives • Foresight exercise in 2011 to craft preferred future for the sector • 4 Quarterly meetings on a annual basis. • Reporting: • The President’s B-BBEE Advisory Council, • Minister of Trade & Industry & • Minister of Agriculture, Forestry & Fisheries. • Composition – 20 Board members & an Independent Chairperson

9. B-BBEE Status of Transformation • B-BBEE Status report: An annual report on scorecard implementation & performance • Objective: Assess the status of transformation in the Forest sector • Scorecard seven (7) elements • Ownership (O) • Management Control (MC) • Employment Equity (EE) • Skills Development (SD) • Preferential procurement (PP) • Enterprise Development (ED) • Socio-economic Development (SED)

10. B-BBEE Status of Transformation • Measured entities are: • Medium & Large Enterprises (MLE,˃ R35M turnover), • Qualifying Small Enterprises (QSE, R5M-R35M turnover), & • Exempted Micro Enterprises (EME˂ R5M) • Medium and Large enterprises (MLE) scored on 7 elements • Qualifying Small Enterprises (QSE) scored on any 4 element • Exempted Micro Enterprises (EME) automatically level 4 status (level three if compliance with Codes of Good conduct) • Fifth (5th) Transformation status report completed

11. B-BBEE Status of Transformation • Certificates with underlying information collected • Information gathered analysed • Analysis based on size of enterprise • Medium & Large Enterprises (MLE,˃ R35M turnover), • Qualifying Small Enterprises (QSE, R5M-R35M turnover), & • Exempted Micro Enterprises (EME˂ R5M) • Further Sub-sector analysis: • Results compared to KPMG report (NB:KPMG report- an annual survey which aims to provide a tool to benchmark B-BBEE implementation progress)

12. B-BBEE Status of Transformation • MLE analysis: Ownership

13. B-BBEE Status of Transformation • MLE analysis: Management Control

14. B-BBEE Status of Transformation • MLE analysis: Employment Equity

15. B-BBEE Status of Transformation • MLE analysis: Skills Development

16. B-BBEE Status of Transformation • MLE analysis: Preferential Procurement

17. B-BBEE Status of Transformation • MLE analysis: Enterprise Development

18. B-BBEE Status of Transformation • MLE analysis: Socio-Economic Development

19. B-BBEE Status of Transformation • QSE analysis: Ownership

20. B-BBEE Status of Transformation • QSE analysis: Management Control & Employment Equity

21. B-BBEE Status of Transformation • QSE analysis: Skills Development & Preferential Procurement

22. B-BBEE Status of Transformation • QSE analysis: Enterprise Development & Socio- economic Development

23. B-BBEE Status of Transformation

24. B-BBEE Transformation Status • Sector achieved a level four (4, 66.5 points ) status, (a level increase from previous year, level 5) • Four of the seven scorecard elements recorded an improvement, Ownership (61%), Employment Equity (40%), Skills Development ( 51%) & Enterprise Development (98%) • Low performance on the Ownership element’s designated groups • Management Control & Employment Equity struggle to move beyond 50% of target

25. B-BBEE Transformation Status • Black women representation as directors and executives limited • Skills Development performance above KPMG target but still needs to improve • Consistent & excellent performance in Enterprise development (98%), Preferential Procurement (77%) & Socio- Economic Development (156%) • QSE’s achieved 80%+ of target, except in Skills Development • QSE’s maintained level 3 status • EME’s maintained level 4 status (65% of EME white managed)

26. B-BBEE Transformation Status Challenges • Verification using generic scorecard - matter to be addressed through Joint Technical Committee- Dti and New Codes,all enterprises falling within a sector that has sector code must be verified under Sector Code • Inaccurate database - addressed through organised sub sector associations and updating database • Level of awareness- an intensified awareness programme to be undertaken • Some entities without B-BBEE certificates - addressed in the new Codes, all enterprises falling within a sector that has sector code must be verified under a Sector Code

27. Conclusion • Reporting entities numbers improved from 26 in 2010 to 77 in 2014 • Average performance in Ownership • Sector performing well in Enterprise development, Socio-economic Development and Preferential Procurement (though sector specific guidelines need to be developed) • More improvement required in Employment Equity & Management Control

28. Conclusion (Continuation) • More efforts to be channelled on under represented sub sectors, Qualifying Small Enterprises & Exempted Micro Enterprises (Better enforcement measures) • Delivery on industry and government undertakings necessary to enhance transformation in Forest Sector • Mandate of Council to be strengthen (such as actual visits to enterprises, monitoring and audits)

29. THANK YOU