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COMMENTS ON THE BROADBASED BLACK ECONOMIC EMPOWERMENT (“BBBEE”) AMENDMENT BILL 2012 (“THE BILL”) PowerPoint Presentation
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COMMENTS ON THE BROADBASED BLACK ECONOMIC EMPOWERMENT (“BBBEE”) AMENDMENT BILL 2012 (“THE BILL”)

COMMENTS ON THE BROADBASED BLACK ECONOMIC EMPOWERMENT (“BBBEE”) AMENDMENT BILL 2012 (“THE BILL”)

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COMMENTS ON THE BROADBASED BLACK ECONOMIC EMPOWERMENT (“BBBEE”) AMENDMENT BILL 2012 (“THE BILL”)

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  1. COMMENTS ON THE BROADBASED BLACK ECONOMIC EMPOWERMENT (“BBBEE”) AMENDMENT BILL 2012 (“THE BILL”) • Avoiding unsustainable BBBEE deals • Repeat offenders undermining the system: stopping the leakage of empowerment • Legal form and terms • Important words

  2. 1. AVOIDING UNSUSTAINABLE BBBEE DEALS • Para 8.7: An example: Some BBBEE deals are over-valued (shares overpriced) and vendor financed at inflated prices in respect of the interest rate charged, for no legitimate reason and there is no significant discount applied to benefit the BBBEE partner • No apparent flow of benefits for BBBEE • Result is that after a period of time it is effectively ‘warehousing BBBEE’- at the end of ‘lock-in period’ there has been no unencumbered ownership transfer • The vendor has earned points and the BBBEE partner has gained nothing

  3. 1. AVOIDING UNSUSTAINABLE BBBEE DEALS (continued) • Legal, financial and other advisors have earned massive fees, with financiers adding margins because it is a BBBEE deal and control cash flows • Financial institutions and vendors should not be the main beneficiaries of BBBEE transactions • In these kinds of bad deals, broadbased groups have no resources to access advisors in order to have the ability to scrutinise these deals and they are exploited • Remedy this under Section 13G in respect of definitive reporting to facilitate transparency, change of behaviour and punitive measures to address this

  4. 1. AVOIDING UNSUSTAINABLE BBBEE DEALS (continued) Companies reporting as per Section 13G should be compelled to show: • Unencumbered ownership transfer to BBBEE partner • Change in asset and debt value in the company • Economic value transfer • Dividend/cash flow to BBBEE partners that is unencumbered • Meaningful economic participation of BBBEE partners

  5. 2. REPEAT OFFENDERS UNDERMINING THE SYSTEM: STOP THE LEAKAGE OF EMPOWERMENT Paras 8-8.6: This addresses an issue wider than the Bill • What can be implemented in respect of the Bill that keeps track of BBBEE malpractice where tenders are concerned? • We suggest a ‘blacklist’ database and a centre of skill attached to the BBBEE Commission • The database would have a ‘look-through’ mechanism to show ownership structures, reflecting actual shareholders and beneficiaries

  6. 2. REPEAT OFFENDERS UNDERMINING THE SYSTEM: STOP THE LEAKAGE OF EMPOWERMENT (continued) • This database will capture and identify repeat offenders who have committed fraud, fronting, corrupt practices and poor/no delivery • Each time a person tenders, they should provide a certificate that shows ‘a clean bill of health’ like SARS’ tax clearance certificate required in tenders • The Commission will receive complaints and be able to know which persons are involved in prior poor performance to other state entities and persons adversely impacting the equitable objects of the Bill

  7. 3. LEGAL FORMS AND TERMS • Para 6: Our emphasis here is on strong accountability measures that should be put in place and these are detailed in our submission • The Commission is a regulating entity and not a business that trades • We are of the view that 3 year terms rather than 5 year terms should be implemented for the Commissioner, Deputy Commissioner and Special Committee Members of the Commission, subject to yearly reviews by the Minister in order to have accountability and good governance • Section 13E focuses attention on legitimacy

  8. 4. IMPORTANT WORDS Para 1: Inclusion of the word ‘sustainable’ in Section 1(c) of the Bill • The word ‘viable’ means capable of working successfully • The word ‘sustainable’ means able to be maintained at a certain rate or level • Our emphasis is on long-term growth opportunities hence the word ‘sustainable’ and not just short term (e.g. for 1 year) gains or opportunities that can also be described as ‘viable’ • Therefore, long-term sustainable empowerment that is viable is critical to BBBEE

  9. 4. IMPORTANT WORDS (continued) Para 1: Inclusion of the word ‘reasonable’ in Section 4 of the Bill • We have included the word ‘reasonable’ as a measure of good governance in the current economic environment in South Africa • This will be inclusive of accountability and transparency whereby Council members will be reimbursed for fair and sensible expenses that they incur in carrying out of their duties

  10. PEOTONA GROUP HOLDINGS (PTY) LTD • Peotona was established in 2005 by four like-minded business women, who came together to form a strong, new player in the South African business landscape – a company based on the principles of innovation, integrity, long-term vision and commitment. Peotona was established not just to create wealth and ownership by women but holistic empowerment. • Between 60% and 70% of the value of all transactions concluded by Peotona to date have been allocated to either Peotona Development or ring-fenced Community Trusts. Returns from these investments are in turn applied to sustainable enterprise development, community projects, the improvement of education and/or the upliftment of disadvantaged groups, for the benefit of communities associated with our investee companies. We also have a mentorship programme that is growing in empowerment and success. • We as Peotona strongly believe in the objectives of the BBBEE Act and the Amendment Bill in order to facilitate the sustainable growth of BBBEE entities like ourselves by ensuring their meaningful economic participation from the commencement of the BBBEE transactions including the sustainable growth of such entities. The DTI certainly needs to continue its leadership role in championing equitable BBBEE.

  11. PEOTONA THANK YOU