the fsc journey summary of the new fsc codes · 2 status of the revised fsc codes • the amended...
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Copyright ©Alternative Prosperity Advisory and Products (Pty) Ltd, 2015
THE FSC JOURNEY
SUMMARY OF THE NEW FSC CODES
31 January 2017Sandton, Jhb
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Status of the Revised FSC Codes
• The amended codes has gone through public comment, been approved by the Minister of Finance and is pending 9(1) Gazette.
• A meeting was held between the council and DTI on 24/1/2017 to resolve some final issues referred to on the next slide, as well as deal with potential issues raised by the BEE Commissioner’s office.
• All guidance notes have been prepared and are pending publication. Revisions to Life and STI access guidelines are well progressed but still to be finalized.
• Reports for the measurement periods 31/12/2014 and 31/12/2015 have been prepared by council and should be published shortly.
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General Comments (1)
• Ownership exit rules as well as empowerment financing rules create a significant potential catalyst for black business growth (R100b in potential funding).
• Shareholders in Banks, Life Offices and Short term insurers have practical funding options on exit of empowerment partners. Exchanges and members thereof still under discussion.
• Stand alone asset managers and other industry players are likely to be subject to generic code rules on exit of empowerment shareholders. (discussions with DTI ongoing)
• The revised profit benchmark (previous year profits), has been questioned by DTI and is thus now under discussion. This is unfortunate for beneficiaries of industry programs.
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General Comments (2)
• A QSFI (small business ) scorecard is included. Relative to the large business scorecard, ownership and SED requirements are much the same; Management Control, Skills Development and ESD are simplified. Sector specific sections are excluded.
• A voluntary framework for the measurement of retirement funds is also included for the first time.
• In general the FSC better aligns to the core business of the sector and seeks to properly address the transformation of the entire financial sector value-chain. Generic code commitments are supplemented by a modified set of sector specific commitments. New sector specific commitments both seek to address national priorities (e.g. Provision of financing for “Black Business Growth”), and address the transformation of elements of the financial sector value chain on which sufficient focus was lacking in previous code (e.g support of small black stockbrokers and intermediary firms).
• The sector council continues to provide a very valuable platform to engage with key stakeholders.
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Summary of changes per element
Element Published Draft (17/03) Current Draft
Ownership • Increased weighting points.• New entrants moved to main scorecard.• Bonus points for Direct EI & VR in access of 32.5%.
• Increase in Net Value points (3 to 6 pts).
Management Control • No EAP targets to measure as in Generic codes.• Additional recognition for achieving EAP target on
African people at each management level.• Bonus points for Independent Directors removed.• Bonus points for EAP targets removed.• Target for disabled employees reduced (3% to 2%).
• Additional recognition for achieving EAP target forAfrican people removed for Board and Executive Management categories.
Skills Development • No EAP targets to measure as in Generic codes.• Skills spend targets per management level.• One category target for employed and unemployed
learnerships.• Only category G training capped.
• Bonus points for absorption reduced from 4 to 3.• Points for Non-management category increased from 1
to 3.• Points for Learnerships category reduced from 6 to 5.• Points for disabled spend reduced from 2 to 1.
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Summary of changes per element
Element Published Draft (17/03) Current Draft
Procurement • Phased in targets.• Empowering supplier criteria adjusted for FSC.• Bonus points for Designated Group suppliers and Black
Stockbrokers/Fund Managers
• Target for procurement from designated group suppliers reduced (3%/4% to 2%).
Enterprise & Supplier Development
• Introduction of Supplier Development.• Qualifying beneficiary criteria (51% BO QSE/EME).• Bonus points for graduation, creating jobs and support
to black stockbrokers, intermediaries, asset managers.
• Included under Empowerment Financing Element for Life/Banks.
• Phased in targets for Supplier development for Banks and Life offices.
• Bonus points for support to black stockbrokers, intermediaries, asset managers reduced (3 to 2 points).
Empowerment Financing • Introduction of Black Industrialist Funding.• Phased in targets for Supplier Development.
• Black Business Growth funding replaces Black Industrialist funding.
SED/Consumer Education • IBA, SAVCA, Reinsurance will be granted exemption by council from CED.
• Bonus point removed for SED.
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The FSC Scorecard
ELEMENTCURRENT FSC
AMENDED GENERIC
NEW FSC
Long-term &Banks
Short-term
Assetmanager & Other
Bonus Points
Main Bonus Points
Long-term & Banks
Short-term Assetmanager &
Other
Bonus Points
OWNERSHIP 14 14 14 3 25 0 23 23 23 5
MANAGEMENT CONTROL 8 8 8 119 0 20 20 20 0
EMPLOYMENT EQUITY 15 15 15 3
SKILLS DEVELOPMENT 10 10 10 20 5 15 15 15 3
PREFERENTIAL PROCUREMENT16 16 16
40 415 20 20
4 (8)ENTERPRISE - & SUPPLIER DEVELOPMENT
5 15 15 0 15 15
EMPOWERMENT FINANCING 15 N/A N/A N/A N/A 25 N/A N/A 4 (0)
ACCESS TO FINANCIAL SERVICES14 14 2 N/A N/a 12 12 N/A 0
SOCIO ECONOMIC DEVELOPMENT3 3 3 5 0 5 5 5 3
TOTAL 100 95 83 7 109 9 112 107 98 19
Priority Element
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Contributor levels - Amended Generic and FSC Codes
Contributor level Points Scored Recognition level
Level 1 Contributor >100 (>100) 135%
Level 2 Contributor 95 – 100 (85 - 100) 125%
Level 3 Contributor 90 – 95 (75 – 85) 110%
Level 4 Contributor 80 – 90 (65 – 75) 100%
Level 5 Contributor 75 – 80 (55 – 65) 80%
Level 6 Contributor 70 – 75 (45 – 55) 60%
Level 7 Contributor 55 – 70 (40 – 45) 50%
Level 8 Contributor 40 – 55 (30 – 40) 10%
Non-Contributor <40 (<30) 0%
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Description FSC (New)
Weighting Target
Voting rights (Black People) 4 25%
Voting rights (Black Women) 2 10%
Economic interest (Black People) 3 25%
Economic interest (Black Women) 2 10%
Economic interest (Designated Groups) 3 3%
Net Value 6 Formula
New Entrants 3 2%
Bonus points:
Direct economic interest in excess of 15% 3 10%
Direct EI & VR in excess of 32.50% 2 1 @32.50% 1 @40%
TOTAL SCORE 23+5
Ownership
10
OWNERSHIP
Main differences
Weighting points out of 23+5 points
(Generic: 25 points)
Bonus points if targets on Voting Rights and Economic Interest
exceeded (>32.5%;>40%)
Increase in Net Value Points
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Description FSC (New)
Weighting Target
Black Board Members as a percentage of all Board Members 1 50%
Black Female Board Members as a percentage of all Board Members
1 25%
Black Executive Directors as a percentage of all Executive Directors 2 50%
Black Female Executive Directors as a percentage of all Executive Directors
1 25%
Black Executive Management as a percentage of all Executive Management
2 60%
Black Female Executive Management as a percentage of all Executive Management
1 30%
TOTAL SCORE 8
Management Control
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Description FSC (New)
Weighting Target
Black Disabled Employees 1 2%
Black Employees in Senior Management 2 60%
Black Female Employees in Senior Management 1 30%
African Employees in Senior Management 1 EAP%
Black Employees in Middle Management 2 75%
Black Female Employees in Middle Management 1 38%
African Employees in Middle Management 1 EAP%
Black Employees in Junior Management 1 88%
Black Female Employees in Junior Management 1 44%
African Employees in Junior Management 1 EAP%
TOTAL SCORE 12
Employment Equity
13
MANAGEMENT/EMPLOYMENT EQUITY
Main differences
Weighting points out of 20 points (Generic: 19 points).
No bonus points.No EAP targets to measure.
Each management level has additional recognition to achieve the EAP target for African people (excluding Board and Executive
Management)
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Description FSC (New)
Weighting Target
Spend on Black Senior Managers & Executives* 1 2.00%
Spend on Black Female Senior Managers & Executives* 0.5 1.00%
Spend on Black Middle Managers * 1 3.00%
Spend on Black Female Middle Managers * 0.5 1.50%
Spend on Black Junior Managers * 1 5.00%
Spend on Black Female Junior Managers * 1 2.50%
Spend on Black People and Non-management staff* 3 8.00%
Spend on Black Females and Non-management staff* 1 4.00%
Spend on Black Disabled People 1 0.30%
Learnerships: Black People in Learnerships (Employed or Unemployed) 5 5.00%
Bonus Points: Number of Unemployed Black People absorbed by the ME and industry at end of Learnership programme
3 100%
TOTAL SCORE 15 + 3
* As a percentage of Leviable amount attributable to appropriate management level
Skills Development
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SKILLS DEVELOPMENT
Main differences
Weighting points out of 15+3 points (Generic: 20+5 points).Bonus points for absorption
reduced from 4 to 3.Non-management category
increased from 1 to 3.Learnerships category reduced
from 6 to 5.
No EAP targets to measure.Skills spend target per
Management Level.
Only one target for Employed and Unemployed
Learnerships
No exclusion on overseas training & mandatory
training / Only Cat G training capped (Generic: Cat F & G)
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Description FSC (New)
Weighting Target Year 1 - 3
TargetYear 3+
Others Life/Banks
B-BBEE Procurement from all empowering suppliers based on Recognition levels as % of Total Measured Procurement Spend
5 4 75% 80%
B-BBEE Procurement from all empowering suppliers that are QSEs based on Recognition levels as % of Total Measured Procurement Spend 3 2 14% 18%
B-BBEE Procurement from all empowering suppliers that are EMEs based on Recognition levels as % of Total Measured Procurement Spend
2 2 8% 12%
B-BBEE Procurement from all empowering suppliers that are at least 51% black owned based on Recognition levels as % of Total Measured Procurement Spend 7 5 20% 30%
B-BBEE Procurement from all empowering suppliers that are at least 30% black women owned based on Recognition levels as % of Total Measured Procurement Spend 3 2 9% 10%
Bonus Point: Spend from Designated Group suppliers that are at least 51% Black Owned 2 2 2%
Bonus Point: Spend from Black Stock Brokers, Black Fund Managers and Intermediaries who are Empowering Suppliers based on the B-BBEE Procurement Recognition Levels as a percentage of Total Value of all Trade with Stockbrokers 2 2 5%
TOTAL SCORE 20+4 15+4
Preferential Procurement
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PREFERENTIAL PROCUREMENT
Main differences
Weighting points out of 15/20+4
points (Generic: 25+2
points)
Targets phased in over 3 years
Priority element for “Others”;
non-priority for Banks/Life offices
Additional bonus points for
procurement from Black
Stockbrokers / Fund managers
Lower targets for procurement from BO and
BWO suppliers
Empowering Supplier criteria adjusted for FSC
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Large entities need to comply with any three of the five criteria to be deemed an Empowering Supplier:• At least 25% of measured procurement spend (including imports) must be from local suppliers;
• Job creation – 50% of new jobs created during the measurement period must be for black people and the total proportion of black people since the last measurement period cannot have dropped;
• At least 25% of SED contributions must be directed at education activities or at least 25% of ED contributions must be directed at black women owned businesses;
• At least 85% of leviable amount should be paid to South African employees by service industry entities
• Skills Transfer - Organisations need to spend 12 days (based on number of employees: >500 = 12 days), in assisting Enterprise Development beneficiaries to increase their operation and / or financial capacity. This process can be outsourced.
Empowering Supplier Criteria
Number of employees Days
0-20 1
21-150 3
151-500 6
>500 12
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Description FSC (NEW)
Weighting Target
Enterprise Development 5 1% of NPAT
Supplier Development 10 2% of NPAT
Bonus Points
Graduation of one or more of the Enterprise Development beneficiaries to the Supplier Development level
1 Yes
For creating one or more jobs as a result of Enterprise or SupplierDevelopment initiatives
1 Yes
ED support for Black stockbrokers, Black fund managers and intermediaries 2 0.5% of NPAT
Enterprise & Supplier Development – Short Term, Asset Managers & Others
20
ENTERPRISE & SUPPLIER DEVELOPMENT
Main differences
Different targets and weightings for Others &
Banks and Life offices
Weighting points out of 15+4 (Others) and 10+4
(Banks/Life) points
Priority element for both “Others” and Banks/Life
offices
Target based on previous year NPAT
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Description Weighting Target
Targeted Investments 12As per current FSC. Reviews
every 2 years.
BEE Transaction Financing / Black Business Growth Funding 3
As per previous target. BEE Transaction funding phased
out with Black Business Growth funding
Enterprise Development 3 0.2% NPAT (grants only)
Supplier Development 7
1.8% NPAT(phased in 0.9% Y1, 1.35% Y2,
1.8% y3)
Bonus Points
Graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level.
1
For creating one or more jobs directly as a result of Supplier Development and Enterprise Development initiatives by the Measured Entity. 1
Enterprise development support of black stockbrokers and intermediaries2 0.5% NPAT
Empowerment Financing
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EMPOWERMENT FINANCING
Main differences
Unique element for the Banks and Life offices
Priority element for Banks/Life offices
Black Business Growth Funding replaces Black Industrialist
Financing
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Description Banks Long Term Short Term Target
Penetration of products 3 7 10
As per current FSC
Appropriate Products 0 3 2
Densification 2 0 0
Affordable housing origination 2 0 0
Geographic / Transactional access 5 2 0
Total 12 12 12
Access to Financial Services
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ACCESS TO FINANCIAL SERVICES
Main differences
Access to Financial Services score out of 12 points
Target for Market Penetration (number in force policies) increases over time:
85% - 201490% - 2015
100% - 2016
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Description Target Points
SED spend (0.7% For IBA, SAVCA, RE-INS)0.60% 3
Consumer Education spend*0.40% 2
Total1.00% 5
Bonus Points
Fundisa grants0.20% 2
Additional CED0.10% 1
Total3
*IBA, SAVCA, Reinsurance will be granted exemption by council from CED
SOCIO-ECONOMIC DEVELOPMENT / CONSUMER EDUCATION
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SOCIO-ECONOMIC DEVELOPMENT / CONSUMER EDUCATION
Main differences
Weighting points out of 5+4 points
No changes other than bonus points and NPAT
Target based on previous year NPAT