FSC ALIGNMENT ISSUES

Change

Implication

Notes

The scorecard elements have been reduced from

7 to 5 (Management Control and Employment
Equity have been merged and so have
Procurement and Enterprise Development)
All companies except Exempted Micro Enterprises
to comply with all elements

None, elements have simply been combines

We can agree to this

Previously medium sized businesses only needed

to comply with 4 elements, greater compliance
requirements for companies with an annual
turnover below R50 mil
Effectively dropping all companies scorecard by an
average of 3 levels.

Non-negotiable, the FSC needs to incorporate

change

Companies are required to do spend a minimum of

2.4% of payroll on training black people, need to
meet 40% of the increased procurement targets
and spend 1.4% of NPAT supporting small black
owned businesses. If the minimum requirements
are not met, companies will be penalised by
having their overall BEE levels reduced by 1 level.

Priority elements are non-negotiable. We will need

to introduce Skills Development and Enterprise
and Supplier Development as priority elements.

More procurement points can be claimed by

buying from these suppliers

Non-negotiable, the FSC needs to incorporate

change

Scorecard points & Qualification criteria for

awarding of B-BBEE status levels adjusted
downward
Introduced minimum requirements for priority
elements: Ownership, Skills Development, and
Enterprise and Supplier Development

Entities who do not meet the minimum

requirements in priority elements, their overall
score will be discounted by 1 BEE level
Enhanced the recognition status of black owned
EMEs and QSEs:
An EME / QSE that is 100% owned by black
people qualifies as a level 1 contributor and
An EME / QSE that is more than 51% owned
by black people qualifies as a level 2

Non-negotiable, the FSC needs to incorporate

change

Ownership as a priority element is not going to be

acceptable. ASISA and BASA will probably be
proposing Empowerment Financing as the 3rd
priority element. This raises a challenge for shortterm insurers who are exempted from
Empowerment Financing. SAIA will therefore,
need to propose another element as our 3rd priority
element. National Treasury will expect this to be
Access.
Non-negotiable, the FSC needs to incorporate
change

FSC ALIGNMENT ISSUES

contributor

FSC ALIGNMENT ISSUES

The thresholds for EMEs and QSEs have been
adjusted as follows:
EME increased from R5 million to R10
million

QSE: increased to from R35 million to R50

million
Large entities: R50 million and above
EMEs & QSEs that have more than 51% black
ownership only have to obtain a sworn affidavit
every year confirming revenue and ownership
Introduced a formula to split targets for black staff
and training spend on black staff, into separate
targets for African, Coloured and Indian using the
EAP targets.

Increased the Skills Development target from 3%

of payroll to 6%

Mandatory sectoral training does not quality as

skills development contribution
Introduced the concept of an Empowering
Supplier and only procurement spend with
companies that are Empowering Suppliers would
count towards procurement points

Greater number of companies will be exempted

from BEE compliance

Non-negotiable, the FSC needs to incorporate

change

Makes it easier for black owned business to

receive BEE recognition. This however, creates a
risk of fronting.
This is problematic as it effectively creates a quota
system for each of the race groups. In addition, the
current formula is incorrect.

Non-negotiable, the FSC needs to incorporate

change

Companies will need to double their training

budgets. However, as the spend is not only
applicable to staff, external training can also be
counted (bursaries etc.)
As Skills Development is a priority element the
minimum spend requirement is 2.4% of payroll.
AS most of the sectors training is mandatory, this
is unacceptable.
The definition of Empowering Supplier is
problematic as it caters for manufacturing
companies and not service companies.
If a company is 100% black owned and is not an
empowering supplier, their BEE certificate cannot
be used for procurement purposes.

The Department of Labour is currently considering

removing the EAP provision for Employment
Equity purposes, because of a recent Supreme
Court ruling that quotas are illegal.
The DTI is awaiting the decision from the
Department of Labour, and may review this
provision.
The DTI will probably not be willing to consider a
lower target.

The sector cannot accept this change.

The DTI has indicated that they will be comfortable
with the FSC tweaking the formula to
accommodate service companies
Non-negotiable, the FSC needs to incorporate
change as it applies to suppliers.

FSC ALIGNMENT ISSUES

FSC ALIGNMENT ISSUES

Increased procurement targets

Split Enterprise Development into Supplier

Development and Enterprise Development

This will make procurement compliance more

difficult, particularly in view of the Empowering
Supplier definition.

Creates a requirement for companies to focus their

enterprise development support on companies in
their supply chain.

SAIA members have proposed a phase-in of the

targets, as was originally done in the DTI Codes
with lower targets applicable in the first 5 years
and the increased targets applicable from year 6.
The FSC Reporting Working Committee supports
this recommendation.
This change is good for the industry, particularly in
view of the industrys challenges with the MBR
industry and raising challenges with contractors.