THE FSC JOURNEY SUMMARY OF THE NEW FSC CODES · 2 Status of the Revised FSC Codes • The amended...

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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%






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

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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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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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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

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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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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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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

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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

THE FSC JOURNEY SUMMARY OF THE NEW FSC CODES · 2 Status of the Revised FSC Codes • The amended...

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