Module

3: Sector Codes and Specialised Enterprises

1. Introduction
You have learnt that the generic scorecard is used to rate the BEE statuses of
businesses. Some industries require specific Sector Codes to measure their
performance. In this module you will be introduced to Sector Codes and
transformation charters to see how they differ from each other and why they are
necessary for use in particular industries.

Specialised enterprises, which include companies limited by guarantee, non-profit

organisations and public entities, require different scorecards for measurement. The
final section of this module will explore these specialised enterprises in more detail.

In this module, you will:

Be able to identify the difference between Sector Codes and transformation

charters;

Understand why sector-specific Codes are necessary;

Be able to identify the process for measuring specialised enterprises.

2. Sector Codes and transformation charters

Note: Sector Codes are what charters originally set out to be. The name
was changed from charter to code to distinguish between the old and
the new, while still recognising the charters.

Transformation charters (the original basis for industry charters) are industry-specific
guides that provide recommendations to entities working within a sector. They form
Section 12 of The BEE Act and function to express an industrys commitment to
transformation. However, they do not form part of The Codes of Good Practice and
are not legally binding.

A transformation charter needs to be developed by major stakeholders (key

indicators, industry bodies, government departments and trade unions) and must
advance the objectives of BEE.

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Sector Codes, which make up Section 9 of the BEE Act, normally originate from
transformation charters and are gazetted into The Codes of Good Practice. This
means that they form part of The Codes of Good Practice and are legally binding on
organs of state and public entities.

They form the default measurement system for all entities in a specific sector. If an
entity is in an industry that has a Sector Code this will be used to measure the entity
rather than the generic scorecard. Ideally all entities would use the generic
scorecard, but Sector Codes are required for certain industries.

The table below highlights the differences between Sector Codes and transformation
charters:

Sector Code (Section 9 Transformation charter (Section 12 of

of the BEE Act) the BEE Act)

Provide recommendations to entities

Default measurement
working within a sector to express
Purpose system for all entities in
industrys commitment to
a specific sector
transformation

Is it legally
Yes No
binding

Who
Usually developed from Industry bodies, government
develops
transformation charters departments and trade union
it?

Table 1: The differences between Sector Codes and transformation charters.

3. The need for Sector Codes

There is a need for sector-specific Codes that vary from the generic Codes. This is
because certain economic sectors have peculiarities, which the generic scorecard
does not take into account. In the past, the lack of a framework for charters resulted
in differences between the industry sectors, leading to an unfair playing field.

Statement 003 (of The Codes of Good Practice), which outlines the guidelines for the
development of transformation charters and Sector Codes, was developed to
streamline the charters and ensure all sectors are measured on an even footing and
that the charters are in harmony with the Codes. Charters need to run along a

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structured path that is consistent with the objectives of BEE so that conflict between
sectors is minimised and that BEE meets its objectives.

4. Sector Codes and the generic Codes

4.1 Alignment to the Codes

Sector Codes have the same legal standing and compliance requirements as any of
the generic Codes and should therefore fully address all the elements contained in
the generic Codes (including the same definitions for beneficiaries and the same
calculation methodologies). A Sector Code may not, for example, cut out the
indicators that appear on the generic scorecard.

They are, however, able to define the dynamics that are suitable to their particular
sector.

4.2 Variations
Sector Codes can introduce a replacement element to be measured. Sectors that
have a reduced target for one of the standard elements can compensate for this by
introducing a new element. For example, the financial services sector reduced the
target for ownership and introduced special finance available to BEE parties, as
shown in the table below:

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Element Available points Weighting %

Ownership 14 + 3 bonus 14%

Management control 8 +1 bonus 8%

Employment Equity 15 + 3 bonus 15%

Skills Development 10 10%

Preferential procurement 16 16%

Empowerment financing 15 15%

Enterprise development 5 5%

Socio-economic development 3 3%

Access to financial services 14 14%

Total 100 + 7 bonus 100%

Table 2: Financial Sector Code weightings.

4.3 Alternative indicators

Sector Codes can use alternative indicators for the management element and the
employment equity element. They are allowed to redefine occupational levels and
use salary bands to define the various levels of employees and management where
the sector can provide sufficient motivation for doing so.


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5. Scorecards for specialised enterprises (Statement

004)
Specialised enterprises include:

Companies limited by guarantee;

Higher education institutions;

Public entities and other enterprises owned by an organ of state;

Public benefit schemes; and

Section 21 companies (not for gain/profit companies).

These entities have a special scorecard and guidance on how to handle BEE.

Public enterprises and other enterprises owned by the state cannot include
ownership in their measurement because the state is neither black nor white. For
the purposes of BEE the assumption is made that these entities have no ownership.

There are two different circumstances that need to be taken into account: when the
entity being measured is without ownership and when the entity being measured is
owned by a company without ownership.

5.1 Entity without ownership is being measured

These entities do not include the ownership element on their scorecard. A separate
scorecard exists for them, known as the adjusted generic scorecard. The scores are
re- allocated to the remaining six elements:

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Element Weighting Code series reference

Management control 15 points 200

Employment equity 15 points 300

Skills development 20 points 400

Preferential procurement 20 points 500

Enterprise development 15 points 600

Socio-economic development 15 points 700

Table 3: Adjusted generic scorecard.

There is also a QSE scorecard for entities without ownership, but this topic will be
discussed in Module 8.

5.2 Entity being measured is owned by a company without

ownership
Entities that do not have ownership are not restricted from owning shares in other
entities. To deal with this, the entity without ownership is handled as though it is a
mandated investment (a mandated investment is an investment that a third party
makes which is managed by a mandate on behalf of the actual owner).

Section 21 companies are deemed mandated investments and measured entities

that have shares held by these companies must apply the provisions for mandated
investments when measuring the ownership contributions of these companies.
Mandated investments will be dealt with in more detail in Module 4.

6. Summary
In this module on Sector Codes and Specialised Enterprises, you:


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Learnt about the difference between Sector Codes and transformation

charters;

Learnt why sector-specific Codes are necessary;

Learnt how specialised enterprises are measured.

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