The B-BBEE ICT Sector Council was appointed by Minister on 24 September 2015.
Their first priority was to align the B-BBEE ICT Sector Code with the Code of Good Practice 2013,
whose primary objective was to strengthen transformation requirements in so far as natural black
people are concerned.
Although recognising the main priority as aligning the ICT Sector Code, the Council took the opportunity to also strengthen some of the elements of the Code to robustly drive transformation in the ICT Sector. In this regard the Ownership and Skills development requirements were strengthened. The rationale was to prevent practices of subverting real transformation requiring black ownership (voting rights and receiving dividends) as was applied through ownership schemes that did not provide real benefits for black people. Ownership bonus points could be earned through ownership for black women and people with disability.
On the side of skills development, the Council ensured that companies can earn bonus points where they invest in skills developments for women, people with disabilities and unemployed black people.
The above changed obviously also shook most big ICT entities from their comfort zone, as it meant that that B-BBEE ratings significantly went down due to the Amended B-BBEE ICT Sector Code.
In this regard, the Council began to receive many complaints and queries relating to the unfairness
of the Code and even accusation of the Council trying to bankrupt them. For instance,
where they could obtain 30 points through Broad Based Ownership Schemes, now they could
only receive 3 points.
It was under the above-mentioned circumstances that the Council requested the Department’s support to embark on a road show to ensure that all stakeholders in the sector are educated about the Code to ensure that all voices are heard, not only those who felt threated by the added pressure to transform.
The stakeholder programme was designed to cover as many provinces as possible within a shorter period to maximise the impact.
It therefore started in KwaZulu Natal (15 February 2016), followed by Bloemfontein (15 February 2016), Northern Cape (17 February 2017), North-West (20 February 2017), Western Cape (22 February 2017), Eastern Cape (24 February 2017), Mpumalanga (27 February 2017) and Limpopo (1 March 2017).
The Gauteng engagement was shifted to the 28th of March 2017 due to the need to create more time for mobilisation as it is a more diverse province.
The Council, guided by the legislation and policy instruments stated in the preamble, shall be established to perform, but not exclusively, the following
2.1. Oversee the implementation and monitoring of the Sector Codes;
2.2. Provide guidance on matters relating to black economic empowerment in the ICT sector;
2.3. Compile reports on the status of black economic empowerment in the ICT sector;
2.4. Share information with approved accreditation agencies conducting black economic empowerment ratings in the ICT sector; engage and advise, the sector Ministers, ICASA and other relevant regulatory entities regarding implementation of the ICT Sector Codes;
2.5. Develop mechanisms and strategies to monitor compliance with the ICT Sector Code;
2.6. Develop strategies for consultation with provincial and local stakeholders regarding the ICT Sector Codes;
2.7. Formulate guidelines and models for broadbased empowerment of black owned companies at local, provincial and national level.; Terms of Reference of the BBBEE ICT Sector Council
2.8. Develop and implement an interactive portal to communicate the basic methods of applying the BBBEE scorecard for all the different elements of BBBEE; 2.9. Develop baseline indicators, conducting or commissioning research for the purposes of ensuring the effective implementation of the ICT Sector Code;
2.10.Report to Government and the BBBEE Advisory Council on the implementation of the ICT Sector Codes;
2.11.Advise on the amendments of the ICT Sector Codes and other pieces of legislation that hamper effective and efficient implementation of the transformation agenda.
The name of the Council is the BBBEE ICT Sector Council hereafter referred to as the “the Council”or “ICT Sector Council”
4. THE COMPOSITION OF THE COUNCIL 4.1. The Council shall consist of: no less than fourteen (14) members and no more than sixteen (16) members.
4.2. The members shall be appointed by the Minister of Telecommunications and Postal Services who has jurisdiction over the ICT Sector.
4.3. When appointing members in terms of the above, regard shall be given to the need for the Council:4.3.1.
To have appropriate expertise;
4.3.2. To represent different relevant constituencies including trade unions, business, community organizations, etc.
Terms of Reference of the BBBEE
ICT Sector Council 3
4.4. The appointed Council shall in consultation with the Line Minister determine the model that will ensure execution of the administrative function of the Council, as well as the model for funding such functions.
4.5. The composition of the Council shall consist of the following members:
4.5.1. Two (2) members each from the four ICT subsectors namely, the Broadcasting, Electronics, Information Technology and Telecommunications;
4.5.2. Two (2) members from relevant Government Departments that interface with the ICT sector;
4.5.3. Two (2) members from organized Labour Federation or Trade Unions
4.5.4. One (1) member from NEDLAC Community constituency;
4.5.5. One (1) member from ICASA;
4.5.6. Two (2) members from women and/or youth and the disable groups participating in the ICT sector.
The Council shall submit annual reports through its Secretariat to the Line Ministry, the dti and the BBBEE Advisory Council.
7.2. Before the Secretariat submits annual reports of the Council to the Line Ministry, the dti and BBBEE Advisory Council, such reports must be tabled
by the Secretariat before the Council and thereafter tabled before the Annual General Meeting.
7.3. The Line Minister shall table a copy of such annual report in Parliament for noting.
7.4. The annual report of the Council shall include the following:
7.5. Report on the work of the Council including its meetings held in terms of its Constitution.
7.6. Programmes and activities as determined and adopted by the Council.
7.7. Report on the initiatives undertaken by enterprises within the Sector;
7.8. Provide any relevant information which would be useful in assessing the state of BBBEE in the ICT Sector; and
7.9. Audited financial report by an independent qualified and admitted auditor.
Should a Member of the Council have a personal or financial interest in any proposed or discussed matter or meeting by the Council, such a Member shall immediately disclose fully the nature of his or her interest, disclose such interest and withdraw his or her participation in such meeting in order to ensure that the decisions of the Council are taken in a fair, unbiased and proper manner.
8.2. If a Member of Council fails to declare his or her interest in a matter or decision taken by the Council, then in such instances, the Council shall have the discretion to either ratify the decision and refer such Member of Council to its disciplinary processes as referred to in this Constitution and
Code of Conduct, or declare such decision null and void.
9.1. The Council shall draft and adopt its Constitution, Code of Ethics and Code of Conduct.
9.2. The Constitution for the Council must be formulated within 60 working days of the Council being established.
9.3. The Constitution of the Council may be amended from time to time after consultation with the Council Members.
9.4. The Council may, by resolution, formulate rules to further regulate its proceedings.
9.5. Members shall subscribe to the Constitution of the Council, Code of Ethics and Code of Conduct.
9.6. The Council shall enforce the rules and procedures of its Constitution, Code of Ethics and Code of Conduct on all Members and officials of the Council
and to institute disciplinary actions in all cases where the legal provisions of these instruments are breached.
9.7. The Chairperson of the Council, or any Member that she/he delegates to, has authority to communicate all official Council business and/or to represent the
Council. The Code of Conduct shall have provisions relating to how other Members of Council may communicate or conduct themselves.
One of the concerning aspects of the engagements was the limited participation by entities. As it became obvious later on, the entities seemed to have been afraid of being in the same place as SMMEs and other beneficiaries of transformation in the Sector, as they would have been expected to account for their intransigence in respect of implementing transformation. A lot of SMMEs seemed to express significant levels of frustrations about lack of transformation and the window-dressing attitudes of big companies who took advantage of destitute emerging black businesses and aspiring black individual businesspeople.
Another element that emerged was concerns by Verification Agencies regarding their customers who felt that they should have been given a reasonable grace period post the gazetting of the Amended Code to adjust and allocate their budgets accordingly. These types of concerns were obviously invalid as they had had the benefit of an unamended Code for a longer time compared with other Sectors.
Attendance is smaller provinces (Bloemfontein, Free State, North-West, Limpopo, Mpumalanga, Northern Cape, Eastern Cape) was mainly by SMMEs and individuals aspiring to establish SMMEs in the sector.
The Durban Stakeholder engagement: The attendance represented a diversity of stakeholders from ordinary citizens, local government, BITF, SMMEs, Qualifying Small Enterprises (QSEs). Verification agencies, media and entities (though very few). The verification agencies, raised technical issues relating to the Code, including concerns of measured entities in terms of the effective date of the Code, stringent skills and ownership requirements and areas where they felt the Code did not provide adequate details. The importance of having a high representation of Verification Agencies is that they are important stakeholders in educating the entities about the Code.
Other issues that emerged were about B-BBEE transaction advisors who seemed more intent on advising companies on how to evade the requirements of the Code rather than how to comply. Unfortunately it always emerged that all they had done was to mislead the measured entities at significant costs to the latter. That is where the Council was able to advise that entities approach the Council for guidance before they proceed with B-BBEE transactions.
Specific technical issues raised were in respect of the following:
Qualifying Small Enterprises (QSE) Scorecard (Code Series AICT600)
Concern about the perceived lack of clarity around the QSE Scorecard, and the need for the Council to consider providing guidelines around it. Relating to the above, concern about the process of obtaining the Affidavit (Section 2.14 of the Amended Sector Code) in that it was seen to could possibly encourage fraudulent behaviour such as fronting. It would also discourage black owned QSE not to participate in B-BBEE implementation. Concerns that the highest that can be achieved by a QSE in the ICT Code is level 4. The Council gave advice to the effect that where the QSE Scorecard is not explicit, reference should be made to the Generic Code. Concern about the maximum 3 points for Black designated groups, Employee share ownership schemes, and Black people in broad based ownership schemes and Black participants in Cooperatives. The Council gave an explanation to the effect that the Amended Sector Code sought to create genuine ownership (shareholders that can have financial benefits through receiving dividends) and Control (Board members that have voting rights).
Skills Development (CODE SERIES AICT300)
Clarity seeking about recognition of skills training falling outside SAQA requirements. Clarity was given that the Code does not prescribe adherence to SAQA skills requirements. Clarity seeking in terms of whether the Code required mandatory sectoral training. Response from the Council was that training interventions should target building capacity and competencies in the ICT Sector to create opportunities for entrepreneurship and employment. The Council indicated that it would initiate work towards the identification of critical skills required to encourage and build capacity towards innovation and leveraging of new technologies to support entrepreneurship and new business initiatives. It was noted that the Code no longer refers to the Employee Assistance Programme (EAP). It was recommended that the removal thereof and the rationale behind it be communicated to Verification Agencies. The proposal that the Council consider developing a technical guide to explain certain elements of the Code, to assist Verification Agencies to guide their customers around the implementation of the Code. Recommendation to the effect that the Council relook the Enterprise and Supplier Development Scorecard (CODE SERIES AICT400 ) as it has the unintended consequence of asking companies that are not profitable to pay more. The Council further indicated that it was aware that most entities in the Sector are using BEE Consultants who were not completely familiar with the Code, and are ending up paying more and receiving wrong advice, as the Council’s interactions with some of those entities has shown. A recommendation was put forward to consider the establishment of a mechanism, in consultations with all the stakeholders, to initiate training for B-BBEE Consultants aimed at establishing uniform standards and regulating the accreditation of B-BBEE Advisors/consultants.
The attendance was a mix from SMMEs and community members. The issues that arose were mainly from SMMEs and the most vociferous criticism came from the Black IT Forum (BITF), who seemed to hold the opinion that the engagements were more of a talkshop than substance issues. The complaints were about B-BBEE fronting, though there was also an admission that their members were supporting fronting as they also needed to earn a living. Their concerns were mainly that SOCs should have Set-Asides for SMMEs thus ensuring that certain products and services are directly procured from SMMEs. They regarded this approach is the most feasible to ensure SMME sustainability.
It however emerged that even though they complained, they were also not willing to organise themselves as a group to lobby big business, using a united voice. The Council Had to therefore emphasis the fact that the Amended Code itself provides Set-Asides in terms of Skills Development, Procurement and Enterprises Development and that it was up to them to approach big business in ICT and present themselves as beneficiaries who would help the companies to improve their B-BBEE ratings and obtain business from government and government owned entities. SITA also came under attack for not accommodating emerging black businesses in their tender processes. There were however indications of commitment from SITA to further engage with stakeholders in the province.
Attendance was mainly from SMMEs, Labour and Government. The attendees seemed very appreciative of the Council’s initiative to visit the province, indicating that it was the first B-BBEE Charter Council to visit the province. One factor that affected the attendance was that the office of the Premier had sent the invitations to the wrong stakeholders and when the corrected it was too late. People were impressed and educated. An important element that emerged was the need to ensure that government officials involved in tender processes needed to be familiarized with the Codes.
What emerged was that there is limited understanding of the scope of IT services, as was witnessed through the issues raised, which related mainly to free WiFi and photocopying services. This highlighted the need for further engagement in the province (Mainly through the SMME Strategy) to ensure that people in the province are exposed to opportunities in the ICT sector.
The event was hosted at The Barn, in Cape Town. Councillor Schofield raised concerns about the lack of transformation in The Barn itself, indicating that the representation of Black people is still at an unacceptable level, even though the centre was created to enable more Black people to access opportunities in the ICT Sector. The audience was diverse in terms of representation though the issues remained primarily around SMME issues, with a few technical questions raised around the Amended Code. An expression of interest for future engagement with the Council was expressed, specifically due to the big entities not being in attendance. These are entities that prefer to speak directly to the Council whenever they had specific issues of concern, sometimes even sending advisors. The Council acknowledged the need for future engagements, as soon as big business is adequately mobilised in the province.
This session was the worst attended, ending with the Councillors engaging informally with the few individuals who attended, which also included the BITF leadership. There was acknowledgement to the need to revisit the province in future. There was also acknowledgement of the importance of the role of convenors in the mobilisation of stakeholders.
Attendance was mainly from SMMEs, Government and BITF. There was also a representative from a Verification Agency. There was vigorous engagement mainly from SMME representatives and members of the BITF, highlighting the same issues which were highlighted in Bloemfontein.
Further engagements happened after the meeting when the attendees engaged the Councillors separately and informally to get guidance on the Code and other related issues. From the Council side, as with other small provinces, was that people tended to believe that opportunities came from government, in the form of tenders, rather than the private sector itself.
The province seemed to have a bigger and diverse audience, from big companies, government, and people with disabilities, black business owners and cooperatives including SMMEs. There was therefore engagements on the technical aspects of the Code, the benefit of the Code to SMMEs, the partnerships and benefits of entering into partnerships with big companies without being absorbed to meet B-BBEE requirements. The audience also seemed to engage much more than was possible within the time that was available.
The Council therefore acknowledged the need to visit the province again as the indication was that there was a bigger audience that could have wished to participate.
The Gauteng province had the most diverse stakeholder base compared to all other provinces. Disappointingly, Vodacom and Neotel did not have any representation. These companies have however been engaging directly with the Council. It therefore became important for the Chairperson and Deputy Chairperson to, in their presentations, highlight the priority elements of the Code, namely Ownership, Management Control and Skills Development as high impact areas in the Code, without diminishing the importance of other elements.
It was also important to highlight the relationship between the Council and other parties involved in the B-BBEE ICT Sector Code, namely SANAS as the accreditation Agency, B-BBEE Commission as the watchdog empowered by law to investigate and ensure that violations of the Code are accompanied by necessary and applicable action, the DTI as the custodian of all Codes and the B-BBEE Council as the overall Oversight structure.
The Deputy Chairperson further articulated areas that the Council had focused on in aligning and amending the Code, as done in other provinces, highlighting the benefits and tightening requirements needed to consistently drive transformation in the sector:
Ownership and Control requirements: The Amended Code has strengthened this area to ensure genuine ownership and Control, i.e. financial interests and voting rights.
Skills Development: Emphasis was that companies failing to meet sub-minimum targets will be downgraded by one level. The reward was however that the Amended Code does not prescribe SAQA skills requirements, in which case the entities had a broader scope of training.
Issues raised by Attendees
→ The first point was raised by a young woman with disability, indicating that many young graduates with disability struggle to get employment from companies both within and outside the ICT Sector. Although the concern was much broader in respect of the sectors, the Council was able to indicate that the Code (STATEMENT AICT 300) does make provision for ICT related training, for both employed and unemployed people. Furthermore, companies can claim bonus points Number of Black People absorbed by the Measured Entity or in the economy at the end of the Learnerships, Apprenticeship, Internships and Graduate programmes.
→ Noting that Socio-Economic Development initiatives (STATEMENT AICT 500) focus specifically on ICT programmes, there was a concern raised that this requirement could impact negatively on the funding of non-profit organisations. A response from the Council was that the sole focus on the ICT Sector was necessary to open and expand opportunities in the ICT Sector. It is also intended to open supplier development opportunities to ICT vendors. PL: our Code includes skills development for graduates. Companies to earn points by skimming people with disabilities, employed and unemployed. Code ensure benefit for companies investing in providing skills to people with disabilities.
→ Skills development commitments: In addition to 18.104.22.168, a representative from Ericsson indicated that the company had made investments in some NGOs and the requirements for specific focus on ICT Skills might expose them to litigation. The Council gave an explanation to the effect that requirements under 2.1.1* and 2.1.2* should be looked at as targets and not a target, with 2.1.3* relating to enhancements for people with disabilities. *Refer to Durban
→ With regard to the Management Control (STATEMENT AICT200): A question was raised about the alignment between the provisions of the Code and the Employment Equity provisions. Clarity was given that the Code’s focus is on Black people and therefore did not represent a deviation from the provisions of the Employment Equity legislation. When the Code refers to women and people with disability it refers to black people.
→ There was acknowledgement to the contribution of the Code in recognising the needs of people with Disability in terms of Management Control and Skills development. That was accepted as a progressive development.
→ The issue of compliance by ICASA was also raised, and the Council indicated that as an organisation operating in the ICT Sector it would be required to comply with the Code. From a legislative perspective there had been interaction between the DTPS and the Council to align the ECA with the provisions of the B-BBEE Act, as the DTPS is currently reviewing the ECA as part of the ICT Integrated Policy White Paper.
→ There was enquiry as to whether there was any hope of reviewing the effective date of the Amended ICT Sector Code, and the answer was in the negative. The Amended ICT Sector Code had faced two realities: being repealed or being amended to align with the Generic Code. If it was repealed, the Sector would have had to revert to the Generic Code which would have been more detrimental.
→ A question was raised as to whether the R49 million turnover for QSEs was not limiting for Black owned business. A response given by the Council was to the effect that the limitations were introduced to reduce the burden on black owned entities.
→ The final issue raised related to smaller companies that are being incubated by bigger companies. Clarity was sought as to whether it was appropriate for the bigger companies to list them as B-BBEE partners and therefore claim points arising out of that. Clarity was given that incubation cannot be used by big entities to claim ownership points, and that entrepreneurs needed to be vigilant in protecting themselves and their IPs in this regard.
What became clear out of the engagements was that there was firstly, an understanding that transformation in the sector is necessary, and no longer negotiable. The stakeholders also realised that embracing transformation, starting with complying with the Amended Sector Code, would be an important step in doing successful business in South Africa, especially if they wanted to do business with government.
Another important message that came through was that business should not simply support SMMEs in the manner of discharging their social responsibility, but rather creating partnerships with SMMEs to support the establishment of sustainable businesses, which would contribute to economic growth, employment and poverty reduction.
It is also important to note that there have been engagements between the Council and individual companies outside of the provincial engagements. These have included Ericsson, Vodacom, MTN, Liquid Telecoms, ITA, Google, Pinnacle Holdings and these engagements are continuing every month as more companies begin to recognise the importance of the Council and consulting it to ensure that they conduct their B-BBEE transaction properly.
There is already a meeting being planned with Cell C and Blue Label Telecoms to engage them on their latest transaction which related to the acquisition of 45% stake by the form in the latter. The Council had wanted to meet the two parties earlier and were asked by the parties to give them some time. Blue Label Telecoms is not a measured entity (subscriber to the Sector Code), Cell C is and therefore has an obligation to honour the Council’s invite. Fortunately even Blue Label Telecoms indicated that they were willing to meet with the Council.
Throughout the engagements, the Council emphasised its availability to stakeholders for consultations and guidance on the implementation of the Amended Sector Code. This was in recognition of the fact that most companies have only consulted the Council after using the wrong advice of consultants, which was obtained at significant cost.