“My company operates in the short term insurance environment. I understand the new Financial Sector BEE Charter was published at the end of 2017 and already applies. Is this correct and what changes has it introduced?”

The Financial Sector BEE Charter (“FSC”) was published on 1 December 2017 and is effective immediately, with no transitional period applicable. All businesses operating within the South African financial sector, which includes banks, short and long term insurers, stock exchange members and other financial institutions, fall within this sector. The aim of the FSC is to promote a transformed and globally competitive South African financial sector that reflects the demographics of our country.

The FSC scorecard consists out of seven elements with two additional elements over and above the five scorecard elements contained in the Generic Department of Trade and Industry Codes of Good Practice (“Generic Codes”), namely Empowerment Financing and Access to Financial Services. The main focus of these additional two elements is to make financial services more accessible to the previously un-banked and un-served. These elements only apply to banks as well as short and long term insurers. Other enterprises within the financial sector only have to comply with the other five scorecard elements.

The targets and point allocation for the Ownership element remains virtually the same as those contained in the Generic Codes, with the overall black ownership target set at 25%, including 10% black female ownership. The Ownership element is also a priority element within the FSC with a sub-minimum of 40% to be reached on the net value points available under this scorecard. 

The Management Control element makes provision for points under executive, senior, middle and junior management categories as well as disabled employees with targets similar to those under the Generic Codes. Importantly, the Management Control targets contained in the FSC are not aligned to the national and provincial demographic targets although additional scorecard points are available for ‘African’ appointments under certain of the management categories.

Training programmes under the Skills Development element is management level driven. Individual targets are set for learning programmes implemented on each management category namely senior, middle and junior management as opposed to the overall skills development target contained in the Generic Codes. Where a measured entity does not distinguish between management levels, the FSC make provision for combining targets on certain management levels. The FSC also contains separate targets for training expenses towards non-management staff as well as unemployed people and learnerships. Internal and category F training is fully recognizable under the FSC and not limited to only 15% as in the Generic Codes.

With relation to the Procurement element, targets for supplier spending are set for the first three year’s, where after targets on this element increases. Enterprise and Supplier Development targets are also based on the previous year’s ‘net profit after tax’ figure whereas targets in the Generic Codes are based on the ‘net profit after tax’ figures of the financial year under review. Bonus points are available for procurement expenditure with intermediated black professional service providers, black stock brokers as well as black fund managers.

The Socio-Economic Development element contains a new concept namely Consumer Education, which requires a financial education programme complying with certain consumer education standards, to be implemented for identified target markets. Targets for socio-economic development contributions and consumer development contributions are set at 0.70% and 0.40% of ‘net profit after tax’ respectively, for all financial institutions except international banks and reinsurers who are exempted from Consumer Education. 

Turnover thresholds for Exempt Micro Enterprises (EME’s) and Qualifying Small Enterprises (QSE’s) remain at R10 and R50 million respectively. EME’s and QSE’s with at least 51% black ownership automatically qualify as level two contributors to BEE, whereas 100% black owned EME’s and QSE’s are automatically awarded a level one BEE contributor status. The FSC makes provision for automatically qualifying entities to confirm their BEE status level by way of an affidavit, although these entities may also elect to confirm their BEE status by way of a BEE certificate, issued by an accredited BEE verification agency. 

As the FSC scorecard does deviate in some aspects rather substantially from the Generic Codes, it is advisable to make a careful study of the FSC and if necessary enlist the help of a BEE specialist to plan to meet the requirements of the FSC.