US embassy cable - 04PRETORIA5316

UNCLAS SECTION 01 OF 02 PRETORIA 005316 
 
SIPDIS 
 
DEPT FOR AF/EPS AND AF/S/TCRAIG AND KGAITHER 
COMMERCE FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
TREASURY FOR BRESNICK, LSTURM, AND AJEWELL 
DEPT PASS USTR FOR PCOLEMAN, WJACKSON AND CHAMILTON 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EINV, ETRD, EFIN, ECON, SF 
SUBJECT:  TRADE MINISTER RELEASES BEE CODES OF GOOD 
PRACTICE 
 
REF: PRETORIA 5063 
 
(U) This cable is sensitive but unclassified.  Not 
for Internet distribution. 
 
1.  (SBU)  SUMMARY.  South Africa's Minister of Trade 
and Industry Mandisi Mpahlwa released three draft 
Codes of Good Practice providing long-awaited 
guidelines on the Black Economic Empowerment 
Framework, Equity Ownership, and Management.  The 
Minister said these Codes come at a time of 
"inconsistent application of Broad-Based Black 
Economic Empowerment (BBBEE) both from the public and 
private sector."  The Black Economic Empowerment 
Framework introduces a new generic scorecard 
recommending that companies achieve 25.1 percent BEE 
equity levels, 40 percent black management, 50 
percent procurement from black-owned firms, and 50 
percent equality in employment.  Sector charters 
should use these figures as a guide and limit 
variations to 5 percent.  Greater deviations might be 
accepted if objectively "based on sound economic 
principles."  A DTI official told Econoff that the 
Minister would eventually release a statement on 
"Ownership for Multinationals" to address the issue 
of exemptions for multinationals.  Public comments on 
these Codes will be accepted for the next 60 days. 
END SUMMARY. 
 
2.  (U) South Africa's Minister of Trade and Industry 
Mandisi Mpahlwa released three draft Codes of Good 
Practice December 8.  The Codes provide long-awaited 
guidelines on the Black Economic Empowerment 
Framework (Code 000), Equity Ownership (Code 100), 
and Management (Code 200).  Public comments on the 
Codes will be accepted for the next 60 days.  The 
Minister said these Codes come at a time of 
"inconsistent application of Broad-Based Black 
Economic Empowerment (BBBEE) both from the public and 
private sector" and that "there has been a lack of 
full understanding and appreciation of the principles 
of BBBEE."  The Minister said that these Codes will 
ensure harmonization among the various industry 
charters and will bring about "predictability, 
consistency, and sustainability in the marketplace." 
 
3.  (U) The Minister clarified that he is not 
releasing these Codes as an approved Cabinet 
document.  He said that while Cabinet members 
reviewed the draft Codes and gave a precursory go- 
ahead, the BBBEE Act requires a 60-day public comment 
period which may lead to modifications of the Codes. 
The Department of Trade and Industry (DTI) plans to 
review public comments and have these three Codes 
gazetted in March.  Another seven Codes will be 
released in a "second phase." 
 
4.  (U) The Codes of Good Practice explain and 
clarify issues pertaining to the various BEE 
scorecard components and consist of one or more 
"statements."  A "statement" is a key principle 
guiding the implementation of a particular BEE issue. 
These Codes are not to be confused with industry 
Charters that, once approved and gazetted by DTI, 
will also be referred to as Codes of Good Practice. 
The three Codes released December 8 are available at: 
www.dti.gov.za. 
 
5.  (U) The Black Economic Empowerment Framework 
(Code 000) includes a new generic scorecard 
recommending clear targets.  Among other things, the 
scorecard recommends that companies achieve 25.1 
percent BEE equity levels, 40 percent black 
management, 50 percent procurement from black-owned 
firms, and 50 percent equality in employment.  The 
Minister said that sector charters should use these 
figures as a guide and that variations should, as far 
as possible, be limited to 5 percent.  He also said 
that industries with existing Charters that are not 
in line with the new generic scorecard would have 
twelve months in which to adjust their targets. 
Deviations greater than 5 percent might be accepted 
if objectively "based on sound economic principles." 
In response to a question, the Minister stated that, 
ultimately, scorecard targets of gazetted charters, 
that is, charters approved by DTI and the sector 
department, would take precedence over DTI's generic 
scorecard targets. 
 
6.  (U) Code 100 on Equity Ownership outlines the 
various elements of ownership: economic interest and 
voting rights.  The Code recommends that ownership 
points be divided between "facilitation points" and 
points that will accrue as the BEE partner(s) achieve 
unencumbered equity.  The Minister said this 
arrangement would ensure that companies are 
separately rewarded for facilitating an empowerment 
transaction as well as the sustainability of the 
transaction. 
 
7.  (SBU) A DTI official told Econoff that the 
Minister would release at an unspecified date an 
Equity Ownership statement on "Ownership for 
Multinationals."  He said that this statement would 
address the issue of exemptions for multinationals 
and would likely generate a great deal of 
controversy.  FRAZER