Knowledge is Power The Defence Sector Code

NPI Governance Consulting is a trusted B-BEE advisor to international investors as well as local and multinational

organisations. The NPI Governance Consulting team consists of Israel Noko, Kelebogile Ntsimane, Thabo Somo,

Thulisiwe Maguma, Tania Heyneke, Zaheera Khota and Mahali Molapo. Each provides B-BBEE advisory and

consulting services with proven best practice in project management to secure the successful implementation

of initiatives across all sectors. The NPI Team collectively has 70 years experience in the field of B-BBEE. NPI is

a proud member of the UN Global Compact and is an advocate for sustainable economic growth and strategic

transformation intelligence, with the premise of 'Pioneering Equitable Growth in Africa’. The King Corporate

Governance Principles guide all implementation methodologies.

B-BBEE compliance has an impact on business and the economy

as a whole. When it is sustainably and meaningfully implemented,

it can provide organisations with healthy leverage in gaining and

retaining business. However, for The Codes of Good Practice

(The Codes), the measurement benchmark of B-BBEE, to be

effective in their inclusive economic objective, it is imperative that

organisations have an in-depth understanding of their expectations

matched with a sustainable approach to drive their business. A

chosen B-BBEE approach, be it a reactive or proactive one, will

affect an organisation not only in financial terms, but in terms of

their reputation and the overall benefits that a well developed and

executed B-BBEE strategy can have.

The gazetting of a new or amended Code catapults both those

operating in the B-BBEE arena and stakeholders affected by the

gazette into a frenzy. As a gazette is published, the B-BBEE sector

moves from Defcon 5 to Defcon 1. What’s App messages go into

overdrive, as those driving the B-BBEE sector come to terms

with the expectations of a gazette. This frenzy stems from the

Department of Trade and Industry (DTI) having mastered the art of

publishing a gazette on a Friday afternoon.

Following a gazette, those operating in the B-BBEE arena in

quick succession receive panicked calls: “What does this mean

for us?”; “When does it become effective?”; or “How quickly

can we implement the amendments of the gazette?”. Slowly as

the expectations and consequences of a published gazette filter

through to organisations, those operating in the B-BBEE arena

move from a high alert Defcon 1 down to Defcon 5. The process

continues.

In this article, the NPI Governance Consulting Team will focus on

the newly gazetted Defence Sector Code. This Code presents

profound operational changes to encourage participation from

'Black’ Designated Groups in the economy.

This article outlines the Defence Sector Code and will provide

an overview of its origins, guiding structures and its ultimate

expectations.

The Defence Sector Codes was gazetted on 18th November 2018

and immediately came into effect. Before the gazette, organisations

operating within this sector were measured on the Generic Codes.

The core aim of this Sector Code is to secure effective participation of 'Black' People in the sector and the broader economy through promoting:

> The participation of and growth of SMMEs;

> The growth of technical innovation;

> The growth of the sector as profitable and sustainable;

> Local manufacturing capability for both the local and export market;

> The acquisition, retention and transfer of critical, technical and scarce skills;

> The protection of South Africa’s Sovereign Capability in the sector;

> Entrepreneurship, especially among 'Black' Designated Groups;

> Entrepreneurship and new enterprises in the sector; and

> Job creation.

The core aim of this Sector Code is to address the challenges hampering the growth and sustainability of the sector, which are identified as :

> Declining local spending;

> A declining economy;

> The rising threat of socio-political instability as a result of economic exclusion and income inequality;

> The exclusion of 'Black' Military Veterans from the economy;

> The inability of businesses in the sector to meaningfully expand into the African continent;

> Continued over-reliance on monopolies, oligopolies and foreign enterprises operating in the sector;

> A lack of adequate protection and preferential access for local Defence manufacturers over the international competition; and

> Regulatory constraints.

Scope of Application

The Defence Sector Code applies to all organisations who derive more than 50% of their annual turnover from operating in the sector. These

include all national and provincial departments, organs-of-state, public and private enterprises providing Defence material and/or any other supplies,

products or services to the Department of Defence and Military Veterans (DoD). This application extends to all DoD agencies irrespective of whether

they procure from local or foreign organisations.

Compliance Reporting

All organisations falling into the ambit of this Sector Code must provide an annual report to the Charter Council. This submission is required within

12-months of the Gazette. The report must outline the progress of an organisation’s transformation objectives and include an audited scorecard in

line with SANAS requirements.

Threshold Eligibility

The financial thresholds for this Sector Code are broken down as follows

The core aim of this Sector Code is to secure effective participation of 'Black' People in the sector and the broader economy through promoting:

> The participation of and growth of SMMEs;

> The growth of technical innovation;

> The growth of the sector as profitable and sustainable;

> Local manufacturing capability for both the local and export market;

> The acquisition, retention and transfer of critical, technical and scarce skills;

> The protection of South Africa’s Sovereign Capability in the sector;

> Entrepreneurship, especially among 'Black' Designated Groups;

> Entrepreneurship and new enterprises in the sector; and

> Job creation.

The core aim of this Sector Code is to address the challenges hampering the growth and sustainability of the sector, which are identified as :

> Declining local spending;

> A declining economy;

> The rising threat of socio-political instability as a result of economic exclusion and income inequality;

> The exclusion of 'Black' Military Veterans from the economy;

> The inability of businesses in the sector to meaningfully expand into the African continent;

> Continued over-reliance on monopolies, oligopolies and foreign enterprises operating in the sector;

> A lack of adequate protection and preferential access for local Defence manufacturers over the international competition; and

> Regulatory constraints.

Scope of Application

The Defence Sector Code applies to all organisations who derive more than 50% of their annual turnover from operating in the sector. These

include all national and provincial departments, organs-of-state, public and private enterprises providing Defence material and/or any other supplies,

products or services to the Department of Defence and Military Veterans (DoD). This application extends to all DoD agencies irrespective of whether

they procure from local or foreign organisations.

Compliance Reporting

All organisations falling into the ambit of this Sector Code must provide an annual report to the Charter Council. This submission is required within

12-months of the Gazette. The report must outline the progress of an organisation’s transformation objectives and include an audited scorecard in

line with SANAS requirements.

Threshold Eligibility

The financial thresholds for this Sector Code are broken down as follows