A Targeted Procurement Strategy to enhance BEE
LIBERTY HOLDINGS / 20 FEBRUARY 2018 - 11.20 / STAFF REPORTER
In this article, the Fourth in a series on "The Financial Sector BEE Charter and You", we talk about procurement and enterprise development
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The Charter refers to procurement – what does it mean?
"Procurement" means the purchasing by a financial institution of goods and services. As mentioned in previous articles the Financial Sector Charter is a broad based empowerment charter and this factor comes through strongly in procurement. When financial institutions looking to buy services and goods from other companies, they will require those companies to be BEE Accredited, that they are validated in terms of this charter as being BEE companies. Procurement also includes Enterprise Development, which is the support by financial institutions of existing Black Small and Medium sized Enterprises (SME’s) and Black Economic Empowerment (BEE) companies.
What is included in terms of procurement in the Charter?
In terms of the Financial Sector Charter, it includes all expenditure by a financial institution, except for commissions paid to brokers; premiums paid to reinsurers by insurance companies; purchases of fixed property and property rentals; classes of expenditure covered in other places in the Charter, e.g. salaries and wages paid to staff; expenditure where there is a natural or existing monopoly, e.g. electricity and water; items and services where the identity of the supplier is imposed by the institution's global policy for technical reasons, e.g. IT expenditure; inter-company charges for services rendered by other members of the financial institution's group; corporate social investment expenditure, and VAT. Every other item of goods or services purchased by a financial institution in the course of its business constitutes procurement and is included in the Charter.
What are the procurement targets?
Provided that there are transformation charters in other sectors that is, Information and Communications Technology sector (the “ICT” sector), the Advertising and the Automotive and Building sectors of the economy and that international suppliers are subject to those charters, 50% of the value of all financial sector procurement must be from BEE-accredited companies by 2008 and 70% by 2014. Suppliers are accredited in terms of their ownership status as being black-influenced (10% - 24% black shareholdings), black-empowered (25% - 50% black shareholding) and black-owned (51% or more black shareholding). There are different weightings attached to procurement from BEE-accredited suppliers, depending on their accreditation status. At least two-thirds of an institution’s expenditure must be spent with a BEE-accredited company as the primary supplier. The balance may be channeled via a non-BEE accredited company as the primary supplier. Only the BEE portion of the expenditure will count towards the procurement target.
What other support measures are mentioned in the Charter relating to procurement?
Financial institutions will also provide support to black SME’s in the form of assistance in tendering (proposing) for financial sector business, reserving certain areas of procurement for black SME’s, promoting early payment for services and encouraging existing suppliers to become BEE-accredited.
Under Enterprise Development additional support is provided by fostering new and developing existing BEE-accredited companies through skills transfer, secondment of staff, infrastructural support and giving technical and administrative support and assistance. In particular, the insurance sector has committed itself to promoting the development of black brokers through whom insurers sell their products and services.
When will procurement targets be reviewed?
In 2005, the Charter Council will assess the status of charters in sectors servicing the financial sector, being the ICT, advertising, automotive and building sectors, to review the 2008 and 2014 targets for progress.
In the next article we will focus on the Empowerment Financing.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER