BUSINESS DAY/ 13 NOVEMBER 8.43 / LINDA ENSOR
The code requires companies to procure at least 60% of their defence materials and technologies from local producers
Rob Davies. Picture: BUSINESS DAY
Trade and industry minister Rob Davies has gazetted the broad-based BEE sector code for the defence sector in a bid to accelerate the pace of transformation in the industry.
The code requires companies to procure at least 60% of their defence materials and technologies from local producers. Another highlight is that the black ownership target has been increased to 30%, which is higher than the 25% benchmark of the generic codes.
The minister emphasised the importance of localisation to improve industry and grow the economy. “We therefore applaud the defence sector for creating a link between localisation and empowerment in this sector code.
“All entities operating in the SA defence industry in its entirety, including national or provincial departments, state-owned and private enterprises, will from the date of gazette of the sector code be measured according to its provisions,” Davies said in a statement on Monday.
“This includes those entities providing products and services to the state — whether they are procured from local or foreign-owned enterprises, defence-manufacturing enterprises, research and development enterprises and other entities, as well as any roleplayer and stakeholder that might opt in.”
The National Defence Industry Council established a team to develop a sector code. The team, which comprised officials of the department of defence, Armscor, SA Aerospace Maritime and Defence Industries Association, drafted the code after a process of consultation and negotiation.
Davies said analysis of the comments received during the 60-day public commentary period showed there was general support for the sector code.
Defence and military veterans minister Nosiviwe Mapisa-Nqakula will appoint a sector charter council to monitor implementation of the code and conduct regular reviews.
The preamble to the code notes the decline in local spending in the defence industry, the exclusion of black military veterans from the economy, the inability of SA defence businesses to meaningfully expand into the rest of the African continent, and the continued over-reliance of the industry on monopolies, oligopolies and foreign enterprises.
In terms of the code, stakeholders have committed themselves to achieving a minimum ownership target of 25% held by black people in the first year after promulgation of the code, 30% in the second year and 35% in the third year. They also committed to achieving a minimum of 10% economic interest held by black women in the first year and 15% in the second and third years.
The code also places an obligation on foreign enterprises to place 75% of their contractual obligations under the defence industrial participation programme with BBBEE-compliant suppliers.
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