Media release after successful conclusion of alignment negotiations

Media release after successful conclusion of alignment negotiations

AGREED CONSTRUCTION SECTOR CODES – ADVISORY 25 MAY 2016

It gives us pleasure in informing you that the Construction Sector Charter Council (“CSCC”) convened alignment negotiations between the Established and Emerging businesses and have concluded the negotiations on the Amended Construction Sector Codes (“ACSC”) Scorecard, bringing to an end 22 months of protracted negotiations characterized by tension, deadlocks and balanced compromises. The ACSC sets out the targets and weighting points to measure BBBEE spend in a sustainable manner. The ACSC will now be gazetted in Draft Form for public comment, and then in the final legal gazette.

The negotiating parties are proud to advise that the forward-thinking and progressive tone set by the crafters of our existing codes, has been continued and amplified in the ACSC. The ACSC are without doubt the most transformative of all sectors, but are realistic, achievable and will provide invaluable benefit to our industry. We have used the alignment exercise as an opportunity to address and rectify many construction-related issues for the benefit of our industry as a whole. These will become evident as the codes are unpacked and understood. One of the biggest achievements in the ACSC, is that they now include all suppliers and manufacturers to the Construction Industry, and this legal mandatory compliance by these industries is clearly outlined in the Codes.

The contents and implications of the ACSC scorecard can be summarized as follows:

  1. MEASUREMENT WEIGHTING POINTS
  • A total of 123 weighting points, 5 points more than the weighting points of 118 set out in the DTi Revised Generic Codes of Good Practice (“DTi RCOGP”), have been agreed to. 4 of these points have been allocated to business where black ownership exceeds the prescribed target and 1 additional point in sustainable Socio Economic Development.

 

  1. FOCUS ON MICRO ENTERPRISES (EMEs) CONTRIBUTING TO SKILLS SPEND AND SUPPLIER DEVELOPMENT 
  • The DTi RCOGP exempt all businesses and measured entities whose annual turnover is less than R 10 million. This means that these become an automatic BBBEE level 1 if they are 100% black owned and BBBEE level 2 if they are between 51% and 100% black owned and they are not obliged to contribute to training spend.
  • In the construction industry a large percentage of companies fall into this bracket and the construction EME classification now ensures that EME companies who do not spend the QSE sub-minimum on training are discounted but if they spend the full QSE spend on training and Enterprise Development they can improve their BBBEE rating by 2 levels.
  • This methodology will encourage and incentivize start-ups, emerging and growing enterprises to contribute to the very urgent need of training for all size companies in the construction industry.

 

  1. OWNERSHIP TARGET
  • Once again the ACSC have set the highest percentage of black economic interest in all the Sector codes and the DTi RCOGP. The weighting points of 31 ensures that the focus of ownership has the highest percentage weighting of the entire scorecard of 123 points.
  • Compared to the target of 25% + 1 in the DTi RCOGP, which is reviewable over a period of 10 years, the targets for black ownership in the Construction Industry is set at 5% for the period of year 1 – 4 and 35% from year 4 until review, with great emphasis being placed on the economic interest of black designated groups.
  • It must be noted that the Construction Sector negotiation and alignment teams were the only sector to include Unions (NUM) in their negotiations, and their advice and aspirations were noted, in particular with regard to Ownership and Skills It must therefore be noted that the percentage ownership for Black Designated groups (Employee Share Ownership Schemes) has been increased by 400% over that in the DTi RCOGP to 12% after year 4. The target is 3% in the DTi RCOGP.
  • Black new entrants receive a target of 5% for contractors and 6% for BEPs compared to the 2% set out in the DTi RCOGP.

 

  1. MANAGEMENT CONTROL
  • The ACSC makes an important distinction between target contractors and weighting points are allocated for the recognition of black people in the management of construction sector measured entities with the highest target being 88% (junior), 75% (middle) and 60% (executive and senior).
  • A total of 22 points have been allocated for management control.
  • More importantly, some bonus weighting points (2 for Contractors and 2 for BEPs) are allocated for the Black Youth as a percentage of the total number of employees in a certain construction company.

 

  1. SKILLS DEVELOPMENT
  • Although the DTi RCOGP has set the target of 6% of the employee’s leviable amount for Skills Development spend, the ACSC set the targets on 2% for the first 2 years, 5% over a period of 3-4 years and 3% after year 5 for both contractors and BEPs.
  • This is in line with the rationale of the 2009 Construction Sector Codes of Good Practice where training percentages were accepted to be 50% of the Generic Codes, as the Construction industry are the third highest employer of labour with the lowest margins of all sectors. The increase noted above still represents an almost 300% increase i.e from 5% black training spend to 3%.
  • It must be noted that although the percentages are less for large companies, that the ACSC now include a training priority for all size companies in the industry including previously Exempt Micro Enterprises.
  • A total of 26 points have been allocated towards this element. Of these, a total of 4 bonus points have been allocated to recognize initiatives that promote black employees that complete mentorship programmes during the last three (3) years of the measurement period (2 points) and on the number of black employees who are registered with industry professional bodies (2 points).
  • The urgent need to drive the training of black youth and unemployed persons has therefore been addressed in these Codes.

 

  1. PREFERENTIAL PROCUREMENT AND SUPPLIER DEVELOPMENT
  • The 2009 Construction Codes contained unique and detailed methodologies on the growth and development of small and medium black-owned companies that have proved invaluable to the growth of these companies in the industry. These unique features have been retained and amplified in the ACSC.
    Preferential Procurement
  • The targets and weightings of the DTi RCOGP have been adhered to and additional bonus points allocated to procurement from 51% black owned suppliers and 35% black woman owned suppliers.
  • A total of 38 weighting points have been allocated on this element spread between preferential procurement and supplier development programmes and contributions.

 

  1. SOCIO-ECONOMIC DEVELOPMENT (SED)
  • This element is usually used to drive soft community based initiatives. The ACSC incentivizes measured entities to focus a significant portion of their SED spend and annual contribution on sustainable projects in communities with limited services where they are doing business.
  • Unlike in the DTi RCOGP which has 5 points allocated, the ACSC has allocated 6 points for SED.
  • Through this element, measured entities would be able to implement broad SED initiatives that will have industry specific impact such as post-retrenchments re-skilling and social housing for construction blue-collar employees.

Advisory issued on behalf of the CSC Code Alignment Negotiating Team 25 May 2016