This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 PRETORIA 001904 
 
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 ECIN ECON SF
SUBJECT:  MUCH IMPROVED ICT CHARTER DELIVERED TO SAG 
 
REFTEL:   A) PRETORIA 1166 
 
          B) PRETORIA 937 
          B) PRETORIA 922 
          B) PRETORIA 425 
          C) 04 PRETORIA 5063 
 
(U) This cable is sensitive but unclassified.  Not for 
Internet distribution. 
 
¶1.  (SBU) SUMMARY.  The information and communications 
technology (ICT) Charter Steering Committee delivered its 
final draft of the ICT empowerment Charter to Minister of 
Communications Ivy Matsepe-Casaburri May 5.  This draft has 
been reduced from ninety to thirty pages and is a 
significant improvement in both form and substance from 
earlier drafts.  The draft elaborates on equity exemptions, 
overscoring, bonus points, as well as the roles and 
composition of the Charter Council.  Initial responses from 
U.S. multinational firms operating in South Africa are 
positive although some say that additional clarification is 
needed on equity exemptions and approved equity equivalents. 
Additional changes may be made to the Charter as the 
Department of Trade and Industry (DTI) releases additional 
empowerment guidelines (aka Codes of Good Practice).  The 
ICT Charter Steering Committee has requested that the 
Charter be published as a Code of Good Practice for the ICT 
industry, which means that efforts by ICT firms to comply 
with scorecard targets will be measured according to the ICT 
Charter scorecard as opposed to DTI's generic scorecard.  A 
copy of the ICT Charter has been sent to AF/S.  END SUMMARY. 
 
¶2.  (SBU)  Following substantive April consultations with 
U.S. multinationals and other industry stakeholders, the 
information and communications technology (ICT) Charter 
Steering Committee delivered its final draft of the ICT 
empowerment Charter to Minister of Communications Ivy 
Matsepe-Casaburri May 5.  Executive Director of the American 
Chamber of Commerce in South Africa (AmCham) Luanne Grant 
and representatives of U.S. multinationals operating in 
South Africa told Econoff that overall they are pleased with 
the new draft Charter., although implementation will present 
new challenges.  Equally important, the new draft Charter 
represents acceptance of the principle of equity offsets. 
They also said that the Charter appears to be more in line 
with their recommendations. 
 
--------------------------------- 
NEW ICT CHARTER SCORECARD TARGETS 
--------------------------------- 
 
¶3.  (U)  This draft was trimmed from ninety to thirty pages 
and is a significant improvement in both form and substance 
from earlier versions.  ICT Charter scorecard targets are in 
line with the Department of Trade and Industry's generic 
scorecard published with the Codes of Good Practice in 
December 2004.  ICT Charter targets are as follows: 
 
Access to ICTs and Corporate Social Investment:  1.5 percent 
of profit before tax. 
 
Enterprise Development:  Quantifiable support equal to 5 
percent of eligible procurement for black small businesses. 
 
Preferential Procurement:  70 percent of eligible 
procurement should be conducted with empowered companies. 
 
Skills Development:  2 percent of payroll for investment in 
skills development programs.  Companies should also provide 
learnerships (i.e., internships) equivalent to 5 percent of 
its number of employees. 
 
Employment Equity:  50 percent of senior management should 
be historically disadvantaged individuals (HDIs).  65 
percent of other management positions should be held by 
HDIs. 
 
Management and Control:  60 percent of a company's governing 
body should be comprised of HDIs.  Of this number, half 
should be women. 
 
Equity Ownership:  30 percent. 
 
--------------------------- 
SIGNIFICANT CHARTER CHANGES 
--------------------------- 
 
¶4.  (SBU)  U.S. multinational firms are pleased with a 
number of changes that were made in the Charter.  For 
instance, a company's BEE status is no longer tied to 
minimum requirements in each of the seven scorecard 
components.  Instead, BEE status is based on the cumulative 
score.  With the opportunity to earn bonus points, this 
effectively allows companies to overscore in certain 
scorecard areas to compensate for low scores in others.  The 
role and composition of the ICT Charter Council were also 
clarified.  In addition, companies were concerned that the 
name of the certificate to be given to companies exempted 
from the equity ownership target carried negative 
connotations.  The certificate will now be called a 
"Certificate of Approval" rather than a "Certificate of 
Permitted Non-Compliance." 
 
¶5.  (SBU)  Finally, while no blanket exemptions will be 
granted in the area of equity ownership, exemption 
conditions were clarified.  Companies seeking a Certificate 
of Approval will apply to the Charter Council and disclose 
their total revenues accrued directly or indirectly from 
South Africa.  The companies will propose equity 
alternatives such as establishing partnerships with black 
companies to increase research and development activities, 
expand manufacturing or assembling plants, or identify new 
investments.  Equity exempt companies will be allocated 
points for these equity equivalents based on the ratio of 
the cost of investment to total revenue generated   in South 
Africa.  IBM Director of BEE and Corporate Planning Jimmy 
Manyi told Econoff that this additional detail is a "step in 
the right direction," but that further refinement and 
clarification is needed on these points. 
 
------------------------------------- 
IS THIS REALLY THE FINAL ICT CHARTER? 
------------------------------------- 
 
¶6.  (U)  While ICT Charter Steering Committee Chairperson 
Joe Mjwara described this as the final draft Charter, he 
acknowledged that it may be updated as the remaining 
unpublished Codes of Good Practice become available.  After 
the Minister of Communications signs off on the Charter it 
will undergo a 2-3 week Cabinet review before being 
published by DTI for a 60-day public comment period.  It is 
possible that changes could be proposed during any one of 
these subsequent phases. 
 
¶7.  (U)  The ICT Charter Steering Committee is asking 
government to publish this Charter as a Code of Good 
Practice for the ICT industry as opposed to a Transformation 
Charter.  Redundancy in the use of the term "Code of Good 
Practice" has been confusing to industry.   DTI's Codes of 
Good Practice are government's general BEE guidelines.  In 
addition, an industry charter may also become a Code of Good 
Practice for that sector.  Transformation Charters have been 
developed by major stakeholders and advance the objectives 
of the Broad-Based BEE Act, but fall short of complying with 
the requirements of the Codes of Good Practice.  This 
deficiency prevents the Charter from being published as an 
industry Code of Good Practice.   The difference between the 
two is significant.  DTI's generic scorecard will be used to 
measure empowerment progress where industries are governed 
by a Transformation Charter whereas the Charter scorecard 
will be used to measure empowerment compliance only when the 
industry Charter has been published as a Code of Good 
Practice. 
 
¶8.  (U)  A copy of the latest draft of the ICT Charter has 
been sent to AF/S. 
 
FRAZER