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ZNR UUUUU ZZH
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FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC PRIORITY 1457
INFO RUEHTN/AMCONSUL CAPE TOWN 2350
RUEHDU/AMCONSUL DURBAN 7443
RUEHJO/AMCONSUL JOHANNESBURG 3853
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 PRETORIA 000575 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR AF/S; AF/EPS; EB/TPP/MTA 
USDOC FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
DEPT PASS USTR FOR FLISER 
TREASURY FOR BCUSHMAN 
 
E.O. 12958: N/A 
TAGS: EINV ETRD EFIN ECON USTR SF
SUBJECT: SOUTH AFRICA: DRAFT BEE CODE 300: EMPLOYMENT 
EQUITY 
 
REF: (A) 05 PRETORIA 4854 
 
     (B) 05 PRETORIA 4855 
     (C) 05 PRETORIA 4856 
     (D) 06 PRETORIA  337 
 
Sensitive but Unclassified; Protect Accordingly.  Not For 
Internet Distribution. 
 
¶1. (U) Summary.  The South African Department of Trade 
and Industry (DTI) released for public comment drafts of 
Broad-based Black Economic Empowerment (BEE) Codes of 
Good Practice belonging to the second and final phase on 
December 20, 2005.  The Minister of Trade and Industry 
plans to promulgate both the first (which have been 
finalized) and the second phases of the BEE Codes of Good 
Practice before the end of 2006.  Included in the second 
phase is Code 300.  This code sets forth the scoring 
criteria for firms striving to comply with BEE objectives 
as they relate to general employment.  The employment 
equity portion accounts for 10% of the BEE scorecard.  In 
each instance, the actual number of points awarded is 
calculated by multiplying the fraction of a compliance 
target (there are six) achieved by the number of possible 
points allotted for each target.  In a recent meeting of 
their BEE Committee, members of the local American 
Chamber of Commerce voiced a number of concerns about 
this draft statement.  Comments on all BEE codes of good 
practice belonging to the second phase must be submitted 
to DTI by March 31 2006. End Summary. 
 
¶2. (U) On December 20 2005, the South African 
Department of Trade and Industry (DTI) released for 
public comment drafts of BEE Codes of Good Practice 
belonging to the second and final phase.  Comments on 
these draft codes must be submitted to DTI by March 31 
¶2006.  While the BEE Codes of Good Practice belonging 
to the first phase have been finalized (Refs A, B, and 
C), the Minister of Trade and Industry will not 
promulgate them until the codes belonging to the second 
phase have also been finalized.  DTI wants this to 
occur before the end of 2006. 
 
¶3. (U) Codes belonging to the second phase deal with 
employment equity (Code 300), skills development (Code 
400), preferential procurement (Code 500), enterprise 
development (Code 600), residual contributions (Code 
700), and small and medium sized enterprises (code 1000 
- 1700).  Also included in the second phase are 
subsections to Codes 000 (the BEE Framework for 
Measurement) and 100 (BEE Equity).  The two subsections 
for Code 000 deal with misrepresenting BEE status 
(Statement 001) as well as and verification issues 
relating to complex structures (Statement 002).  The 
four subsections for Code 100 deal with guidelines for 
the recognition of BEE ownership by BEE targeted 
warehouse funds (Statement 102), multinational 
companies (Statement 103), public entities and organs 
of the state (Statement 104), and companies limited by 
guarantee and Section 21 (i.e. nonprofit) companies 
(Statement 105).  All may be sourced from DTI's 
website: www.thedti.gov.za. 
 
¶4. (U) This cable focuses on Code 300, which sets forth 
the scoring criteria for firms striving to comply with 
BEE objectives as they relate to general employment. 
Subsequent cables will address issues of import that 
the other draft codes present. 
 
CODE 300 
-------- 
 
¶5. (U) Code 300 sets forth six compliance targets 
pertaining to employment equity.  Total points account 
for 10% of the BEE scorecard.  In each instance, the 
actual number of points awarded is calculated by 
multiplying the fraction of a compliance target achieved 
by the number of possible points allotted for each 
target.  Excess scoring for exceeding any of the 
employment equity targets is not possible.  For a more 
complete understanding as to how this portion of the 
generic scorecard factors into the rest of the scorecard, 
 
PRETORIA 00000575  002 OF 003 
 
 
please refer to Ref A. 
 
¶6. (U) Under draft Code 300, a firm can earn a maximum of 
two points if black people with disabilities represent 4% 
of the total full-time employees.  A firm can earn a 
maximum of two points if 60% of senior management is 
black and an additional two points if black women 
comprise 30% of senior management.  A firm can earn a 
maximum of two percentage points if 75% of its 
professionals, experienced specialists, and middle 
managers are black and one percentage point if 40% are 
black women.  A firm can earn a maximum of one point if 
80% of its qualified workers, junior management, 
supervisors, foremen, and superintendents are black.  The 
following table spells out the maximum possible points 
and employment targets, as percentage of a firm's general 
work force, for employment equity in the BEE scorecard: 
                                                  BEE 
                                        Points   Target 
                                        ------   ------ 
Black people with disabilities            2        4% 
Black people at senior management level   2       60% 
Black women at senior management level    2       30% 
Black people as professionals,            2       75% 
  specialists and middle management 
Black women as professionals,             1       40% 
  specialists and middle management 
Black people employed as qualified        1       80% 
  workers, junior management, 
  supervisors, foreman, and 
  superintendents 
 
Concerns 
-------- 
 
¶6. (SBU) On February 1 2006, members of the BEE Committee 
of the local American Chamber of Commerce met to discuss 
draft Code 300.  Committee members agreed that the 
employment equity targets were onerous.  A human 
resources consultant pointed out that an average firm 
with an 8% attrition rate would have to hire only blacks 
for six to eight years running to comply with the target 
for hiring blacks.  A large automobile manufacturer added 
that its attrition rate was considerably lower so it 
would take much longer.  The target of 4% for disabled 
blacks suggested that there were as many as 600 thousand 
disabled blacks able to work and with evenly distributed 
skills.  The target for learnerships (i.e., one-year paid 
internships) would make one out of every five employees 
an intern.  This seemed to assume that industry was the 
only source of training. 
 
¶7. (SBU) Moreover, the paradigm was rather strict, 
setting forth specific categories within employment 
equity for companies to score points, but with little 
flexibility for overscoring in one area to compensate for 
difficulties with another.  Several committee members 
thought that such high compliance targets should be 
phased in over time and with recognition that not all 
categories of employees were immediately available.  The 
committee noted that while these targets would be 
difficult for existing companies, they would be even more 
difficult for companies starting without a base of 
operations in South Africa.  This could hamper future 
investment. 
 
Pertinent Definitions 
--------------------- 
 
¶8. (U) "Senior management" means those occupational 
levels as determined through the use of selected grading 
systems as employed in South Africa. 
 
¶9. (U) "Top management" means those occupational levels 
as determined through the use of selected grading systems 
as employed in South Africa 
 
¶10. (U) "Black" as black, "coloured," and Indian South 
Africa citizens (or those who could have applied for 
South African citizenship, if permitted) who suffered 
or whose descendants suffered discrimination under the 
 
PRETORIA 00000575  003 OF 003 
 
 
apartheid regime. 
 
¶11. (U) According to the Employment Equity act 55 of 
1998, "people with disabilities" means people who have a 
long-term or recurring physical or mental impairment 
which substantially limits their prospects for 
advancement or entry into employment. 
 
¶12. (U) The "Economically Active Population" is defined 
by Statistics South Africa as the total working 
population aged 15 to 65 less the non economically active 
population.  This excludes full-time scholars and 
students, full-time homemakers, retirees, and those 
unable or unwilling (have not taken active steps to look 
for work in the four weeks prior to the survey) to work. 
In September 2005, Statistics South Africa estimated that 
the Economically Active Population was 16.788 million. 
TEITELBAUM