BEE - CONSTRUCTION SECTOR CHARTER

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Aveng regards its responsibility to help bring about the empowerment of previously disadvantaged South Africans as integral to being a model corporate citizen and a truly South African Company. The Group endorses government led initiatives in this arena and wholeheartedly supports the development of the Construction Sector Charter. Aveng will continue to proactively engage in the ongoing process to formalise the Charter as a Code of Good Practice and will support the implementation of the Charter in the sector.

The objectives of the Construction Sector Charter detailed below are closely aligned to the objectives of the Aveng group. The Charter objectives are:

• The transformation and growth of the construction sector;
• An improvement in the competitiveness and efficiency of the sector;
• The aim to achieve a substantial change in the racial and gender composition of the ownership, control and management within the sector;
• To address the critical skills shortage and skills development with a specific focus on women;
• To enhance entrepreneurial development and sustainable development of Black Economic Empowered (BEE) Small, Medium and Micro Enterprise (SMME) construction companies through strategic partnerships;
• To bring an end to the perceived malpractice of fronting in the industry.

Objectives are aimed at promoting a vibrant, competitive and sustainable construction sector in South Africa. Progress to date in this regard has been significant and includes;

• The signing of the Construction Sector Charter by all industry stakeholders and the Minister of Public Works, the late Ms Stella Sigcau on 17 March 2006.
• The submission of the application for section 12 approval of charter in terms of the B-BBEE Act No. 43 of 2003 by the Department of Public Works (DPW) in July 2006.
• A section 12 approval implies that the construction sector charter is binding on all stakeholders in the construction sector as defined in the Charter.
• The development and distribution of a circular to ensure the Charter is used as soon as practically possible in B-BBEE tender requirements was implemented  during September 2006.
• The DTi approval of the Charter in terms of section 12 of the Act and the gazetting of the Charter as a Section 12 Code on the 9^th February 2007.
• The DTi gazetting the Generic DTi Codes of Good Practice on the 9^th of February 2007.

The charter applies to all stakeholders in the creation, expansion and/or maintenance of fixed assets related to residential or non-residential buildings, infrastructure or other form of construction works in South Africa.

The charter consists of the charter document and scorecard. The scorecard consists of three focal areas broken down into seven elements. These comprise the seven pillars of Broad Based Economic Empowerment as detailed below:

The impact of these 7 pillars will be of great benefit and will support growth, sustainability and development as noted above and can be summarized as follows;

 

In the scorecard each of these seven elements is subdivided into sub-elements, each with its own weighting. Targets have been agreed for each sub-element.  These targets are seven year targets and where appropriate, interim four year targets have been agreed.

Aveng has historically been proactive in its approach to broad based empowerment and accordingly finds the South African operations of Aveng (Africa) and Trident Steel well placed with regard to their Broad Based Black Economic Empowerment (B-BBEE) credentials.

If one considers the various elements of the scorecard, commencing with ownership, the BEE deal finalised on 11 February 2005 is a broad based arrangement which, together with the relevant contributions from The Aveng Group more than adequately addresses both the economic interest and voting rights requirements of the charter.

The control section of the scorecard focuses on the composition of the board and executive management both from a black people and black women perspective. The employment equity section focuses on senior, middle and junior management from the same perspective. Whilst significant progress has been made in these areas, the level of black people and especially black women at all levels in the organisation is below the four and seven year targets set by the charter. This will continue to receive focus and attention by the Board.

The skills development section of the scorecard focuses on the total training spend, skills and management training for black people and black women, total learnerships, learnerships for black people, black women, and designated groups, bursaries for black people and mentorship. Skills development in the group has been a strong suit of the operations historically and is generally well aligned to the needs of the sector as defined in the scorecard. Skills development is the key to future sustainability and accordingly will receive a greater focus in the periods ahead.

The procurement section of the scorecard measures the discretionary spend of the Aveng(Africa) and Trident operations in South Africa. This section of the scorecard is designed to drive B-BBEE development in other sectors. Currently the group gives preference to B-BBEE enterprises in accordance with the requirements of the Preferential Procurement Policy Framework Act No. 5 of 2000 (PPPFA). To assist suppliers to evaluate their B-BBEE credentials and facilitate their understanding of interventions required to improve and develop their B-BBEE status, the group has focused these processes through the Chief Procurement Officer and developed an online evaluation process. In turn this facilitates procurement preferencing and evaluation. In giving preference, Aveng will not compromise on standards of service or quality. The current B-BBEE procurement spend falls short of the charter seven year target. This is anticipated to improve rapidly as a result of the central focus in this area and as the online process gains momentum and as suppliers to the group embrace B-BBEE.

The enterprise development section of the scorecard focuses on the promotion of sustainable development through a co-ordinated development of black enterprises which is not limited to SMMEs. Aveng believes that it can continue to add significant value in this arena as it has done in the past. This includes appropriate mentorship, training and skills transfer to the enterprises to be developed. The focus will be on quality and not quantity of enterprise development to ensure that the new enterprises are sustainable and develop into significant businesses over time.

Corporate Social Investment (CSI) in the scorecard can be both sector specific or general. The group undertakes significant CSI initiatives, as detailed in the sustainability report. It is anticipated that when all the initiatives are collated and measured that the group will continue to meet the seven year charter target on an ongoing basis.

In order to verify the B-BBEE status of the Aveng(Africa) and Trident Steel companies, interim evaluations are being conducted internally to enable Aveng to review progress made to date and set appropriate targets to ensure that appropriate progress is being made in each area on a continuous basis.  Aveng has also undertaken a detailed review of verification agencies and has selected a preferred partner to undertake the verification process. This will augment the work undertaken internally and provide the necessary validation of our B-BBEE credentials to our various clients.

In order for the construction sector charter to become a code and be legally binding in terms of section 9 of the B-BBEE Act No. 53 of 2003 on all organs of state (including central government, provincial government, municipalities, public entities, public business enterprises and Public Finance Management Act Schedule II and III companies) and at private sector clients operating within the build environment. The following process has to be concluded by the Charter Grouping Integrated Management Committee and various government departments:

• Undertake a third party review of construction sector charter. This was completed by the end of June 2007 and the necessary alignment of the Construction Charter with the DTi Codes of Good Practice will be undertaken in the second half of 2007.
• Develop the Charter Council constitution.
• Submit application for section 9 of the BBBEE Act No. 53 of 2003 approval of the construction sector charter to the DTi.
• A section 9 approval, as noted above implies that the construction sector charter becomes a code and is legally binding on the sector and all organs of state and takes precedence over the DTi generic Codes of Good Practice as gazetted.
• Approval and gazetting by DTi of the Construction Charter as a Section 9 Charter.