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ICT industry gets its own BEE Sector Codes

By November 8, 2016September 26th, 2019No Comments


The Departpicture1ment of Trade & industry published Amended ICT sector BEE Codes in the Government Gazette on November 7 2016. To date, this effectively means that there is a total of 3 Sector Codes that have been aligned to the October 2013 Amended BEE Codes.  The ultimate objective of the Amended ICT Sector Codes is to tackle the socio-economic legacy of apartheid by increasing participation of all South Africans in the economy so that it may better reflect the demographics of the country.  The other objectives of the charter include the support of skills development and training initiatives, the bridging of the ‘digital divide’ by actively promoting access to ICT and providing an enabling environment conducive to transparency, fairness and consistency when adjudicating on matters related to BEE in the ICT sector.

The ICT industry is one of the most important sectors of the South African economy in that broadcasting, electronics, information technology and telecommunications are all significant stakeholders in the sector and, thus, the introduction of Amended ICT BEE Codes will effectively influence all areas of the economy.  This development comes on the back of a study done earlier in the year by global research company, International Data Corporation (IDC).  The IDC had predicted that IT spending in South Africa will top US$26.6 billion in 2016 with organisations, “increasingly embracing digital transformation initiatives in a bid to streamline their costs and bolster their flexibility.”  Cities in major provinces such as Gauteng, Western Cape, and KwaZulu-Natal have engaged in “Smart-City” transformation activities in order to improve the quality of life of citizens, enhance the experience of businesses, and provide an environment conducive to economic development.

In the Amended ICT sector BEE Codes, the overall ownership target of 30% remains higher than that under the general codes (which is 25% plus one share). This deviation is a recognition by the ICT sector of the need to accelerate the pace of transformation in the sector and to ensure that more companies are owned by black people. This overall ownership target of 30% correlates with the Electronic Communications Act requirement for a minimum level of equity in a new individual licensee by historically disadvantaged individuals, including black people, of 30%.

In addition, the weighting of 15 points for the Enterprise Development indicator under Enterprise & Supplier Development scorecard is significantly higher than under the general codes (where the weighting for enterprise development is
five points).  The compliance target of 3% of net profit after tax (NPAT) under the ICT sector code for this element also remains higher than the compliance target under the general codes (1% of NPAT).  The weighting of 12 points for the Socio-economic development element under the Amended ICT sector code is also higher than that under the general codes (five points).

Where a beneficiary entity was, before 24 October 2014, measured under the general codes or any other sector code, instead of the ICT sector code, the measurement and recognition of enterprise development and Socio-economic Development contributions under the aligned ICT sector code will not be limited to contributions made to black owned ICT entities or ICT programmes. The measured entity will be entitled to earn weighting points as if the beneficiary entity was measured under the ICT sector code. This will be valid until the future review of the ICT sector code.

Most of the changes that have been made to the ICT sector code, to bring it into alignment with the general codes, are not unexpected. Once the new sector code is finalised, companies in the ICT sector can now commence to develop their transformation plans and strategies, particularly given the importance of BEE in the assignment of spectrum. While this might come as a shock to many, it is a right step in the right direction.

For further information, contact:

Thato Malebane, Marketing & Communications Manager

Tel: (+27) 011 259 4018