Page 8 - Q&A 2019/2020

The New Defence Sector BEE Code aims to
develop the defence sector BEE

January 2019

“Our company supplies specialised products exclusively to organisations in
the defence sector. Our company is BEE compliant, but with our certificate
having to be renewed soon, I am unsure whether the new Defence Sector
BEE Code will apply to our business. Up to now we have reported under the
Generic BEE Codes. What will the position be going forward?”
The Defence Sector BEE Code (“Defence Code”) was published on 9 November
2018 with the aim of transforming the South African Defence Industry. Before the
Defence Code, private companies which supplied products and services to the
defence industry, were required to report under the Generic BEE Codes of Good
Practice (“Generic Codes”) in the absence of an industry specific charter. With
the Defence Code now published, it will apply to the following entities:
• All entities operating in the South African defence industry, including
national or provincial departments, state-owned and private
enterprises;
• Entities providing products and services to the State - procured from
local or foreign-owned enterprises, defence manufacturing enterprises,
research and development enterprises and other entities;
• Any role-player and stakeholder that elects to opt in; and
• Any entity that derives more than 50% of their annual turnover from the
South African defence industry.

As with the publication of any new or amended BEE code, the challenge faced
by companies in the defence industry are to align their current BEE compliance
initiatives with new or amended requirements applicable. Fortunately, whilst the
Defence Code does contain unique requirements, most of the other elements
are quite similar to that of the Generic Codes, with the following key differences
worthy of highlighting:
There is a clear emphasis on the inclusion of black Military Veterans throughout
the Defence Code with an extensive definition being provided and including
veterans of the liberation struggle military organisations.

The Ownership element is very similar, save for higher targets which are set to be
phased in from 25% for year one after the effective date of the Defence Code,
30% for year two, and 35% for year three. Black women ownership is set at 10%,
increasing to 15% from year two onwards. Four points are specifically allocated
to a 3% ownership stake held by black Military Veterans and/or black people in
broad-based ownership schemes.

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