Page 9 - Q&A 2019/2020

The targets contained in the Management Control element are similiar to
that of the Generic Codes, but the targets for board participation, middle
BEE management and junior management increases slightly in year three. There is
also the inclusion of one point for the appointment of black Military Veterans as
board members.
The Defence Code further aims to address the shortage of technical and
critical skills in the defence industry through the Skills Development element. The
overall target for this element is aligned with that of the Generic Codes, however
the point allocation is adjusted to provide for additional criteria which have
been added in for the promotion of the objectives of the Defence Code. These
criteria comprise the inclusion of skills development expenditure on learning
programmes for black Military Veterans, as well as black designated groups
participating in learnerships, apprenticeships and/or internships.

Within the Enterprise and Supplier Development element, the Procurement sub-
element is identical, save for a slightly lower target on procurement spend with
QSE suppliers. For the remaining two sub-elements, the following provision is
introduced: targets for both Supplier Development and Enterprise Development
are set at 1% of an entity’s net profit after tax (“NPAT”) but with fewer points
available. A further requirement is introduced, namely contributions equal to
a further 1% of an entity’s NPAT to an Enterprise and Supplier Development
Fund which is to be established by relevant stakeholders and approved by the
Department of Defence and Military Veterans and the Department of Trade and
Industry no later than 12 months after publication of the Defence Code. Until
such fund is established, the target for Enterprise Development is set at 2% of
an entity’s NPAT.

The Socio-Economic Development element is also similar to that of the Generic
Codes, however the 1% of NPAT target is split equally between general qualifying
socio-economic development contributions and socio-economic development
contributions to black Military Veterans.
The key highlight of the Defence Code is the introduction of an additional
element. This is the Localisation Element which aims to measure the extent to
which entities procure defence material from local enterprises that contribute to
the development of manufacturing and new locally developed technology. This
element requires entities to procure at least 60% of defence materials produced
locally, as well as locally produced technologies.

The inclusion of the Localisation Element provides for 10 additional points on the
scorecard, however the recognition levels are identical to those in the Generic
Codes. Therefore, even though a company such as yours would not necessarily
have implemented initiatives to comply with this element yet, it is still possible to
reach a Level 1 (>100 points) as there are a total of 115 points available on the
Defence Code scorecard.

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