The aim of the charter is to actively promote a transformed financial sector that reflects the demographics of South Africa, and contributes to the establishment of an equitable society by effectively providing accessible financial services to black people and by directing investment into targeted sectors of the economy. The charter has a broad scope, with South African businesses subject to compliance requirements in the following areas:
• Human resource development
• Ownership in the financial sector
• Procurement policies
• Control in the financial sector
• Enterprise development
• Shareholder activism
• Access to financial services
• Corporate social investment
• Empowerment financing
Compliance with the above areas is measured on a points system, with compliance in each area being calculated to give a total score of Broad-Based BEE compliance. Broadly speaking, South African businesses are required not only to comply with the above areas but also to take into account the level of Broad-Based BEE compliance of the companies they work with. This analysis forms part of their calculation with respect to procurement.
A financial services entity that has been granted an exemption from all the provisions of the Charter by the Council is deemed to have a Broad-Based BEE status equivalent to that of a black-empowered entity. This gives the client of the exempted entity procurement recognition of 100% on their placements with any exempted entities.
Following assistance from the South African Insurance Association (SAIA), and extensive negotiations between Lloyd’s and the FSCC relating to the unique structure of Lloyd’s, the FSCC has confirmed that Lloyd’s has been granted an exemption from the FSC to date up to 2007 on the basis of Lloyd’s and the underwriting members not having South African operations that provide short-term insurance and reinsurance. To the extent that there are managing agents that have operations in South Africa, these may be required to comply with the FSC in their own right.
Procurement recognition is currently an important aspect for the insured and, therefore, Lloyd’s underwriters/coverholders should make it clear to the policyholder, if questioned, that cover provided by Lloyd’s underwriters would provide the insured with procurement recognition of 100%.
Furthermore, on 9 February 2007, the South African Department of Trade and Industry (DTI) published the final Codes of Good Practice, issued in terms of section 9 of the Broad-Based Black Economic Empowerment Act, 2003 (the Codes). Lloyd’s understands that the DTI will require that the Codes are aligned with the FSC in August 2008 to form a new ‘Sector Code’, which is envisaged to be broader and more widely encompassing than the current FSC. Whilst Lloyd’s is exempt from the FSC, Lloyd’s may be caught by the Codes and is investigating the extent to which it is required to comply with the Codes, if at all. We will keep you updated with our progress
