15 June 2011

DTI gazettes the draft ICT Charter

Some five years after the Department of Trade and Industry (DTI) initiated discussions regarding the need for an ICT sector charter. On 10 June 2011, the Minister of Trade and Industry published a draft ICT Sector Charter for public comment.

The draft Charter proposes a BEE scorecard along with the principles and methodologies for measuring the BEE compliance of participants within the ICT sector. The Charter will ultimately replace the generic Broad-Based Black Economic Codes of Good Practice (promulgated in February 2007) as the source of measurement of BEE compliance for enterprises operating in the ICT sector.

The same seven elements contained in the generic Codes of Good Practice are to be used to measure BEE compliance. However, in areas such as the elements of Ownership, Employment Equity, Skills Development, Enterprise Development and Socio Economic Development, the weighting and targets differ somewhat from those contained in the generic Codes of Good Practice.

Most notably, the ownership target for ICT sector participants is more onerous than that contained in the generic Codes of Practice, which has a compliance target of 25% plus one vote. In the interests of accelerating transformation in the ICT sector, an ownership compliance target of 30% has been suggested in the draft Charter.

In assessing compliance with the Charter by listed companies, the draft Charter proposes that the prescribed minimum free float of 20% be excluded from the computation of the target, which will effectively reduce the ownership compliance target for listed companies to 24% of its issued share capital. For State Owned Entities, 30% of the equity which is not held by government must be held by BEE shareholders.

The draft Charter contains transitional provisions to allow participants time to meet the ownership and management targets. During the first year that the ICT Sector Charter is in force, ICT sector participants may choose to be measured in terms of the transitional scorecard applicable to the elements of ownership and management control. After the first year, they will be measured in terms of the entire ICT sector scorecard.

The DTI envisages that the final ICT Sector Charter will be binding from the date that it is gazetted until 31 March 2026, with a mid-term review of the Charter on 31 March 2016.

Interested persons have until 10 August 2011 to submit written comments to the DTI on the draft Charter.

For a copy of the draft Charter or if you require any advice on the provisions of the draft Charter or assistance with making submissions to the DTI, please contact us.

Kathleen Rice and Tayyibah Suliman

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