Defence Sector – Enterprise and Supplier Development (ESD) Fund

We received a notice from the Defence Sector Charter Council (DSCC) confirming that they have established the ESD Fund to support the South African Defence Industry (SADI) economic transformation and that it is now operative.

This initiative aims to transform and revitalise the defence industry by enabling effective and sustainable economic participation of Black people in the SADI value chain. 

The ESD Fund will engage in financing enterprises, encouraging entrepreneurship, and developing the capability and capacity of diversified SMME businesses with a specific focus on designated groups in the defence industry. It will oversee the receipt of funds from contributors and disburse the funds as directed by the DSCC.

What does this mean for your verification?

According to the Defence Sector Code, all Measured Entities (except Exempted Micro Enterprises) must contribute 1% of their Net Profit After Tax (NPAT) to the ESD Fund.

Verification agencies will need to verify this donation to the ESD fund for Measured Entities to qualify for the five points under paragraph five of the ESD scorecard. If the Measured Entity contributed less than 1%, the five points would be pro-rated.

Unfortunately, the DSCC’s notice did not mention when the ESD Fund was established. Therefore, our view is that this notice will apply to entities with a Measurement Period (financial year under review) ending after 12 April 2022 – the date of the DSCC’s notice.

The ESD Fund (officially the Defence ESD Fund) is a registered NPC, Registration Number: 2022/383286/08.
 

All contributions may be deposited into the following bank account, using the name of the Measured Entity as reference:

Account Holder: DEFENCE ESD FUND NPC

Bank: Nedbank

Account Number: 1221078860

Branch Code: 198765

Reference Name of the Measured Entity

Proof of payment must be forwarded to This email address is being protected from spambots. You need JavaScript enabled to view it. with a copy to Cede Capital: This email address is being protected from spambots. You need JavaScript enabled to view it..

Clarity of Measurement Period

In response to a directive issued by the B-BBEE regulator (SANAS) regarding the use of the latest financial year-end for B-BBEE Verification purposes, the Pretoria High Court has set aside the SANAS directive dated 6 April 2021, declaring it unlawful.

The High Court ruled that “SANAS has no power in terms of the Broad-Based Black Economic Empowerment Act No.53 of 2003 (“the BEE Act”) or any other legislative instrument to prescribe the measurement period that must be taken into account when verifying an enterprise’s compliance with the BEE Act or the Codes of Good Practice issued under the BEE Act.”

While the Verification Manual makes provision for the use of financial statements which are not audited and details the additional testing requirements, thereby suggesting it is possible to apply the latest financial period even before the financials have been audited, neither the Verification Manual nor the Codes, nor any other Gazette issued in line with B-BBEE Act (with the exception of four sector codes) prescribe the Measurement Period to be used, or state that it may only be the latest financial period. 

The only way to prescribe the Measurement Period is for it to be defined within a Code of Good Practice or, similarly, issued by the Minister of Trade and Industry through the Government Gazette in terms of Section 9 of the B-BBEE Act. The following sector codes, issued in terms of Section 9 of the B-BBEE Act, do prescribe the Measurement Period:

• Amended Financial Services Sector Code
• Amended Construction Sector Code
• Amended Forestry Sector Code
• Amended Tourism Sector Code

These codes prescribe that “Measured entities for which verification is required may not be measured for a measurement period that has ended more than 12 months prior to the commencement of the verification thereof”.

Many agencies, including AQRate, apply a standard 18-month rule to ensure the information is still reasonably current. Therefore, a certificate is issued no later than 18 months after the year-end used for the Measurement Period. This is more than sufficient time to complete the verification, even on the largest entities.

Wellness break

Please note that our offices will be closed from 15 – 17 June 2022 for a mid-year break.

Staff wellness is essential to us, and we want to afford our employees the time to get some rest ahead of our busy season.

As one of the top B-BBEE rating agencies in South Africa, we are committed to providing you with the utmost quality and professional service, with uncompromising ethics and a passion for transformation.

If you have any queries, please do not hesitate to contact our office at This email address is being protected from spambots. You need JavaScript enabled to view it.. For technical queries outside of your verification, please direct your question in as much detail as possible to This email address is being protected from spambots. You need JavaScript enabled to view it..

 
Sincerely,
Jeanette Buys
CEO