Trade and Industry Minister Dr Rob Davies has approved and gazetted for public comment the draft broad-based black economic empowerment (BBBEE) code for the defence industry, the Department of Trade and Industry (DTI) announced on August 4. In line with the BBBEE Act, there will now be a 60-day period for public comment and input before the defence industry code is gazetted for implementation.
In his statement about the code, Davies cited two elements as being of particular importance. One is that defence companies will have to obtain 60% of “products” from local companies, while the other is that they must support those enterprises which introduce new technologies into the sector.
“This is a defence industry-specific element designed to stimulate local manufacturing and increase global competitiveness,” he affirmed. “The other key highlight is that . . . private-sector entities in [the] defence industry must subcontract no less than 30% of any contract exceeding R30-million to companies owned by the black designated groups. “This will enable such companies to be sustainable.”
The development of the defence industry code has followed on from the creation of the National Defence Industry Council, which was set up in March 2016. (Its creation had been proposed in the Defence Review, which was approved by Cabinet in March 2014 and by Parliament in June 2015.) The council is composed of the heads of the relevant government departments and the CEOs of State-owned and private-sector defence companies; it is headed by the Secretary of Defence. It was the council which set up the team which developed the draft BBBEE code for the sector.
The team was composed of representatives of the Department of Defence (DoD), Armscor, and the South African Aerospace, Maritime and Defence Industries Association (better known as AMD). The team undertook the required consultations and negotiations about, and the drafting of, the code.
(Armscor is the DoD’s acquisitions, sales, and research and development agency. “[The] AMD’s primary objectives are the representation of the industry in matters of mutual interest, and the promotion of a profitable, sustainable and responsible industry. The association is acknowledged as the only trade association of South Africa’s defence industry … and is mandated by its members to promote and champion the collective interests of the industry,” it states on its website.)
Davies pointed out that the code was applicable to all South African defence industry entities. These include both public- and private-sector companies and national and provincial government departments.