Since the first phase of the Codes of Good Practice on Broad-Based BEE was released in draft form for public comment in December 2004, there has been widespread confusion in the market as to the status of sector transformation charters (also known as industry or sector charters) in relation to the Codes and vice versa.

Purpose of the Codes

Section 9 of the Broad-Based Black Economic Empowerment Act No. 53 of 2003 (BEE Act) legally provides for the issuing of Codes of Good Practice on broad-based black economic empowerment. Besides the dti's Strategy for Broad-Based Black Economic Empowerment and the BEE Act, drivers of transformation charter processes to date, have lacked a standard BEE framework from which to develop charters. Furthermore, some charters were developed even before the BEE Act and the Strategy document were released. Consequently, there exists substantial incomparability amongst charters, with respect to content as well as criteria for measurement. This results in entities in certain sectors with stricter measurement criteria being unfavourably disadvantaged when competing for business with entities in sectors with more lenient measurement criteria.

The purpose of the Codes of Good Practice is therefore to provide both government and industry with a standard framework for the recognition and measurement of broad-based BEE.

Status of Charters in Relation to the Codes

Transformation Charters may either be gazetted in terms of section 9 of the BEE Act, or in terms of section 12. Code 000 contained in the Codes of Good Practice includes a Statement on transformation charters as well as guidelines on the gazetting of charters.

A transformation charter gazetted in terms of section 9 of the Act means that the charter has been gazetted as a Code of Good Practice and that it therefore has the same status as the Codes. This effectively means that the charter becomes legally binding on organs of state and public entities.

A transformation charter gazetted in terms of section 12 of the Act expresses an industry's commitment to transformation but is not legally binding on organs of state and public entities.

In cases where transformation charters have not been gazetted as Codes, government will make use of the Codes of Good Practice as a means of BEE measurement

Charters contained in Acts

There are currently two charters which were enacted as part of amendments to Acts in 2001 and 2003. These are the Mining Charter and Scorecard and the Petroleum and Liquid Fuels Charter. The Mining Charter and Scorecard are contained in the Mineral and Petroleum Resources Development Act 28 of 2002, whilst the Petroleum and Liquid Fuels Industry Charter is contained in the Petroleum Products Amendment Act of 2003.

Where acts are amended, government will be bound by them in their interactions with these industries.

Sector Codes gazetted under Section 9(1):

If the majority of the measured entity's turnover is derived as a result of gazetted sector related activities, then the relevant sector code will apply to such measured entity.