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An Enterprise and Supplier Development Fund will also be set up for
purposes of funding Enterprise and Supplier Development initiatives
BEE within the defence industry. Entities will have to agree on contributing
1% of the value of their contracts with the Department of Defence or
Armscor, to this fund, with such contributions counting towards their
B-BBEE scorecard.

Private sector entities will have to sub-contract a minimum of 30% of all
contracts exceeding R30 million to EME’s and QSE’s owned by black
people, black females, black youth, military veterans and black people
with disabilities, whilst state owned enterprises will be allowed to set
aside 30% of their total procurement budget towards such enterprises.
A specific scorecard element introduced by the Defence Charter, is
Localisation – an element, designed to stimulate local production and
increase the global competitiveness of the industry. Recognition will
be given to companies that procure at least 60% of defence material
products from local companies as well as supporting companies that
introduce new technology within the South African defence industry.

Military veterans are specifically included throughout the draft Defence
Charter, including within the Ownership, Management Control, Skills
Development and Socio-Economic Development elements with
specific targets and point allocations, aligned to each inclusion.
Other scorecard changes includes black ownership scorecard targets
set at 25% equity interest held by black people in the first year, 30% in
the second year, 35% in the third year, with black female ownership
targets at 10% in first year and 15% in the second and third year,
following the promulgation of the charter. Black board representation
targets are set at 50% in the first year, increasing to 60% in third year,
whilst black female board representation targets are set at 25% in the
first year, increasing to 30% in the third year.
The Defence Charter will definitely change the lay of the land for
enterprises operating in this sector, and it would be advisable to take
careful note of the draft charter and consult with your BEE planner
to establish where you will need to adapt your BEE planning to take
account of the new rules that the Defence Charter will introduce.

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