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employees from the beginning of 2003. We have also extended our voluntary counseling and testing<br />
(VCT) programs, and are offering an HIV test to every employee who visits the clinics for a medical<br />
examination. We estimate that approximately 58% of our employees that are HIV / AIDS positive<br />
participate in our HIV / AIDS managed care programs, which is an improvement on the prior year’s<br />
participation rate (56%).<br />
The government and organized business have taken a number of steps in recent years to increase<br />
the participation of Black people in the South African economy. To this end, the Employment Equity Act<br />
(No. 55 of 1998), the Skills Development Act (No. 97 of 1998) and the Preferential Procurement Policy<br />
Framework Act (No. 5 of 2000) were promulgated. The Broad-Based Black Economic Empowerment Act<br />
(No. 53 of 2003) has formalized the country’s approach to distributing skills, employment and wealth<br />
more equitably between races and genders. BEE focuses on increasing equity in ownership,<br />
management and control of businesses, and improving Black representation in all levels of employment.<br />
It also promotes the development of skills within a business, the nurturing of Black entrepreneurship<br />
through preferential procurement and enterprise development, and the uplifting of communities through<br />
social investment.<br />
In February 2007, the BEE scorecard as set out in the Codes of Good Practice published by the<br />
Department of Trade and Industry was streamlined and simplified without affecting their intended<br />
objectives. Our South African businesses were evaluated by Empowerdex, an independent BEE<br />
certification agency, against the Department of Trade and Industry’s generic BEE scorecard and we<br />
achieved a score of 41 points with an overall BEE status of a ‘‘level seven contributor’’ (B rating) and a<br />
preferential procurement recognition level of 50%. In July 2009 Empowerdex undertook the second<br />
verification of the South African businesses’ BEE scorecard, and we improved our rating to a score of 54<br />
points and an overall BEE status of a ‘‘level six contributor’’ (BB rating) and a preferential procurement<br />
recognition level of 60%.<br />
The Forest Sector Charter was gazetted in June 2009 as the ‘‘Forest Sector Code’’. This Charter<br />
applies to all enterprises involved with commercial forestry and the first level processing of wood<br />
products. Our South African businesses are signatories to this charter via their membership of both<br />
Forestry South Africa (FSA) and the Paper Making Association of South Africa (PAMSA). This charter sets<br />
the objectives and principles for BEE, and includes the scorecard and targets to be applied within the<br />
industry, as well as certain undertakings by government and the private sector (or South African forestry<br />
companies) to assist the forestry industry to achieve its BEE targets. With effect from calendar 2010, our<br />
South African businesses were evaluated against the Forest Sector’s BEE scorecard.<br />
In June 2010, Sappi completed a BEE transaction whereby ordinary and ‘‘A’’ ordinary shares<br />
equivalent to 4.5% of Sappi Limited were issued to its strategic empowerment partners, and to various<br />
trusts for the benefit of its black managers, its employees and growers/communities in the geographic<br />
areas where Sappi’s South African businesses have operations. The value of the BEE transaction<br />
(approximately ZAR 814 million, US$ 115 million) corresponds to an effective 30% interest in Sappi<br />
Southern Africa, which meets the requirements of Forest Sector Charter and BEE legislation in general.<br />
For further information on the BEE transaction, see ‘‘Item 7—Major Shareholders and Related Party<br />
Transactions’’<br />
In September 2010, Empowerdex verified the South African businesses’ against the Forestry<br />
Sector’s BEE scorecard for the first time, and we further improved our rating to a score of 75.2 points with<br />
an overall BEE status of a ‘‘level three contributor’’ (AA rating) and a preferential procurement<br />
recognition level of 110%. As a result, 110% of the value of all purchases from our South African<br />
businesses qualify as preferential procurement spend in a customer’s BEE scorecard. Preferential<br />
procurement is used to drive transformation throughout the South African economy in that many<br />
customers will only buy from high BEE scorecard suppliers to boost their own BEE scorecard ratings.<br />
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