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THE CODES OF GOOD PRACTICE FOR BROAD – BASED BLACK ECONOMIC EMPOWERMENT OWNERSHIP CODE 100 – STATEMENT 100, 102 AND 103. CODE 100 – OWNERSHIP. Statement 100 – The general principles for Measuring Ownership Statement 102 – Recognition of the Sale of Assets
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THE CODES OF GOOD PRACTICE FOR BROAD – BASED BLACK ECONOMIC EMPOWERMENT OWNERSHIP CODE 100 – STATEMENT 100, 102 AND 103
CODE 100 – OWNERSHIP • Statement 100 – The general principles for Measuring Ownership • Statement 102 – Recognition of the Sale of Assets • Statement 103 – The Recognition of Equity Equivalents for Multinationals
Ownership (Code 100 : Statement 100) • Entrench a key objective of the Act, i.e. to increase the number of black people that manage, own and control enterprises and productive assets. • Provide recognition and measurement criteria for black ownership
GUIDELINES FOR EQUITY EQUIVALENT PROGRAMMES FOR MULTINATIONALS
GUIDELINES : EQUITY EQUIVALENT PROGRAMMES FOR MULTINATIONALS THE MULTINATIONAL ENTITY • Must be able to prove that they have not entered into any Ownership partnership arrangements in other countries globally • The EE contributions towards the ownership element of B-BBEE made by Multinationals will be measurable against: • 25% of the value of their operations in South Africa • 4% of Total Revenue from its SA operations annually over the period of continued measurement
GUIDELINES : EQUITY EQUIVALENT PROGRAMMES FOR MULTINATIONALS • An EE programme would entail a • Public Programme / Scheme and / or • Private Programme / Scheme • Designed to fulfill the requirements of B-BBEE Ownership. • Such Programmes need to be approved by the Minister of Trade and Industry in order to qualify for Ownership points on the Scorecard
GUIDELINES : EQUITY EQUIVALENT PROGRAMMES FOR MULTINATIONALS • OBJECTIVES • EE Programmes are expected to contribute towards the achievement of the following objectives: • Enterprise creation and development. • Foreign direct investment. • Accelerated empowerment of black rural women and youth. • Sustainable growth and development. • Human development with focus on education and skills development. • Infrastructure investment with emphasis on developing the country’s research and development infrastructure.
GUIDELINES : EQUITY EQUIVALENT PROGRAMMES FOR MULTINATIONALS • PRINCIPLES • The economic impact of the EE Programme must be aligned to the objectives of the B-BBEE Act. • The EE Programme must not displace other B-BBEE initiatives to be undertaken as per the scorecard. • The EE Programme must be broad based in its impact on the black population.
GUIDELINES : EQUITY EQUIVALENT PROGRAMMES FOR MULTINATIONALS • QUALIFICATION CRITERIA FOR PARTICIPATION IN EE PROGRAMME • EE proposals must demonstrate commercial viability and long term sustainability (economically and operationally) • EE proposals must be aligned to the overall objectives of B-BBEE. • There must be transfer of business and/or technical skills. • EE proposals must be measurable against the value of their operations locally with tangible measurable outputs.
GUIDELINES : EQUITY EQUIVALENT PROGRAMMES FOR MULTINATIONALS • EXAMPLES OF DIFFERENT FORMS OF EE PROGRAMMES • Enterprise Creation Programmes • Economic Development Programmes • Projects aimed at technology transfer/diffusion within the small, medium and micro-enterprise sector of the local economy. • Programmes that promote economic growth and employment creation through the enhancement of technological innovation.
CODE 100 : OWNERSHIP - APPLICATION OF THE PRINCIPLES • The Flow-Through Principle is the default • Modified Flow-Through and Control Principle are limited to companies with shareholding
CODE 100 : OWNERSHIP - MEASUREMENT Black People Non-Black People 90% 10% Family Trust 90% 10% Company A 35% 65% Company B 74% 26% Measured Company Effective black ownership in Measured Company = 90% x 90% x 65% x 26% = 13.7%
CODE 100 : OWNERSHIP – APPLICATION OF THE FLOW-THROUGH PRINCIPLE • Apply the Flow-Through Principle to all measurement • General Concerns: - • Flow-Through Principle ignores black control • Minority white shareholding in a BEE vehicle is an important financing mechanism • Solution – Development of a New Principle • Modified Flow Through – Economic Interest only
CODE 100 – OWNERSHIP – MODIFIED FLOW-THROUGH PRINCIPLE Black People Non-Black People 90% 10% Family Trust 90% 10% Company A 35% 65% Company B 74% 26% Measured Company Effective black ownership in Measured Company = 90% x 90% x 100% x 26% = 21.1%
CODE 100 OWNERSHIP – REALISATION POINTS • 1 Point if no encumbrances against black shareholders (including interposed vehicles) • 7 Points linked to Net Equity Interest • measures the extent to which black participants have paid off all debt associated with their acquisition of shares (including interposed vehicles) • Takes into account growth in value of shares, amounts paid off as well as all dividends received • Yearly targets for required level of settlement • Yearly Targets:
