BEE Partner, South Africa Economy Watch

Interestingly, the sale of assets is not addressed in the enterprise development element. Strictly speaking, by selling a Black person an income-producing asset, an opportunity to produce an enterprise has been created.

A measured enterprise may recognise the sale of assets as enterprise development or ownership. No points will be awarded for enterprise development if the transaction has been recognised and scored in ownership, and vice versa. Ownership represents a measured entity’s contribution to facilitating Black ownership of the economy and is measurable in this light. Enterprise development measures the entity’s contribution to stimulating Black business.

As the sale of assets also facilitates Black ownership of the economy, the Codes provide measurement under the ownership element. However, if the measured entity has full points in the ownership element, it may wish to recognise the sale of assets under enterprise development where the measured entity has facilitated the deal.

The measured entity may include the discount, the differential between market value and the actual disposal value of an asset sold to Black people in its measurement of enterprise development spend.

From the perspective of BEE points, the sale of assets is likely to receive higher recognition under ownership than in enterprise development. Selling an asset to Black people at fair market value does not count as enterprise development as there is no development benefit accruing to the Black beneficiary in the transaction. The quality of the asset being disposed of is also important. The disposal of non-productive assets does not count towards enterprise development because it is not sustainable.

Inception date and recognising past contributions

Enterprise development has been going on for a while and so is not something new. It would be unfair if BEE did not recognise initiatives that had already been made before the effective date of the Codes. Statement 600 allows the measured entity to recognise large enterprise development programmes entered into before the start of the Codes.

The business may set a date of measurement earlier than the effective date if it wishes. The earlier date is known as the inception date and may be a maximum of five years before the effective date.

It is important to note that the annual accumulation of the compliance target is linked to the inception date, not the effective date. The annual accumulation begins from the date the measured entity chooses as its inception date. One should therefore not choose an earlier inception date without first calculating the benefit provided by this choice. If the value of the contribution does not exceed the cumulative target on the effective date of the Codes, then choosing measurement according to the inception date will be counterproductive for the entity.

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