BEE Partner, South Africa Economy Watch

The Codes use enterprise development as a secondary driver for encouraging BEE contributions. Becoming a beneficiary for enterprise development is attractive to any business because it means other BEE contributors may invest their enterprise development contributions in that qualifying business.

Qualifying contributions are not restricted to Black-owned businesses. By allowing a white-owned business that achieves a substantial BEE score to qualify as an enterprise development beneficiary, it is argued that this would encourage the facilitation of Black ownership in the white businesses through financing mechanisms.

Approved beneficiaries now include the following:

• black micro and small businesses
• black-owned businesses that make a fair contribution to transformation

White-owned companies with a 25% Black ownership that make a substantial contribution to transformation.

The beneficiaries are classified in terms of Category A or Category B contributions. If a contribution does not fall into Category A or B, then no points are available for that contribution. (There is an exception to this provided through an exemption, which is discussed below.)

The meaning of Category A and B are provided in the definitions to the Codes under Enterprise Development Contributions. They are not directly addressed in Statement 806 or 600.

The definition refers to the following:

• Category A enterprise development contributions (Category A beneficiary) include contributions to exempted micro enterprises (EMEs) or qualifying small enterprises (QSEs) that are 50% Black owned.
• Category B enterprise development contributions (Category B beneficiary) are contributions to any enterprise other than QSEs or EMEs that is:

50% Black owned or

25% Black owned with a BEE status level between Level One and Level Six.

A Level Six provider needs to score a minimum of 45 points on the generic scorecard. Through this provision there is an opportunity for white-owned companies with 25% Black ownership and that contribute to BEE in other areas, to qualify as participants for enterprise development contributions.

The qualifier “50% Black owned” refers to entities in which Black people own more than 50% of the voting rights and economic interest, and which have earned all the net value points. In other words, there is net equity value accruing to Black people in the entity. The modified flow-through principle may not be applied when determining Black ownership in this measurement.

Note: EMEs and QSEs will not qualify as enterprise development beneficiaries where they are 25% Black owned and achieve a Level Six status. EMEs and QSEs must be 50% Black owned to qualify as recipients of enterprise development contributions. This is not an oversight. It was purposely created like this to protect Black owned EMEs and QSEs.

While the Statement recognises a measured entity’s contribution to Category B recipients, it encourages contributions in favour of Black- owned small and micro enterprises.

Statement 600 provides that all contributions to Category A beneficiaries may claim enhanced recognition. This means the measured entity may recognise any Category A contribution at a multiple of 1,25 of the actual amount contributed.

EMEs and QSEs are still seen as a priority sector. By providing enhanced recognition for contributions to Category A beneficiaries, government achieves its initial objective of encouraging investment and growth in the small business arena.

The measured entity may recognise the value of Category B contributions at the invoiced value.

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