BEE Partner, South Africa Economy Watch

A broad-based group that meets the definition of a general broad-based ownership scheme, but wants recognition as a special broad-based ownership scheme may do so where it meets the additional criteria as per Section 5 of Annexure 100B of Statement 100. The primary difference between a special and general broad-based ownership scheme is that there is no limitation on recognition of percentage owned by the special scheme.

A measured business may realise 100% of ownership points where 25% is owned by a special scheme. They were created in recognition of established broad-based entities that have a track record of achieving the objectives of BEE ownership.

Businesses wanting to enter ownership deals with a broad-based scheme must ensure they qualify or are capable of qualifying as a special scheme if the intention is to sell a full BEE participation to that scheme.

The additional criteria are:

• a track record of operations of a broad-based ownership scheme, or in the absence of such a record, evidence of full operational capacity to operate as such, and
• the operational capacity must be evidenced by suitably qualified and experienced staff, professional advisors, operating premises and all the requirements for operating a business.

Unfortunately, the additional criteria supplied by the Codes contain no real distinction and are easily circumvented. The track record does not mention length of service and an entity wishing to front can obtain offices and staff with relative ease.

Entities wanting to take on broad-based ownership schemes as BEE partners may wish to insist on a complete review of the following criteria to ensure that they acquire a partner of substance that will implement the objectives of BEE:

• historical audited financial information and accounts that provide insight into the benefits that have been distributed to intended beneficiaries

• A detailed breakdown of the management fees and the benefits accruing to beneficiaries
• A report on the nature of the projects undertaken by the scheme and the alignment of those projects with the provisions contained in the Socio-Economic and Enterprise Development Code
• A report on the manner in which beneficiaries are identified and the geographic spread of benefit implementation
• The names and details of senior employees of the scheme
• An explanation of the services provided by the scheme’s administrators.

A broad-based scheme may include the beneficiaries representing Black women, Black designated groups or any other Black people. The measured entity will receive points for ownership by priority groups through bonus points. For example, the broad-based scheme may receive bonus points for including Black women and/or Black designated groups, who, through the scheme, participate in 10% of the total ownership. The various indicators in the ownership scorecard are entitled to recognise this split as long as the claim is supported by evidence provided by the broad-based group.

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