BEE Partner, South Africa Economy Watch

Net remuneration

This represents the amount of remuneration after deducting the following:

• current and arrear contributions, within specified limits, to approved pension and/or retirement annuity funds that the employer is entitled or required to deduct from the employee’s remuneration
• at the option of the employer, current and arrears retirement annuity fund contributions, within specified limits, which the employee has paid directly to the fund, provided the employee furnishes the employer with proof of payment; such proof of payment must be obtained annually by the employer from the employee (or when the employee terminates employment, if earlier) and retained for inspection purposes

Medical aid scheme contributions in the case of persons aged 65 or older. Read the rest of this entry »

The Codes have introduced new concepts in enterprise development to encourage sustainable contributions.

Statement 600 provides a benefit-factor matrix that classifies the substance of contributions on their ability to enhance the financial and operational capacity of the beneficiary entity. The greater the substance of the contribution, the higher the recognition granted to that contribution. The benefit factor is the percentage recognition given to the actual amount of the contribution. Read the rest of this entry »

Exemption from Category A and B contributions

Where contributions are made to an entity that is not a Category A or B beneficiary it is not measurable unless the contributions were made, in part, for the purpose of helping that recipient become a Category A or B beneficiary. The contributions may only be included in the measurement once the recipient has qualified as a Category A or B beneficiary. Read the rest of this entry »

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. Read the rest of this entry »

Qualifying socio-economic development contributions

Socio-economic development contributions consist of monetary or non-monetary contributions actually initiated and implemented in favour of beneficiaries by a measured entity with the specific objective of facilitating sustainable access to the economy for those beneficiaries.

The contributions may be monetary based or non-monetary, such as providing training or sacrificing their employees‘ time in favour of beneficiary groups, as opposed to incurring a direct expense. The contribution must be “actually initiated and implemented“, meaning it must be exercised and paid for. Future initiatives do not count. Read the rest of this entry »

Targets

As mentioned above, the target is calculated on the same basis as that of enterprise development. The calculation is not clearly articulated in the Codes and is a technical computation. To avoid repetition, the following constitutes a brief summary of what was communicated under enterprise development.

The target for socio-economic development is 1% of net profit after tax (NPAT). NPAT is easily manipulated through accounting entries, so the Codes use an anti-circumvention approach, outlined below. Read the rest of this entry »

The socio-economic development element is a request to business to play an active role in social upliftment. It is BEE‘S conduit for Black people living below the poverty line by providing a lifeline to people without any access to the mainstream economy. Socio-economic development may take a variety of forms, including rural development, contributions to traditionally non-economic activities such as the arts and medical facilities for the poor. Read the rest of this entry »

BEE Qualifying Contributions

Sector-specific contributions

The benefit-factor matrix refers to sector-specific contributions, which are not addressed elsewhere in Statements 700 or 807. There is a definition referring to sector-specific programmes. Although it is not clear whether there is a link between the definition and the reference to sector-specific contributions above, it would appear logical to assume so.

The origin of sector-specific contributions is from previous draft statements. The objective is that sector codes will determine sector- specific socio-economic development contributions as guidance to industry from each sector. Read the rest of this entry »

BEE Benefit-Factor Matrix

Statement 700 provides Annexure 700A, which contains a benefit- factor matrix. The purpose of this matrix is to assign a benefit factor to the various types of contributions. Priority contributions will receive 100% recognition. Contributions that offer less substance are recognised at a lower benefit factor. Read the rest of this entry »

Tax law is dynamic. Any tax commentary could be outdated After the final Codes have been approved as law, time will reveal inconsistencies with the application of BEE and the Tax Act.

Private parties will probably make submissions to National Treasury on amending tax law to accommodate BEE. The point is that it is too early to give conclusive advice on BEE and tax. Further, the nature of tax advice varies according to the base of the company, making it a difficult topic to discuss conclusively in this format. Read the rest of this entry »