How Broad Based Is Black Economic Empowerment Going To Be? Ownership Element Plan Ditched
The Department of Trade and Industry (DTI) released new sector codes early in May. Although a detailed handbook of how to implement the codes is still outstanding, there were some welcome clarifications such as businesses with existing scorecards can keep these to 30 October 2015.
What was surprising was the DTI clarification concerning the ownership element. This downgraded employee and broad based ownership schemes – out of 25 points, broad based schemes could, per the proposal, only claim 3 points. As approximately 80% of BEE deals have been done on this basis, this created confusion and anger from business. DTI then issued a further clarification saying that existing BEE deals would not be affected and would still get maximum points. It also said a task team had been set up to give recommendations to the Minister within the next 30 days.
Then on 15 May, the DTI withdrew this notice altogether, with the end result that broad based ownership will no longer be penalised as was proposed. No mention is made of the task team in the withdrawal notice.
What seems to be driving the DTI’s thinking is the idea that moving to individual equity ownership will give more meaningful participation to black shareholders. The DTI also see broad based ownership programs as a potential vehicle for fronting.
Companies should carefully consider this new thinking and seek advice if in doubt, as it could have serious ramifications for your business.