31 Jul GUIDE TO BROAD-BASED BLACK ECONOMIC EMPOWERMENT IN SOUTH AFRICA
OVERVIEW OF BEE
FOR MULTINATIONAL ENTITIES
“Black Economic Empowerment (“BEE”) was introduced as a mechanism to redistribute wealth in South Africa. This is critical due to imbalances in society owing to South Africa’s political history. It is important to remember that BEE is the South African government’s main instrument of economic transformation. It is vital to the delivery of its economic and social policies.
BEE is also key to government’s ambitions to redress past economic imbalances to the benefit of all. Black Economic Empowerment forms a part of its strategy to eradicate both poverty and inequality. Advance’s view is that, although BEE is voluntary and not mandatory, no company with assets in South Africa can ignore the challenges and opportunities that BEE presents.
In considering an ownership transaction, Advance believes that it would be appropriate for all companies operating in South Africa to investigate the possibility of introducing black ownership into the entities in some form. The goal would be to implement an innovative and meaningful black ownership solution. Furthermore, to implement a solution which is aligned to the corporate’s intrinsic global values.
Progress on the part of corporate entities in achieving BEE compliance is measured under a so called “Balanced Scorecard”. This comprises five areas of transformation. The balanced scorecard was codified as a part of the original BEE Codes of Good Practice (“Generic Former Codes”), which took effect in 2007. A number of significant amendments came into force in force on 1 May 2015, creating the Generic Amended Codes of Good Practice (“Generic Amended Codes”).
The Generic Amended Codes provide for certain sectors to build their own balanced scorecards,. these are known as Sector Codes, and govern the demonstration of progress in achieving transformation in those sectors.
One of the five areas of transformation is equity ownership by black South Africans. This is an important pillar of the balanced scorecard. The Amended Generic Code scorecard sets a 25% target for both economic interest and voting rights of black people. It is important to note that around 18% of the total points available for the Balanced Scorecard pertain to Black ownership. The ownership scorecard is built up out of a number of complex aspects, which will be discussed in detail later in this document.”
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