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Enterprise development from a BEE perspective
Badian Maasdorp
Introduction and Background
High level overview of enterprise development in BEE context
BEE not a simple black/white issue
Has also become highly technical • Significant grey areas
• Still being developed
BEE Framework
Various statutory enactments govern BEE generally
B-BBEE Act and Codes• most important
• With various sector charters
Balanced scorecard / generic scorecard• Seven elements of BEE listed in the generic scorecard
• Each element given a specific weighting
BEE Framework (continued)
Seven elements of BBBEE• Ownership
• Management control
• Employment equity
• Skills development
• Preferential procurement
• Enterprise development
• Residual (e.g. corporate social investment)
Focus is shifting away from mere ownership and
control
Enterprise Development
Direct empowerment• Ownership
• Control
Indirect empowerment• Preferential procurement
• Enterprise development
Code / Statement 600• Recognition of Enterprise Development Contributions
Enterprise Development: Key Definitions
Measured Entity• The entity whose Enterprise Development contributions
are being measured
Beneficiary Entity • Exempted micro enterprise - <R5 Million turnover per
annum
• Level 1-6 contributor enterprise and > 50% owned by Black people
• Level 1-3 contributor regardless of Black ownership
Enterprise Development: Key Definitions (continued)
Non Recoverable Contributions• Monetary value of contributions
• In form of grants, donations, discounts and other quantifiable benefits
• Which are not recoverable by Measured Entity
Recoverable Contribution• Contributions that must be repaid to Measured Entity
• e.g. loans etc.
Enterprise Development: Key Definitions (continued)
Qualifying Enterprise Development Contributions• Monetary or non-monetary
• Recoverable or non recoverable contributions
• Initiated and implemented in favour of Beneficiary Entities
• Objective of assisting/accelerating the development, sustainability, capacity etc of Beneficiary Entities
NPAT• Net Profit After Tax
Enterprise Development Scorecard
Points/weighting allocated to contribution by Measured Entity as a % of NPAT
Bonus point allocation for contributions which directly contribute to increased employment levels in preceding year
Benefit Factor Matrix
• Different “benefit factor” given to contribution type
• Direct costs in supporting enterprise development – 100% benefit
• Loan provided to Beneficiary Entity – 60%-70% depending on type of entity
Qualifying Enterprise Development Contributions
Recoverable contributions and value of • Investments in Beneficiary Entities
• Loans granted to Beneficiary Entities
• Guarantees given to Beneficiary Entities
• Credit facilities made available to Beneficiary Entities
Non recoverable contribution and• Direct costs in assisting with development of Beneficiary Entities
• Overhead costs attributable to Qualifying Entities Development Contribution
• Provision of seed/development capital
• Preferential credit terms
• Preferential terms in respect of supply of goods /services
Qualifying Enterprise Development Contributions (continued)
Certain contributions calculated at a specified multiple• e.g. creation of employment in rural communities
receives recognition at a multiple of 1.5 to Rand value of contributions
Both monetary and non-monetary contributions are considered
Qualifying Enterprise Development Contributions (continued)
Payment to third parties to perform enterprise development on behalf of a Measured Entity
Provision of training/mentoring to Beneficiary Entities to assist with developing operational/financial capacity • Measured by e.g. cost of time spent by staff or
management in such activities
What can the industry do?
ISPA/Uniforum launched initiative to provide mechanism to industry for Enterprise Development spend/activities
Similar to other initiative in respect of socio-economic development obligations (Code 700)• e.g. Business for Empowerment Trust
Trust/foundation structure• Also registered as a public benefit organisation for tax
purposes
Possible Structure
Trust / Trustees
Measured Entities
Contribute funds/time/resources
- funding - training- mentorship
Beneficiary Entities
Enterprise Development
Advantages of proposed structure
Vehicle for entities/business that do not have capacity to act by themselves
Initiatives will potentially be more meaningful/effective
Driven by industry players• With understanding of industry requirements, will build
industry for benefit of all
With greater capacity – industry will be more sustainable
