Page 45 - EngineerIt August 2021

INFORMATION FOR BUSINESS

Broad-based ownership and

development schemes and trusts

can and should continue to

contribute to B-BBEE

By Deon Oberholzer, CEO: Gestalt Growth Strategies

he market finally has clarity on the ownership schemes, the B-BBEE commissioner’s statements in 2019 that broad-based
use of broad-based ownership and trusts are not compliant with the law may have poisoned the well. The commissioner is
Tdevelopment schemes in broad- not a fan of trusts, broad-based ownership schemes and employee share ownership
based black economic empowerment programmes because they are often geared towards passive shareholding rather than
(B-BBEE) ownership structures. It is towards specific individuals who would drive transformation in companies.
almost two years since the office of the However, aligned with the goals and the spirit of B-BBEE, broad-based structures have
B-BBEE commissioner took the position the potential to benefit a broader base of deserving black beneficiaries than transactions
that many transactions involving broad- geared to benefit only a few, specified individuals.
based or development trusts do not Back in 2019, the commissioner contentiously stated that for a broad-based trust to
constitute genuine black ownership and contribute B-BBEE ownership points, the beneficiaries must exercise voting rights, receive
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subsequently forced several companies the same economic benefits as other shareholders and ultimately become unencumbered
to change their shareholding structures or owners of the shares in which they are invested. She drew a distinction between
risk losing their BEE credentials . ownership and socio-economic development, saying that ownership should come with
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In May of this year, Trade, Industry vested rights .
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and Competition minister Ebrahim Patel Understandably, the commissioner’s statements resulted in much uncertainty and
confirmed that such structures can after debate, and what followed was the subsequent disallowing of several broad-based
all, be B-BBEE compliant. In the gazetted shareholding structures.
Practice Note, minister Patel sought to Amongst the casualties of the fallout were students, unable to access bursary funding
clarify a number of issues on what would provided by broad-based entities and ESOPs which did not meet the commissioner’s
satisfy the ownership requirements under then stated requirements. In the provision of bursaries, broad-based entities have made a
the B-BBEE Codes . significant contribution to B-BBEE and are an important vehicle for promoting truly broad-
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One of the clarifications was that based BEE through the development of the country’s future leaders.
employment ownership schemes (ESOPs) In the past two years, how much funding has been diverted from the much-needed
or worker ownership schemes which development of skills amongst the country’s disadvantaged youth? How many smart and
provide a benefit for a defined proportion willing youths have lost access to funding for tertiary studies that was made possible by
or all of the current and future black broad-based entities that were disallowed?
workers of the company, as well as broad- Access to tertiary education and skills development opportunities amongst South
based schemes which provide a benefit Africa’s disadvantaged youths is a national crisis, as was starkly evident during the
for certain, specified designated groups 2015 and 2016 #FeesMustFall movement. What began as a protest to stop increases in
such as black students as recipients university tuition quickly gained momentum, turning into a national uprising with students
of bursaries, can meet the ownership demanding free access to higher education.
provisions under the B-BBEE codes. While the protests led to the creation in 2018 of a national bursary scheme for poor
The Practice Note also highlights and working class students totalling R12.4-billion , it is evident that government alone
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that it is government policy to promote cannot address the problem. Innovative broad-based empowerment solutions have an
broad-based empowerment through important role to play in providing disadvantaged youths with opportunities to study.
the facilitation of ownership by groups Amongst the rewards of enabling young people who would otherwise not have had a
of designated persons by means of chance to pursue tertiary studies, is the earning of B-BBEE ownership points.
women’s investment vehicles, youth Structured properly, such development ownership schemes and similar entities are
empowerment structures, cooperatives viable black empowerment vehicles that are used by about a third of all major B-BBEE
and community welfare projects . transactions . The codes even incentivise the use of broad-based entities, and companies
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While the Practice Note provides may score an additional three B-BBEE ownership points if a broad-based entity or ESOP
clarity on the treatment of broad-based has at least 3% ownership.

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