Page 46 - EngineerIt August 2021

INFORMATION FOR BUSINESS

If companies follow the rules and
create the appropriate structures for
the meaningful development of the
designated group of people they commit
to developing, broad-based entities are a
useful and viable way to get to a B-BBEE
score card Level 1.
Companies may consider the option
of setting up a development scheme
exclusively for their own use, based on
the assumption that it would give them
more control over the management
of the investment entity. However, the
downsides are significantly high set-up
costs, the complexity of managing
the scheme and the responsibility to
fund the costs and the accounts of
the scheme. There are also various Deon Oberholzer Ebrahim Patel
requirements in the codes for broad-
based ownership schemes and trusts full points and qualify to be recognised as a black, woman-owned company. The Trust also
which must be adhered to, especially emphasises low entry and exit valuations because it is focused on retaining the dividend
if the shareholding held by such entity stream for development purposes.
is above 10%. These additional criteria The Trust can also assist companies to comply with the socio-economic development
are tough to comply with if a trust is set (SED) element of the codes, as the target beneficiary groups of the Trust qualify for SED.
up specifically to hold shares in one This offers two benefits, firstly that the SED contributions would operationalise the Trust
measured entity only. while income to the Trust from dividends during the initial years may be low, and secondly,
There may still be a risk of fronting, the management of the SED contributions can be taken care of by the Trust.
in that many of the schemes on offer Using a vehicle such as this not only removes the complexity of management and
at the moment, for example, present compliance, but also alleviates the concerns that businesses have about selling ownership
themselves with a fees based “rent- to a B-BBEE partner, such as being trapped into ownership structures from which they
a-shareholder” model. Schemes that can’t easily exit or risk losing control over how the company is managed.
do not result in unencumbered actual Importantly, partnering with a development scheme like the Intombazane Development
ownership of the shares by the scheme Trust means that even small, owner-managed businesses have the opportunity to invest in
may still blur the lines on compliance. the development of South Africa’s next generation of leaders.
Therefore, partnering with an already Though the commissioner may have tainted their use, it is pleasing to know that the
established and compliant entity, such ownership status of correctly structured broad-based schemes is no longer in question.
as the Intombazane Development Trust, They can and must continue to make a contribution to B-BBEE. n
takes the pressure off and is a good
option for companies requiring legitimate, About Gestalt Growth Strategies
compliant B-BBEE ownership without the Gestalt Growth Strategies is a trusted business strategy and broad-based black
risk of fronting. economic empowerment (B-BBEE) consultancy. Established in 1998, Gestalt uses
The Trust’s beneficiaries are young original and proven business transformation models to help companies unlock
black woman under the age of 29. This business growth and shareholder value through B-BBEE.
allows the Trust to be recognised as
a 100% black, women owned entity, References
and helps ensure that new recruits for i. https://www.businesslive.co.za/bd/opinion/2019-05-28-b-bbee-commissioner-says-
investing businesses can be targeted broad-based-trusts-not-compliant/
from the right demographic groups. ii. https://sstlaw.co.za/2020/07/26/can-community-trusts-still-be-used-for-b-bbee-
Its share purchase model is structured ownership-purposes/
to provide an optimum balance for the iii. https://www.abp.org.za/wp-content/uploads/2019/06/BBBEE-Commission-article-on-
companies in which it owns shares. For Trusts-final-May-2019.pdf
example, a transaction with the Trust iv. https://insights.transcend.co.za/part-4-getting-the-biggest-social-impact-from-your-bee-
for a sale of just over 10% of equity will budget-0-0
meet the minimum requirements of the v. https://www.politicsweb.co.za/documents/ebrahim-patels-clarification-on-bee-codes
ownership priority element in the B-BBEE vi. https://www.werksmans.com/legal-updates-and-opinions/broad-based-trusts-is-the-
codes to gain between 14 and 16 points bbbee-commission-moving-the-goal-posts-or-simply-applying-the-law/
on the score card. A sale of the full 25% vii. https://mg.co.za/article/2018-02-21-finally-how-government-plans-to-fund-free-
+ 1 share of equity will secure the full 25 education/
ownership points for a company. A sale of viii. https://www.bee.co.za/post/broad-based-trusts-ownership-status-no-longer-hanging-in-
more than 30% of equity will secure the the-balance

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