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Enterprise development from a BEE perspective

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.

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Enterprise development from a BEE perspective

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  1. Enterprise development from a BEE perspective Badian Maasdorp

  2. 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

  3. 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

  4. 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

  5. Enterprise Development • Direct empowerment • Ownership • Control • Indirect empowerment • Preferential procurement • Enterprise development • Code / Statement 600 • Recognition of Enterprise Development Contributions

  6. 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

  7. 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.

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. Possible Structure Measured Entities Contribute funds/time/resources Trust / Trustees - funding - training - mentorship Enterprise Development Beneficiary Entities

  15. 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

  16. Thank you Tel: (011) 286-1183 Email: Badian.Maasdorp@dlacdh.com

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