Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Industry Charters

Chartered Accountancy Charter

Section C From Theory to Practice: The Scorecard

12. The Generic Scorecard for the CA Sector

12.2 Application of the CA Sector Scorecard

12.2.6 Enterprise Development Scorecard

Purchase

Through the indicators listed below, the objective is to measure initiatives intended to assist and accelerate the development and sustainability of other enterprises, more specifically black-owned entities that struggle to take their business from survivable and / or micro level to a level of sustainability and profitability. The challenges the Code seeks to address are-

• the high failure rate amongst black-owned start-ups due to a lack of access to financing and other business support; and

• job creation.

The indicators and Weighting points are as follows:

Enterprise Development indicator	Weighting points		Compliance Target for 2016
Enterprise Development indicator	Code	CA sector
Average annual value of all Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of NPAT or turnover	15	15	3% of NPAT or 0,375% of turnover

While recognising the need for the CA sector to contribute to the development of black enterprises, Measured Entities are encouraged to provide support for small black-owned accountancy firms.

In fact, the custom of established audit firms working with black firms on joint projects, with working arrangements ranging from joint assignments which are shared equally between the firms to subcontracting arrangements where an established firm subcontracts part of the work to an emerging black firm, should be extended to the whole sector. At present arrangements of this nature are prevalent in servicing the public sector and in state-owned entities. They are beneficial in that emerging firms are given the opportunity to develop themselves. Established firms are encouraged to extend these arrangements to the private sector as well, and are incentivised by earning points on their scorecards.

For the CA sector, the following are applicable:

•	3% of NPAT or 0,375% of turnover, whichever is the greater. In view of the partnership structure, which is unique to the CA profession, NPAT is not always an appropriate means of measurement, and accordingly turnover was agreed upon as an alternate acceptable measure.

•	The CA sector shall be entitled to receive recognition for any qualifying Enterprise Development Contributions. It must be possible to quantify such contributions by attaching a monetary value, using a Standard Valuation Method.

•	Qualifying Enterprise Development Contributions of any Measured Entity shall be measured cumulatively, which shall be from the commencement date of this Sector Code until the date of measurement.

•	Qualifying Enterprise Development Contributions of the CA sector means capacity building of a monetary and non-monetary nature for black-owned firms within the profession and outside of the profession.

Beneficiaries of Enterprise Development defined

Beneficiary		Description of Beneficiary
1	Enterprise development Category A (QSEs & Exempted Micro Enterprises (EMEs)))	QSEs and EMEs which are 50% black owned or 50% black women owned
2	Enterprise development Category B (any size entity)	Any size entity which is • 50% black owned or 50% black women owned • 25% black owned or 25% black women owned that also has a B-BBEE Status of level one to six
3	Sector Specific Programmes	Assistance to black-owned accountancy firm Job creation through The Hope Factory

Recognition of Enterprise Development Contributions

•	Grant Contributions to Beneficiary Entities. This would include grants made to the SAICA job creation initiative (The Hope Factory) which is recognised for Enterprise Development purposes.

•	Investments in Beneficiary Entities.

•	Loans made to Beneficiary Entities.

•	Guarantees given or security provided on behalf of beneficiaries.

•	Credit facilities made available to Beneficiary Entities.

•	Direct costs incurred by a Measured Entity in assisting and backing development of Beneficiary Entities.

•	Overhead costs of a Measured Entity directly attributable to Enterprise Development Contributions.

•	Preferential credit terms granted by a Measured Entity.

•	Preferential terms granted by a Measured Entity in respect of the supply of goods or services to a Beneficiary Entity.

•	Contributions made to settling service costs relating to the operational or financial capacity of Beneficiary Entities.

•	Payments made by the Measured Entity to third parties to perform Enterprise Development on behalf of the Measured Entity.

•	Facilitating access to credit for Beneficiary Entities without which access to similar credit facilities would not be possible.

•	Provision of training or mentoring to Beneficiary Entities which will assist the Beneficiary Entities to increase their operational or financial capacity.

Calculation of the value of the benefit

These calculations are based on the Benefit Matrix below:

Qualifying contribution type	Contribution amount	Benefit Factor
Grant and related contributions
Grant contribution	Full grant amount	100%
Direct cost incurred in supporting Enterprise Development	Verifiable cost (including both monetary and non-monetary)	100%
Discounts in addition to normal business practices supporting Enterprise Development	Discount amount (in addition to normal business discount)	100%
Overhead costs incurred in supporting Enterprise Development (including people appointed in Enterprise Development)	Verifiable cost (including both monetary and non-monetary)	80%
Loans and related contributions
Interest-free loan with no security requirements supporting Enterprise Development	Outstanding loan amount	100%
Standard loan to Black-Owned EME and QSEs	Outstanding loan amount	70%
Standard loan provided to other beneficiary enterprises	Outstanding loan amount	60%
Guarantees provided on behalf of a beneficiary entity	Guarantee amount	3%
Lower interest rate	Outstanding loan amount	Prime rate - actual rate
Equity investments and related contributions
Minority investment in Black-Owned EME and QSEs	Investment amount	100%
Minority investment in other beneficiary enterprises	Investment amount	80%
Enterprise Development investment with lower dividend to financier	Investment amount	Dividend rate of ordinary shareholders - Actual dividend rate of contributor
Contributions made in the form of human resource capacity
Professional services rendered at no cost and supporting Enterprise Development	Commercial hourly rate of professional	80%
Professional services rendered at a discount and supporting Enterprise Development	Value of discount based on commercial hourly rate of professional	80%
Time of Employees of Measured Entity productively deployed in assisting beneficiaries	Monthly salary divided by 160	80%
Other contributions
Shorter payment periods	Percentage of invoiced amount	Percentage being 15 days less the number of days from invoice to payment

Measurement of qualifying contribution

Where A = the score achieved in respect of the qualifying contributions made by the Measured Entity

B = the value of all qualifying contributions made by the Measured Entity measured from the effective date the CA Sector Code to the date of measurement

C = the compliance Target for qualifying contributions as specified in the scorecard

D = the Weighting points allocated to the indicators in the scorecard