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

Industry Charters

Financial Services  Charter

Code Series FS100: Measurement of the Ownership Element of Broad-Based Black Economic Empowerment

Statement 103: The Recognition of Equity Equivalents

2. Key measurement principles

 

2.1 Any Equity Equivalent contributions towards the Ownership Element of B-BBEE made by an entity recognising equity equivalents are measurable against the value of their operations in the Republic of South Africa.

 

2.2 Equity Equivalent contributions may take the form of, but is not limited to, additional B-BBEE Transaction Finance, Access to Financial Services, Targeted Investments, Enterprise Development etc. These additional contributions may only be counted under either Equity Equivalents or the respective element, not under both.

 

2.2.1 For avoidance of doubt, where an Equity Equivalent contribution may qualify under, for example, Empowerment Financing it must only be included under either Empowerment Financing or Ownership.

 

2.2.2 Further, any "single" Equity Equivalent contribution may only be counted as an Equity Equivalent contribution in its entirety under either Ownership or the pillar scorecard. Measured entities may not split a contribution and attribute part of that contribution to Ownership and part of the contribution to a specific pillar. However, should a measured entity have achieved 100% of its target in a qualifying pillar, it may apply to the Council to allocate the excess portion of a particular qualifying transaction to another pillar.

 

– The target for Equity Equivalents shall be the Rand Value of 5% (for local entities) /or 25% (foreign branches) of the measured enterprise measured using a standard valuation as at 31 December 2010.

 

2.3 Local measured entities seeking to utilise Equity Equivalent Contributions may only utilise these contributions for a maximum of 5% of the Measured Entity (calculated as a percentage of South African operations of that measured entity at 31 December 2010) with respect to its ownership target of 15% direct ownership.

 

2.4 Lending types of Equity Equivalent contributions will be recognised as follows:

 

– The origination amounts shall be recognised under paragraphs 2.1 to 2.5 of the Ownership Scorecard:
• For the purpose of paragraph 2.1 of the ownership scorecard Equity Equivalent contributions shall be deemed to hold voting rights;
• For the purpose of paragraph 2.2 of the ownership scorecard 50% of the voting rights recognised under paragraph 2.1 shall be deemed to be held by Black Women;
• For the purpose of paragraph 2.3 of the ownership scorecard Equity Equivalent contributions shall be deemed to hold Economic interest;
• For the purpose of paragraph 2.4 of the ownership scorecard, 50% of the economic interest recognised under paragraph 2.3 shall be deemed to be held by Black Women;
• For the purpose of paragraph 2.5 of the ownership scorecard, 50% of the economic interest recognised under paragraph 2.3 shall be deemed to be held by Black Designated Groups.
– Only the balance sheet exposure as at measurement date shall be recognised under paragraph 2.6 of the ownership scorecard.