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

Industry Charters

Financial Sector Charter on Black Economic Empowerment

9. Empowerment financing


9.1 Resourcing


9.1.1 All the parties to the charter commit themselves to working in partnership with Government and its DFls to mobilise resources for empowerment financing.


9.1.2 Based on preliminary calculations, it is estimated that the aggregate amount of new empowerment financing from the financial sector could exceed R75bn. All parties agree to working together to meet the objective of increasing the total amount of empowerment financing.


9.1.3 As part of the process, the parties will, by no later than 30 June 2004, establish: the total amount of empowerment financing; the desired breakdown between BEE transaction financing and the four components of targeted investment; appropriate risk mitigating measures and risk sharing arrangements between Government and its DFls on the one hand and the private sector on the other; the period over which the empowerment financing will be done; the institutional framework and financing models for the mobilisation of the various resources; and the extent to which and how past empowerment financing transactions will be taken into account in terms of paragraph 9.1.6.


9.1.4 Investment in transformational infrastructure will, in part, depend on the establishment of a mechanism to identify and analyse potential projects (including appropriate skills and post funding care).


9.1.5 The total amounts to be invested in BEE transaction financing and targeted investments in terms of will be calculated as percentages of the total designated investments in the financial sector as at 31 December 2003, and currently estimated to be of the order of R2,000 bn. Those percentages of designated investments in each affected financial institution will constitute the targets for BEE transaction financing and targeted investment respectively.


9.1.6 Without reducing the total amount for new empowerment financing by the sector, the targets of individual affected institutions might be adjusted to take account of empowerment financing which they have on their books on the effective date of the charter.


9.1.7 Different affected institutions within the sector may choose to participate to a greater or lesser extent in each of the components of targeted investment, depending on where they are relatively better positioned to do so.


9.1.8 For the purposes of calculating the targeted investment made by an affected institution:
investments and financing made by the affected institution, and held on its own balance sheet, or any securitised financing or investments in or financing to institutions which themselves hold targeted investments or financing, will be taken into account; and
any financing and investment which falls within the definition of a first-order retail financial service or product as set out in paragraph 2.27.3 will be taken into account.


9.1.9 Each affected institution shall annually report its investment into each of the four targeted investment areas so that the aggregate can be monitored and actions taken to ensure that the desired results are achieved.


9.1.10 The Charter Council will review the financial sector's impact on the four classes of targeted investments at the end of the period determined in terms of paragraph


9.1.11 Pension fund trustees, fund managers and consultants play a critical role in influencing the flow of funds. Initiatives will therefore be developed to enhance their understanding of investments in general and specifically their participation in targeted investments and BEE transaction financing and to make a material contribution to shareholder activism as contemplated in paragraph 12.


9.2 Principles  of BEE transactions


9.2.1 BEE ownership initiatives should be aimed at promoting the productive and sustainable participation of black companies and black people in each sector of the economy;
9.2.2 Ownership will be particularly encouraged if it adds value to the companies involved and includes meaningful participation in management and control;
9.2.3 The funding structures should facilitate the transfer of full economic interest to the BEE partner and longer-term shareholder-type relationships, as opposed to short-term portfolio investments (especially where the transaction has been facilitated);
9.2.4 If the acquisition of equity by the BEE company is facilitated in terms of the provisions of this charter or Government assistance, the retention of the shareholding as a BEE share should be promoted to the greatest extent possible;
9.2.5 Initiatives aimed at achieving broad-based empowerment will be promoted. This would include employee ownership, community and collective ownership; and
9.2.6 Joint ventures or partnership arrangements should be meaningfully structured with equitable portions of the responsibility and benefit to each party.