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

Industry Charters

Financial Services  Charter

Code Series FS600: The Measurement of the Enterprise Development and/or Empowerment Financing Element of Broad-Based Black Economic Empowerment

Statement 601: The Measurement of the Enterprise Development Element for Measured Entities that are exempted from contributing towards Empowerment Financing

3. Key Measurement Principles


3.1 General principles


3.1.1 Measured Entities receive recognition for any Qualifying Enterprise Development Contributions that are quantifiable as a monetary value using a Standard Valuation Method;


3.1.2 Qualifying Enterprise Development Contributions of any Measured Entity are recognisable cumulatively from the commencement date of this statement, or an earlier date chosen by the Measured Entity (the inception date), until the date of measurement;


3.1.3 No portion of the value of any Qualifying Enterprise Development Contribution that is payable to the beneficiary after the date of measurement can form part of any calculation under this statement.


3.2 Recognition of Enterprise Development Contributions:


3.2.1 Enterprise Development Contributions consist of monetary or non-monetary, recoverable or non-recoverable contributions actually initiated and implemented in favour of beneficiary entities by a Measured Entity with the specific objective of assisting or accelerating the development, sustainability and ultimate financial and operational independence of that beneficiary. This is commonly accomplished through the expansion of those beneficiaries' financial and/or operational capacity;


3.2.2 The full value of Category A Enterprise Development Contributions, adjusted using the Benefit Factor, multiplied by 1 ,25 is recognisable;


3.2.3 The full value of Category B Enterprise Development Contributions is recognisable;


3.2.4 Recognition of Enterprise Development Contribution is limited to Qualifying Enterprise Development Contributions made to beneficiary entities if the beneficiary has met the definitional requirements of a beneficiary entity.


3.2.5 The following is a non-exhaustive list of Enterprise Development Contributions: Grant contributions to beneficiary entities; 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 hastening development of beneficiary entities; Overhead costs of a Measured Entity directly attributable to Enterprise Development Contributions; Enterprise Development or developmental capital advanced to beneficiary entities; Preferential credit terms granted by a Measured Entity to beneficiary entities; Preferential terms granted by a Measured Entity in respect of its supply of goods or services to beneficiary entities; Contributions made to settling service costs relating to the operational or financial capacity or efficiency levels of beneficiary entities; Payments made by the Measured Entity to third parties to perform Enterprise Development on the Measured Entity's behalf; Discounts given to beneficiary entities in relation to the acquisition and maintenance costs associated with the grant to those beneficiary entities of franchise, licence, agency, distribution or other similar business rights; The creation or development of capacity and expertise for beneficiary entities needed to manufacture or produce goods or services previously not manufactured, produced or provided in the Republic of South Africa; Facilitating access to credit for beneficiary entities without access to similar credit facilities through traditional means owing to a lack of credit history, high-risk or lack of collateral; Provision of training or mentoring to beneficiary entities which will assist the beneficiary entities to increase their operational or financial capacity; and The maintenance by the Measured Entity of an Enterprise Development unit that focuses exclusively on support of beneficiary entities or candidate beneficiary entities.


3.2.6 The creation or development of the capacity of beneficiary entities, which will enable them to manufacture and produce goods or provide services previously not available in the Republic of South Africa, may constitute an Enterprise Development Contribution.


3.2.7 New projects promoting beneficiation may constitute an Enterprise Development Contribution.


3.2.8 Provision of preferential credit facilities to a beneficiary entity by a Measured Entity may constitute an Enterprise Development Contribution. Examples of such contributions include without limitation: Provision of finance to beneficiary entities at lower than commercial rates of interest; Relaxed security requirements or absence of security requirements for beneficiary entities unable to provide security for loans; and Settlement of accounts with beneficiary entities over a shorter period of time in relation to the Measured Entity's normal payment period, provided the shorter period is no longer than 15 days.


3.2.9 Providing training or mentoring to beneficiary communities by a Measured Entity. (Such contributions are measurable by quantifying the cost of time (excluding travel or commuting time) spent by staff or management of the Measured Entity in carrying out such initiatives. A clear justification, commensurate with the seniority and expertise of the trainer or mentor, must support any claim for time costs incurred). Maintaining an Enterprise Development unit by the Measured Entity. (Only that portion of salaries and wages attributable to time spent by the staff in, and the other expenses related to, promoting or implementing Enterprise Development, constitutes contributions). Payments made by the Measured Entity to third parties to perform Enterprise Development on the Measured Entity's behalf.