Eleanor Roosevelt wisely said; “Learn from the mistakes of others. You can’t live long enough to make them all yourself”; and in business learning from ones’ own mistakes could amount to considerable outlay. Expert BEE consultants, EconoBEE have used their vast experience to compile a list of the top five mistakes that businesses make when interpreting the ownership element on the BEE scorecard in order to save you the time, and money, of making them yourself.
1. Black ownership percentage targets for Voting Rights and Economic Interest
- The target for each of the above indicators is 25% plus 1 vote. Companies usually misinterpret this target and allocate 26% ownership to black people.
2. In certain cases, companies may wrongly assume that since they have more than 25% black ownership, they score full points on the ownership scorecard. To realize full points, companies will have to comply with all indicators of the ownership scorecard.
3. A common misconception is that companies will not score points on Ownership if the black partner leaves. However, companies may score points on ownership for a certain period even if the black partner has left. This concept would be Recognition of Ownership after Sale/ Loss of Assets, subject to the following criteria:
- Black shareholders must have their equity stake for at least 3 years prior to exit
- There must be value created in the hands of black people
- There must be a level of BEE transformation within the company
- Proof of sale or loss of share
4. Companies may confuse a ‘Black New Entrant’ with a new black shareholder. A Black New Entrant is a black person that has not previously made any ownership deals to a value of more than R20m. However, a new black shareholder may have previously held equity of more than R20m, despite being a new shareholder in the company.
5. Most multinational companies believe that since they do not have any local black ownership, they may not score points on the ownership scorecard. This is incorrect. Multinationals are able to claim ownership points on the scorecard based on their equity equivalent programmes as determined by the Department of Trade and Industry.
Keep a look out for more of the reliable and quality advice offered by EconoBEE as they breakdown the top mistakes made by companies interpreting each of the elements of the BEE scorecard. Alternatively, visit their website at http://www.econobee.co.za/ or contact one of their professional consultants at 011 483 1190.