Definitions and Interpretations used in the B-BBEE Act and Codes of Good Practice (part 1)

Have you ever wondered what all the terminology in the B-BBEE world mean? Below is a comprehensive list.

Absorbtion

means a measure of the measured entity’s ability to successfully secure formal permanent or long-term contract employment as updated in Gazette Number 42496 (May 2019).

Acquisition debt

Is the debt associated with the purchase of an asset. In the context of empowerment, it means the funding extended to a Black participant to purchase shares in a Measured Entity.

Advisory

means having the power to make recommendations but not to take action on them.

Anti Zero-Sum

describes a situation where for one person to gain, another would incur a matching loss. The opposite of zero-sum is Win-Win.

Apprenticeship

means an agreement between an apprentice and an employer for a set period of time during which the apprentice works and receives training in the workplace.

Associated entity

means an entity with which a Seller has concluded a Qualifying transaction.

B-BBEE

means broad-based black economic empowerment.

B-BBEE Certification Date

The date upon which a Measured Entity obtains a B-BBEE certification by a SANAS accredited B-BBEE Verification Agency.

B-BBEE Controlled Company

means a juristic person having a shareholding or similar members interest in which black participants enjoy a right to Exercisable Voting Rights that is at least 51% of the total such rights measured using the Flow Through Principle.

B-BBEE Owned Company

means a juristic person having a shareholding or similar members interest that is B-BBEE controlled, in which black participants enjoy a right to Economic Interest that is at least 51% of the total such rights measured using the Flow Through Principle.

B-BBEE Act

means the Broad-Based Black Economic Empowerment Act, 53 of 2003, as amended.

B-BBEE Amendment Act

means the Broad-Based Black Economic Empowerment Amendment Act, 46 of 2013.

B-BBEE Status

means the B-BBEE status of a Measured Entity as determined under statement 000.

B-BBEE Verification Professional

is a person who preforms any work in connection with rating the status of enterprises in terms of Broad-Based Black Economic Empowerment compliance, on the authority of, or for a rating agency accredited by, a B-BBEE Verification Professional Regulator.

B-BBEE Verification Professional Regulator

is a body appointed by the Minister for the accreditation of rating agencies or the authorisation of B-BBEE verification professionals. SANAS now performs this role.

Benefit Factor

means a factor specified in the Benefit Factor Matrix applicable to fixing the monetary value of Enterprise Development and Supplier Development and Socio-Economic Development Contributions claimable under the Enterprise and Supplier Development Element and the Socio-Economic Development Element.

Black Designated Groups

means:

Unemployed black people not attending and not required by law to attend an educational institution and not awaiting admission to an educational institution;

Black people who are youth as defined in the National Youth Commission Act of 1996;

Black people who are persons with disabilities as defined in the Code of Good Practice on Employment of people with disabilities issued under the Employment Equity Act;

Black people living in rural and under developed areas;

Black military veterans who qualify to be called a military veteran in terms of the Military Veterans Act 18 of 2011.

Black new entrants means black participants who hold rights of ownership in a measured entity and who, before holding the equity instrument in the measured entity, have not held equity instruments in other entities which has a total value of more than R50,000,000, measured using a standard valuation method. (Note: this has been changed from R20 million under the 2007 Code, thereby widening the pool of “new entrants”).

Black Empowerment

means the empowerment of black people.

Black people

is a generic term which means African, Coloureds and Indians:

Who are citizens of the RSA by birth or descent; or

Who became citizens of the RSA by naturalization

  1. before 27 April 1994
  2. on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date.

Broad-based ownership scheme

means an ownership scheme which meets the rules set out in Annexe 100B of the Codes.

Call Option

The right to buy a pre-agreed asset at a pre-determined price at some stage in the future.

Certified Learning Programme

means any Learning Programme for which the measured entity has:

(a) any form of independent written certificate as referred to in the “Learning Achievements” column of the Learning Programme Matrix; or if it does not have such certification;

(b) an enrolment certificate issued by the independent person responsible for the issue of the certification referred to in the Skills Development element confirming the employee has:

  1. enrolled for, is attending, and is making satisfactory progress in the Learning Programme; or
  2. enrolled for but not attended the Learning, or
  3. attended the Training Programme but has failed an evaluation of their learning progress.

Codes

means the Codes of Good Practice including all statements as issued under Section 9 of the B-BBEE Act, as amended.

Companies Act

means the Companies Act, No. 71 of 2008 as amended or substituted.

Competent person

means a person who has acquired through training, qualification and experience, the knowledge and skills necessary for undertaking any task assigned to them under the Codes.

Consultant

means a person who provides professional advice.

Core skills

means skills that are:

(a) value-adding to the activities of the measured entity in line with its core business

(b) in areas the measured entity cannot outsource, or

(c) within the production/operational part of the measured entity’s value-chain; as opposed to the supply side; services or downstream operations.

Critical skills

means those skills identified as being critical by any SETA.

Current Equity Interest Date

means the date of commencement of Statement 100 and the date upon which the transaction undertaken by the measured entity to achieve Black Rights of Ownership became effective and unconditional.

Debt

means an amount owed to a person or organisation for funds borrowed. Debt can be represented by a loan note, bond, mortgage, preference share or other form stating repayment terms and, if applicable, interest requirements. These different forms all imply intent to pay back an amount owed by a specific date, which is set forth in the repayment terms.

DTIC

means the Department of Trade Industry and Competition (the dtic) established after the merger of the Department of Trade and Industry and the Economic Development Department.

EAP

means the Economically Active Population as determined and published by STATS SA. The operative EAP for the purposes of any calculation under the Codes will be the most recently published EAP. Economic Interest means a claim against an entity representing a return on ownership of the entity similar in nature to a dividend right, measured using the flow-through and, where applicable, the Modified Flow Through principles.

EBITDA

means Earning Before Interest, Tax, Depreciation and Amortisation.

Economic Interest

means a claim against an Entity representing a return on ownership of the Entity similar in nature to a dividend right, measured using the Flow Through and, where applicable, the Modified Through Principles.

ED

means Enterprise Development, which focuses on the extent to which small Black business receive support and are helped to develop their operations.

EE Act

means the Employment Equity Act of 1998, as amended.

EE Regulations

means the regulations under the Employment Equity Act.

EME

means an Exempt Micro Enterprise, which is a business with an annual turnover less than R10m.

Employee with a disability

has the meaning defined in the Code of Good Practice on Key Aspects of Disability in the Workplace issued under section 54 of the Employment Equity Act, align with the Employment Equity Act.

Employee ownership scheme

means a worker or employee scheme.

Empowered Supplier

means an Empowered Supplier within the context of B-BBEE is a B-BBEE compliant entity, which is a South African entity, compliant with all regulatory requirements of the country and should meet at least three if it is a large enterprise or one if it is a QSE of the following criteria:

(a) At least 25% of cost of sales excluding labour cost and depreciation must be procured from local producers or local suppliers in SA, for service industry labour costs are included but capped at 15%;

(b) Job creation – 50% of jobs created are for black people provided that the number of black employees since the immediate prior verified B-BBEE Measurement is maintained;

(c) At least 25% transformation of raw material/beneficiation which includes local manufacturing, production and/or assembly, and/or packaging;

(d) Skills transfer – at least spend 12 days per annum of productivity deployed in assisting black EME’s and QSE’s beneficiaries to increase their operation or financial capacity.

Employed learner

means, in terms of Section 18(1) of the Skills Development Act, a learner that was in the employment of the employer party to the learnership agreement concerned when the agreement was concluded. The learner’s contract of employment is therefore not affected by the agreement.

Enterprise Development Contributions

means monetary or non-monetary contributions carried out for the following beneficiaries, with the objective of contributing to the development, sustainability and financial and operational

independence of those beneficiaries:

(a) Enterprise Development Contributions to Exempted Micro-Enterprises or

(b) Qualifying Small Enterprises which are at least 51% black owned or at least 51% black women owned.

Entity

means a legal entity or a natural or juristic person conducting a business, trade or profession in the Republic of South Africa.

Entrepreneur

means a person who starts and/or operates a business which includes identifying opportunities in the market, taking risks with a view of being rewarded with profits.

Equity Equivalent

means an alternative method to secure ownership points for foreign companies.

Equity Equivalent Contribution

means an equity equivalent contribution made by a Multinational under an Equity Equivalent Investment Programme.

Equity Equivalent Investment Programme

means a public programme or scheme of any government department, provincial or local government in the Republic of South Africa or any other programme approved by the Minister as an Equity Equivalent Investment Programme.

Equity Instrument

means the instrument by which a Participant holds rights of ownership in an Entity.

Equivalency Percentage

means a percentage ownership performance for all the indicators in the Associated Enterprises Ownership Scorecard arising from a Qualifying Transaction included in the Ownership Scorecard of the Beneficiary Entity.

Executive Member of board

means members of the board who are executive directors as defined in the King Report.

Exercisable Voting Right

means a voting right of a participant that is not subject to any limit.

Flow-through principle

means the Flow-through principle reflecting the portion of a company ultimately held by Black people in an ownership structure of a Measured Entity. If a natural person who qualifies as Black owns 30% of a company (or partnership or is the vested beneficiary of 30% of a non-discretionary trust) that in turn owns 30% of a Measured Entity, that Measured Entity is recognised as being 30% of 30%, or 9% Black Owned by the Flow Through Principle. The Flow Through Principle is frequently abbreviated to, “FTP.

Author: Craig Tonkin

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