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Draft Amended Aviation sub-sector code of 2016 – Part 3 – Ownership

This is part three of a series of articles explaining the draft Aviation sub-sector code.

In March 2021 the Department of Transport hosted a summit for the Review of Civil Aviation Policy and specifically B-BBEE transformation.

During the summit reference were made to the following legislation, Policies, Strategies, and information:

  • The B-BBEE Act (53/2003): Transport Sector Broad-Based Black Economic Empowerment (B-BBEE) Codes in Gazette 39744 dated February 2016
  • Broad-Based Black Economic Empowerment Amendment Act
  • The National Development Plan (NDP – 2030)
  • The Aviation Sector Code
  • The Employment Equity Act
  • The Skills Development Act
  • The Competition Act
  • White Paper on National Transport Policy, 1996
  • National Civil Aviation Policy, 2017
  • Draft National Civil Aviation Transformation Strategy, 2018

This article discusses the Ownership Element of the Scorecard.

OWNERSHIP

GUIDING PRINCIPLES

  1. Achieve significant black ownership, management control, and operational involvement throughout the industry value chain.
  2. All other measurement principles of Code Series 100 of the Amended Codes of Good Practice apply to this statement.

KEY MEASUREMENT PRINCIPLES

A. An Entity receives points for participation by Black People in its rights of Ownership, using the Ownership scorecard in paragraph 2. Black People may hold their rights of Ownership in a Measured Entity as direct Participants or as Participants through some form of Entity such as:

  1. a Company as defined in the Companies Act of 2008 (as amended);
  2. a Close corporation;
  3. a Co-operative;
  4. a Trust;
  5. a Broad-Based Ownership Scheme;
  6. an Employee Share Ownership Programme;
  7. a partnership or other association of natural persons; and
  8. any form of juristic person recognised under South African law.

B. The Rights of Ownership held by black people in South African multinationals are measurable against the value of their South African operations only. The Exclusion Principle must be applied with reference to the value of the Measured Entity’s foreign operations when calculating its ownership score.
C. Measurement principles associated with the ownership element are contained in Statement 100 of Code 100 of the Generic Code of Good Practice as amended.
D. The formulae required in the determination of the ownership score are contained in Annexure 100 (E) of Statement 100 of Code 100 of the Generic Code of Good Practice as amended.
E. The recognition of the sale of assets under the ownership element have the same meaning as that contained in Statement 102 of Code 100 of the Generic Code of Good Practice as amended. The targets as contained in the ownership element of this Draft Sector Code will apply.
F. The recognition of the equity equivalent programmes for multinational organisations has the same meaning and interpretation as that contained in Statement 103 of Code 100 of the Amended Generic Code of Good Practice.
G. The formulae required in the determination of the ownership score based on equity equivalent contributions are contained in Annexure 103 (A) of Statement 103 of Code 100 of the Generic Code of Good Practice as amended.

Foreign Ownership

Equity equivalent programmes are supported by the line minister of the transport sector and approved by the dtic Minister. Contributions toward these programmes were re-measured as the actual contributions made using the general principles set out in statement 103, code series 400 and 500 of the Amended Codes of Good Practice.

Weighting 25 points
Target Provide evidence of a global practice against selling equity to locals in investee countries.

Voting Rights

1.1 Exercisable voting rights in the hands of Black people

Weighting 4 points
Target 25% + 1 Vote

1.2 Exercisable voting rights in the hands of Black Women

Weighting 2 points
Target 10%

Economic Interest

2.1 Economic interest in the hands of Black people

Weighting 4 points
Target 25%

2.2 Economic interest in the hands of Black Women
Weighting 2 points
Target 10%

2.3 Economic interest of the following Black natural people in Enterprise:

• Black designated groups;
• Black Participation in Employee Ownership Schemes (ESOP);
• Black beneficiaries of Broad-based Ownership Schemes;
• Black participants in Co-operatives

Weighting 3%
Target 3%

Below is a list of types of Ownership to keep in mind for B-BBEE purposes. Prior articles related to Ownership schemes have been published on www.beeratings.com for further information.

Direct Ownership (shareholding)
Indirect shareholding (flow- through principle)
Mandated Investments ( investments made by or through any third party regulated by legislation on behalf of the actual owner of the funds)
Sale or loss of shares by a black participant (after a black participant has exited through the sale or loss of shares)
Broad-Based Ownership Schemes (BBOS) and Employee Share Programs
Private Equity Funds
Trusts
Equity Equivalent (for Multinationals)
Sale of Assets

The next article in this series will focus on the Management Control Element of the Scorecard.

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