MARITIME TRANSPORT & SERVICES INDUSTRY SUB-SECTOR CODE FOR B-BBEE – Part Two – Indicators of Empowerment and Ownership

This is the second article discussing the Maritime Transport and Services Sub-Sector code and will provide information related to indicators and ownership.

INDICATORS OF EMPOWERMENT

This “Broad-Based BEE Sub-Sector Code for the Maritime Transport & Services Industry” seeks to encourage all stakeholders to pursue a transformation agenda according to the broad guidelines set out in the BEE National Strategy and B-BBEE Act 53 of 2003. It is also necessary to set different targets and timeframes for the public and private industries because the two are at different stages of the transformation process.

This Sub-Sector Code remains in effect until amended, substituted and repealed under Section 9 of the BBBEE Act, or with the parties to this Sub-Sector Code process agreeing to do so. The Transport Charter Council that will be established will review this sub-sector code following the end of the 5th year after its gazetting, and despite the aforementioned, it shall be reviewed on an annual basis for monitoring purposes.

Ownership

Guiding Principle

Stakeholders commit to increasing Black participation across the entire spectrum of the domestic MT & SI value chain in ownership, management control and operational involvement and design appropriate funding mechanisms to facilitate the process. The ownership component will be measured against the exercisable voting rights and the economic interest that the Black equity participants are entitled to.

This principle is linked to the long-term strategy of growing the domestic Maritime Transport & Services Industry (MT & SI) so as to ensure that B-BBEE does not become a zero-sum game.

The ownership contribution by enterprises in the MT & SI refers to direct ownership and is specifically aimed at any enterprise that has an MT & SI domestic asset base. There is also a need to measure the level of net economic interest that is possessed by the Black equity participants. Net economic interest is the unencumbered equity stake that the Black shareholders hold.

Foreign Ownership

Foreign companies, which have an asset base in South Africa, will implement B-BBEE strategies in accordance with the guidelines provided by this Charter. They will be encouraged to sell equity in their local operations.

The standard ownership target and measurement methods outlined below will apply as long as there is no existence of the global practice that disallows the sale of equity to local investors. If such a global policy can be evidenced, the company that holds the asset will be encouraged to contribute to ownership by making an application to the DTI for the implementation of an equity equivalent programme.

Multinationals should give the necessary attention to the creation and development of Black-owned and controlled enterprises within the MT&SI.

The beneficiary enterprises of such programmes should have Black people having more than 50% of economic interest and voting rights and/or Black women having more than 30% of the economic interest and voting rights.

Other programmes that can be supported through the Equity Equivalent programmes are such that they are supportive of the following programmes:

1. The Accelerated and Shared Growth Initiative of South Africa (ASGISA);
2. The Joint Initiative for Priority Skills (JIPSA); and
3. The National Skills Development Strategy (NSDS).

Equity equivalent programmes may also take the form of socio-economic development initiatives, particularly with reference to companies that have ownership structures where more than 50% of the economic interest and exercisable voting rights are in the hands of Black people and/or more than 30% of the economic interest and exercisable voting rights are in the hands of Black women or Black people who are rural-dwellers, youth, unemployed or disabled and own more than 50% of the economic interest and exercisable voting rights. Companies that choose to include enterprise development or socio-economic development initiatives as equity equivalent programmes will not be able to earn points for those initiatives under any other element on the B-BBEE Scorecard of the sub-sector code.

The value of the contributions, measured against the value of the domestic asset or South African operations using a standard valuation method, will be used to calculate the equivalency percentage, and this will be applied to the stated targets for ownership in order to score points for ownership.

Ownership fulfilment will occur once the black equity participants are free from any third-party financial obligations relating to the share acquisition as well as any financial obligations to the principal entity.

The Private Industry commits to:

1. Broaden the ownership base of their companies and ensure that a minimum of 25% of economic interest is in the hands of Black people and 10% is earmarked for Black women;
2. 25% + 1 vote voting rights, or equivalent thereof, are in Black hands, with a minimum of 10% earmarked for Black women;
3. A minimum of 3% for Black people who are rural dwellers, youth, unemployed or living with disabilities within the next 5 years. The first option will be extended towards employees when considering options for achieving this ownership target, and
4. Ensure that the net economic interest of the black equity participants is 100% of their acquired share of the business within 5 years. If this is achieved, it will be deemed that ownership fulfilment has been achieved.

Qualifying Small Enterprises (QSEs), as defined in this sub-sector code, will also commit to the following:

1. Increase the ownership base of their companies and ensure that a minimum of 25% of economic interest is in the hands of Black people. 25% + 1 vote voting rights, or the equivalent thereof, are in Black hands.
2. Ensure that the net economic interest of the black equity participants is 100% of their acquired share of the business within 5 years. If this is achieved, it will be deemed that ownership fulfilment has been achieved.

Funding Mechanisms

Facilitate through creative financing mechanisms the acquisition of equity in their operations by B-BBEE companies so as to ensure the sustainability of the investment by Black shareholders and to maximise their net economic interest. Increase awareness about the industry amongst the traditional banking institutions as well as public financing institutions.

Measuring Principles and the Application of the Charter

1. Measurement principles associated with the ownership element are contained in Statement 100 of Code 100 of the Generic Code of Good Practice.
2. The formulae required in the determination of the ownership score are contained in Annexure 100 (c) of Statement 100 of Code 100 of the Generic Code of Good Practice.
3. The recognition of the sale of assets under the ownership element has the same meaning as that contained in Statement 102 of Code 100 of the Generic Code of Good Practice. The targets as contained in the ownership element of this sub-sector code will apply.
4. The recognition of the equity equivalent programmes for multinationals has the same meaning and interpretation as that contained in Statement 103 of Code 100 of the Generic Code of Good Practice.
5. 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.
6. Measurement principles relating to the ownership element for QSEs are contained in Statement 801 of Code 800 of the Generic Codes of Good Practice.

The next article will discuss the indicators of empowerment for management control and employment equity.