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BEE codes clear confusion
05 December 2005

The Codes of Good Practice clearly set out the requirements of empowerment deals and explain in more detail the empowerment scorecard.

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THE muddy waters of broad-based black economic empowerment (BEE) are clearing with the release of the first phase of the final Codes of Good Practice for BEE. This is expected to end uncertainty about empowerment deals, and boost economic growth.

Released early last month by the Department of Trade and Industry (DTI), this follows the Broad-Based Black Economic Empowerment Act of 2003 and the department's BEE Strategy Document. That document gave an outline of the broad-based BEE scorecard, together with weightings, but did not detail measurement principles and how the scorecard was to be applied.

Now, however, the Codes of Good Practice contain frameworks for determining BEE, including the generic scorecard, guidelines and BEE agencies, and how the different parts of the scorecard are to be measured in companies.



Overview of the codes

Debated since a draft was released in December 2004, the codes ensure that the days of high-profile black business people representing faceless members of "broad-based" groups in empowerment deals are numbered.

They also aim to ensure that empowerment benefits not only the black elite but also women, workers, youth, people with disabilities and people living in rural areas. And they strongly discourage "fronting", or schemes that claim to be broad-based but which are found to be wanting when their composition is unpacked.

The new codes relax the regime for empowerment partners who borrow heavily to finance their stakes. In previous drafts, eight of a possible 20 points on the ownership scorecard were withheld until debt was repaid. This is now reduced to one, with seven points accruing gradually as repayments are made.

A revised point-scoring formula is included in the new codes. It encourages companies to enter into deals with groups that are not necessarily 100 percent black-owned.

The change allows a company whose empowerment is being measured to treat one 51 percent-or-more black-owned company in its corporate structure as if it was 100 percent black owned, increasing the points awarded.



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Last Updated on 21 January 2013