7 December 2006
South Africa’s finalised codes of good practice on black economic empowerment, approved by the Cabinet on Wednesday, give exemption to smaller companies and start-ups in their first year of operation, while allowing multi-nationals flexibility in how they structure their empowerment deals.
According to Business Day, the black economic empowerment (BEE) requirements for companies doing business in SA – which will be published in the government gazette early in 2007 – also give greater leniency to medium-sized firms, and incorporate a number of suggested changes to the earlier drafts that will give companies more breathing space.
Flexibility for multinationals
“Global, multinational companies have been given more flexibility in how they make black economic empowerment arrangements, as it does not only have to be representation at ownership level,” Trade and Industry Deputy Director-General Lionel October told journalists after the Cabinet meeting in Pretoria on Wednesday.
He explained that a global company doing business in South Africa would, if it chose, be allowed to retain sole ownership of its South African subsidiaries, so long as it made up for this exemption with alternative BEE measures.
Instead of selling shares of its local operations, such a business could, for example, introduce empowerment through its procurement processes or retail functions by ensuring that its dealerships were representative of BEE.
The Cabinet also approved a sector-wide generic BEE scorecard, a scorecard for multi-nationals, and the sector-specific charters of a number of industries that applied for their scorecards to be made legally binding.
Relief for small businesses
The generic scorecard makes a distinction between the compliance requirements for smaller and larger companies – and now uses company turnover alone to define qualifying small businesses, disregarding size of workforce.
The turnover threshold has also been raised. Small businesses with an annual turnover of R5-million or less, along with start-up companies which have been in business for less than a year, will not be checked against BEE scorecards.
According to Business Day, the codes also give some relief to businesses with an annual turnover of between R5-million and R35-million (revised upwards from R25-million).
Medium-sized businesses will be able to choose four from the seven components of the codes with which they wish to comply.
SouthAfrica.info reporter and BuaNews