The Importance of Ownership and Black Designated Groups on the B-BBEE Scorecard

The revised Codes of Good Practice established Ownership as one of the priority elements. This means that a Measured Entity must achieve the required sub-minimum for the Net Value sub- element to avoid being discounted on the overall level obtained.

Ownership is therefore a critical component in B-BBEE planning. The following (with specific reference to Black Designated Groups) may not directly affect Net Value, but should be considered to earn valuable points on the B-BBEE scorecard.

Ownership points are awarded for–

(a) exercisable voting rights of Black people (and Black Women) in a Measured Entity;

(b) economic interest in the Measured Entity to which Black people (and Black women) are entitled; and

(c) realisation points for the Net Value component[1].

Earning points for Economic Interest on the B-BBEE scorecard

Apart from earning points for Economic Interest as referred to above, the Economic Interest of any of the following Black natural people in the Measured Entity will also earn points on the scorecard:

  • Black Designated Groups
  • Black participants in Employee Share Ownership programmes
  • Black people in Broad-Based Ownership Schemes
  • Black participants in Co-operatives.

For Black New Entrants a further 2 points can be earned under Economic Interest.

Earning points for Black Designated Groups on the B-BBEE scorecard

To understand how points can be earned for Black Designated Groups, it is important to know what counts under Black Designated Groups.

Black Designated Groups include the following:

  • 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.

When can B-BBEE scorecard points be earned?

It should be easy enough to determine whether a Black person falls under any of the 5 classifications above at the date of Measurement, i.e. at the time the Measured Entity is being audited to obtain their B-BBEE certificate. A 35-year-old person, for example, can use his/her identification document to confirm that he/she is classified as Youth in terms of the National Youth Commission Act.

What if the same person still holds rights of Ownership in the Measured Entity for the next verification period? They will then be 36 and will not be seen as Youth in terms of the National Youth Commission Act. Will the Measured Entity still be able to claim points for Designated Black Groups?

A determining factor in establishing whether an individual falls within any of the Black Designated Group categories with reference to the Measured Entity will be the transaction date or date of purchase of the rights of ownership[2]. The answer to the question pertaining to the 36-year-old in the example will then be ‘yes’ (subject to the fact that Rights of Ownership were obtained when the 36 -year old was youth as in terms of the National Youth Commission Act). The Measured Entity can still claim points under Black Designated Groups as the Measurement date is not the deciding factor for awarding these points.

As the industry leaders, SERR Synergy assists business owners with B-BBEE compliance matters and the implementation of a workable B-BBEE strategy.

About the author: Audrey Cloete obtained her LLB degree from the North-West University Potchefstroom. After 7 years in legal practise, she changed career paths by entering the corporate environment in 2009. Audrey joined SERR Synergy in 2015 where she currently works as the National Verification Manager.

Reference: 

[1] Codes of Good Practice on Broad-Based Black Economic Empowerment, GG 38765 6 May 2015

[2] GG 39378, 6 November 2015