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DTI changes the threshold for BEE Ownership Transactions

The Department of Trade & Industry (DTI) has gazetted some interesting new changes with regards to the BEE Transactional thresholds. This is a significant development as a number of development financing institutions, like the NEF, IDC and PIC, facilitate and finance BEE deals in a variety of sectors.  The new notice gazetted on 9th June 2017, requires that all ownership transactions which equal or exceed R 25 million (and not as previously R 100 million) must be registered with the BEE Commission. NPI CEO, Israel Noko, advises that it is important to note that the regulation does not constitute the requirement to obtain approval from the Commission before the transaction can be implemented.

Whilst the B-BBEE Regulations make specific reference to these types of B-BBEE transactions being equal or exceeding R 100 million, the calculation is done either by combining the annual turnover of both entities or their assets value. It would appear that this calculation may still apply but it does not appear to be gazetted, which may lead to differences in interpretation. However questions do arise whether an accredited SANAS Verification Agency will be required to report any B-BBEE transaction that has not been reported to the BEE Commission.

NPI CEO, Noko also points out that this new requirement is retrospective. All major BEE ownership transactions concluded on or after the proclamation date of the B-BBEE Amendment Act, (i.e. 24 October 2014), must be registered with the BEE Commission within 30 days of the final publication of this Notice. What seems quite clear is that the pool of BEE transactions that require reporting to the BEE Commission has increased and government will probably put more resources to understand the trends of how BEE transactions are being structured and whether true equity value is being created for Black people.

So what does this mean for companies? Some practical advice from Israel Noko is as follows:

  1. Get professional advice from a professional BEE Advisor who has a record of accomplishment of implementing meaningful transformation. “Cut & Paste” BEE programmes will cost you more in the long term.
  2. Qualified Small Enterprises (QSEs) might have to report their BEE transaction to the BEE Commission, and requested by government officials to give clarity on their transaction.
  3. If you have entered into any ownership transaction over the R25 million threshold from 24th October 2014, you will need to Icomplete a number of documents and submit all relevant transactional documents (ie shareholder’s agreement, MOI, sale of shares agreement etc).
  4. If you have concluded a transaction with broad-based groups, ensure that the participation of the Black beneficiaries is not too restrictive or too removed from the measured entity.

 

For more information contact:

Casandra Kruger, Executive Assistant to the CEO

Email: casandra@npiconsulting.co.za

www.npiconsulting.co.za

Tel: (+27) 011 259 4018

 

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