This week, the Broad-based Black Economic Empowerment Commission (B-BBEE) announced that the vast majority of transactions involving broadly-trusted funds are not in line with the law and do not represent real and effective black ownership.
It was further stated that the commission informed dozens of companies of the need to rectify their own structures and be subject to re-verification of their status as B-BBEE or to face inquiries about the front-line.
These are surprising statements that will negatively affect most of the corporate South Africa, says Sanjay Cassen, executive director at the commercial commercial department of ENSafrica.
"Wide black ownership patterns typically involve the use of trust that works for the benefit of a defined group of Black South Africans," he said.
"According to the 2017 Intelledex Research Report (Strengthening the Foundation), over 50 billion valuable values have been created for charitable beneficiaries through broad B-BBEE structures, including community confidence.
"As such, there is no doubt that property pattern schemes have significantly contributed to an increase in the number of black South Africans who do not usually receive such benefits."
The B-BBEE codes
Regarding B-BBEE codes, Black South Africans can retain their ownership of company rights as direct participants or as participants through some form of entity, such as trust or a wide ownership scheme, said Casen.
"Therefore, participants do not have to directly retain the ownership rights that will be retained by the subject in question and are measured at that level, provided that the confidence is in accordance with the relevant B-BBEE Criteria .
To effectively neglect broadband funds as a property vehicle and to measure the exercise of property rights at user level would be contrary to the legislation and would make it possible to retain ownership rights through trust (or any other entity ) completely irrelevant, he said.
"It seems that the funds still take the place in the Black Property structures, provided they work in favor of the identified" smaller "group of Black South Africans who can participate as shareholders of a trusted company (with a right to vote , the right to receive economic interest and the right to receive unused share ownership over a period of time). "
Casen said reconsideration of broad black ownership is fine – at least the form in which they are traditionally structured.
There is a clear government directive to eliminate broad-based schemes that are financially beneficial to the black public in general without giving them ownership rights, since such schemes do not contribute to the ultimate goal of changing their own B-BEEE models to corporate South Africa , he said.
"Simply stated that the vast majority of the general B-BBEE funds are not in line with the law and represent the front is not something that corporate South Africa will accept easily and such a change will also cause significant instability in the market that is already facing with challenging economic conditions.
"The threat of a criminal sanction where it does not intend to surrender, will not, in our opinion, produce results that the Ministry of Commerce and Industry and the B-BEIE Commission want to achieve.
"There should be a better approach for co-operation between the government and corporate South Africa so that it can have a clear direction towards broad black ownership," he said.
Casen said that as long as the new and simplified direction in a collaborative way was not agreed, there would probably be some form of moratorium on the existing widely structured structures, and consideration should also be given to considering the existing broad structures.
"It may be appropriate for the new direction to be applied to new broad structures established after a previously announced future date.
"These considerations will be the most practical and sensible approach in order to ensure a smooth and stable transition to a new widespread," he said.
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