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Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Codes of Good Practice on Broad-Based Black Economic Empowerment

Amended Property Sector Code

Statement 000: General Principles and General Scorecard as applied to the Amended Property Sector Code

6. Ownership

 

6.1 To date the commercial activities surrounding property continue to reflect inequalities in ownership, with little transformation having taken place. The situation is further exacerbated by skewed ownership patterns of property in general.

 

6.2 There are two Ownership scorecards which relate to generic: Property owning companies and all other companies. The All other companies must comply with ownership scorecard is as indicated in the DTI Codes.

 

6.3 This code aims to address the low levels of black ownership in property enterprises (including property services enterprises), as well as deal with obstacles to ownership by black people of property assets.

 

6.4 Each property sector enterprise commits to achieve the following targets:
• at least 27% ownership and economic interest held by black people and 27% exercisable by black people in such enterprises;
• at least 10% ownership and economic interest held by black women and 10% votes exercisable by black women in such enterprises;
• at least 3% participation in ownership and economic interest held by broad-based ownership schemes and/or designated groups; and
• at least 3% participation in ownership and economic interest held by new entrants.

 

6.5 For property owning companies only, the following measurement of net equity (realisation points) will be applied as indicated in the table below, whilst for the all other companies in the property sector the measurement of net equity (realisation points) as indicated in the DTI Codes will apply.

 

Year

Percentage

Year 1

3%

Year 2

7%

Year 3

10%

Year 4

15%

Year 5

19%

Year 6

24%

Year 7

30%

Year 8

36%

Year 9

43%

Year 10

50%

 

6.6 Given that the majority of the listed share register have a mandated investments that are far beyond 40%, a special consent is given for only property listed companies and property unit trusts or REITS companies to cap the mandated investment at 50%. Despite this provision, the cap shall be 40% as in the Generic Codes for those listed companies and property unit trusts, unless there is consistent evidence of 50% or more of the mandated investment ownership from the time the measured entity got listed or three years prior to being verified of their B-BBEE status.

 

6.7 The Property Listed industry is such that there is high level of dilution of Economic Interest than in any other listed companies. To address the excessive dilution of BEE shareholdings in property listed companies relative to other listed corporate companies, as a result of frequent equity capital raisings a normalisation formula has been created:
• The formula seeks to calculate the deemed number of shares in issue. The deemed number of shares in issue is calculated as:

 

Y x (1 + X)n

• Where:
o Y = number of shares in issue at the time of doing direct B-BBEE deal
o X = Average 10 year compounded increase in number of shares in issue for the top 50 listed companies (excluding real estate)
o n = year of Measurement (e.g. Year 1)
• X in the formula will be calculated by an independent external party and published by the PSCC at the beginning of every year

 

• X = 0.8% applicable from 1 June 2017-December 2017 and thereafter the number will be independently calculated and published every year by PSCC, to be applied at the beginning of each calendar year.

 

6.8 Peculiar cases will be reviewed and assessed on a case to case basis via an application to the Sector Charter Council office and the DTI (BEE Unit). The application would have to provide detailed and full justification that warrants a special concession.

 

6.9 Property Sector commits to providing financial support to Black owned and controlled companies with at least 51% black ownership (level 1-3) measured as a percentage of development/redevelopment spend on properties not currently owned by the measured entity. The target to graduate over a period of time as follows:
6.9.1 1% from the first to the end of third calendar year (1-3 year) after commencement;
6.9.2 2% from the first calendar day of the fourth year to the last calendar day of the fifth year (4-5 year) after commencement.

 

6.10 The financial support sub-element in ownership is subject to the measured entity doing development or redevelopment at any given year.

 

6.11 Where the measured entity has not done any form of development or redevelopment, it will calculate its overall performance based on the total maximum points minus the weighting allocated the financial support sub-element.

 

6.12 If the measured entity choose under this provision to give financial support that result in ownership points, the same provision can not be counted again under Enterprise and Supplier Development.

 

6.13 Black people and designated groups including black women, black youth, black people with disabilities and black people living in rural areas who are already involved in the sector should be given preference in case of any competitive bids for equity ownership opportunities in enterprises within the property sector.

 

6.14 The funding structures should facilitate the transfer of full economic interest to the black partners and longer term shareholder-type relationships.

 

6.15 Any provisions in Code 100 relating to the recognition of ownership contributions arising from the sale of shares, businesses or assets by enterprises, shall apply to enterprises in the property sector, provided that the sale itself is not counted under enterprise development.

 

6.16 The parties to the code commit to devise mechanisms to remove the obstacles that restrict the ability of black people to own property and to participate in the property market. These would include but not be limited to the following:
6.16.1 Address administrative and other constraints to ownership, in partnership with the relevant government departments at national, provincial and local level;
6.16.2 Design partnerships with the financial sector and government to enhance access to finance for property ownership and property development initiatives;
6.16.3 Meet asset disposal targets as outlined in the Ownership bonus section of this code;

 

6.17 The Charter Council will follow and apply the DTI Codes regarding indirect ownership. If there is any matter relating to scorecards and/or measuring of enterprises in this codes, the generic DTI Codes shall take precedence over the charter code 100.

 

6.18 All principles under Ownership in the revised codes as amended time to time (for both generic and QSE) are applicable.

 

CODE 100 OWNERSHIP GENERIC SCORECARDS – 30 POINTS

 

CATEGORY

OWNERSHIP

INDICATOR

WEIGHTING

POINTS

COMPLIANCE TARGET


Property

Owning

companies

All other

companies

Property

Owning

Companies

All other

companies

Voting

Rights

Exercisable Voting Rights in the Enterprise in the hands of Black people

4

5

27%

25% +

1 vote

Exercisable Voting Rights in the Enterprise in the hands of Black women

2

2

10%

10%

Economic

Interest

Economic Interest of Black people in the Enterprise

4

5

27%

25%

Economic Interest of Black women in the Enterprise

2

2

10%

10%

Economic interest of the following black natural persons in the measured entity

1. Black designated groups
2. Black participants in Employee share ownership Schemes Programme;
3. Black beneficiaries of Broad based

4

4

2.5%

2.5%

Realization

points

New Entrants

2

2

2%

2%

Net equity value

8

10

Yr 1 - 3%

Yr 2 - 7%

Yr 3 - 10%

Yr 4 - 15%

Yr 5 - 19%

Yr 6 - 24%

Yr 7 - 30%

Yr 8 - 36%

Yr 9 - 43%

Yr 10 - 50%

Yr 1 = 10%

Yr 2 = 20%

Yr 3 = 40%

Yr 5 = 60%

Yr 7 = 80%

Yr 9 = 100%

Financial

Support

Financial support to Black property owned and controlled companies with at least 51% black ownership (level 1 - 3) measured as a % of development/ redevelopments spend on properties not currently owned by the measured entity

4

 

1 - 3 yrs

 

1%

4 - 5 yrs

 

2%

 

 

OWNERSHIP BONUS POINTS FOR GENERIC SCORECARD

 

6.19 There has been limited support by the sector of entrepreneurial development and and both public and private sector disposal strategies have in general inadequately incorporated B-BBEE objectives.

 

6.20 The sector commits to utilise property disposals to increase property ownership amongst black people and to contribute towards the growth of sustainable enterprises. In pursuit of this commitment, when an enterprise engages in the above activity in the sector, it commits to target 35% of total disposals to Level One (1) to Level Three (3) B-BBEE enterprises which are 51% black owned over a five year period from the effective date of this sector code. The enterprises should be independent from the measured entity and the disposed assets must result in the creation of sustainable businesses or business opportunities in the hands of black people as well as the transfer of specialised skills or productive capacity to black people. Contributions will be measured using a rolling 5 year period commencing on the effective date of the revised Codes of Good Practice being 2015. This means that the 35% target must be achieved at any time in a rolling 5 year period as a percentage of the total disposal of assets during that same period. A sale of fixed property may not be simultaneously counted towards the ownership score under sale of Assets, regardless of the fact that an actual business unit may have been sold.

 

6.21 In each year a sub-minimum of 20% of 35% i.e 7% must be achieved before any bonus points are awarded.

 

6.22 Where greater disposal on any year are achieved, they can be carried forward as contribution to the next years.

 

6.23 The bonus points will be calculated for the organisation that make disposal in line with clause 6.20 above.

 

CRITERIA

BONUS

POINTS

BONUS

TARGETS

Disposal of assets to Black owned and controlled company with at least 51% Black ownership (level 1-3) as a % of total asset disposal

3

35%

 

CODE 701: OWNERSHIP QSE SCORECARD - 27 POINTS

 

The following table represents the indicators and method for calculating score for Ownership used this statement:

 

MEASUREMENT CATEGORY INDICATOR

WEIGHTING

POINTS

COMPLIANCE TARGETS

Property Owning  Companies

All other companies

Property owning  companies

All other companies

1.1        Voting Rights
1.1.1 Exercisable voting rights in the enterprise in the hands of Black people

5

5

25% + 1 vote

25% + 1 vote
1.1.2 Exercisable voting rights in the enterprise in the hands of Black women

2

2

10%

10%
1.2 Economic interest
1.2.1 Economic Interest of Black people in the enterprise

5

5

25%

25%
1.2.3 Economic Interest of Black women in the enterprise

2

2

10%

10%
1.2.3 New entrants or Black designated groups

3

3

2%

2%
1.3 Realisation Points

 

 

 

 
1.3.1 Net Value

10

10

Y 1 = 3%

Y 2 = 7%

Y 3 = 10%

Y 4 = 15%

Y 5 = 19%

Y 6 = 24%

Y 7 = 30%

Y 8 = 36%

Y 9 = 43%

Y 10 = 50%

Y 1 = 10%

Y 2 = 20%

Y 3 = 40%

Y 5 = 60%

Y 7 = 80%

Y 9 = 100%