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

Industry Charters

Financial Services  Charter

Code Series FS100: Measurement of the Ownership Element of Broad-Based Black Economic Empowerment

Interpretation Note on Code FS100, Statement 100

2. Illustrative example: Ownership Scorecard of Bank A as at 31 December 2005

 

Calculations:

 

Effective Voting Rights and Economic Interest attributable to Black People (paragraphs 2.1. and 2.3 of the scorecard):

= total number of shares (voting rights) attributable to Black People / total number of baseline shares
= 10 / 100
= 10%

 

Effective Voting Rights and Economic Interest attributable to Black Women (paragraphs 2.2. and 2.4 of the scorecard):

= total number of shares (voting rights) attributable to Black Women / total number of baseline shares
= (50% of 10) /100
= 5%

 

Effective Voting Rights and Economic Interest held by Black Designated Groups (paragraph 2.5 of the scorecard):

= total number of shares (voting rights) attributable to Black Designated Groups / total number of baseline shares
= ((2.5 - employee trust) + (5 - new entrants)) / 100
= 7.5%

 

Net Equity Value attributable to Black People (paragraph 2.6 of the scorecard):

= the lower of Formula A or Formula B

 

Formula A:

= (1%/2.5%) X 3
= 1.2 points

 

Formula B:

= (10%/25%) X 3
= 1.2 points

 

Direct or Indirect Ownership in excess of 15% (paragraphs 2.7 of the scorecard):

= 0%

 

Bonus Points

•        Ownership Attributable to black new entrants (paragraph 2.8 of the scorecard)

= (50% of 10) / 100
= 5%

 

•        Ownership Attributable to black ESOPs and Co-Ops (paragraph 2.9 of the scorecard)

= (50% of 5) / 100
= 2.5%

 

Ownership Scorecard of Bank A as at 31 December 2005

Ownership

Points

Targets

Bank A

Points Scored
2.1 Voting Rights of Black People

3

25% + 1 Vote

10%

1.2
2.2 Voting Rights of Black Women

1

10% + 1 Vote

5%

0.5
2.3 Economic Interest of Black People

3

25% + 1 Share

10%

1.2
2.4 Economic Interest of Black Women

1

10% + 1 Share

5%

0.5
2.5 Economic Interest of Black Designated Groups, Black Participants in Employee Share Ownership Schemes, Black Participants in Broad Based Ownership Schemes and / or Black Participants in Co-ops

1

2.5%

7.5%

1

Ownership Fulfillment

 
2.6 Net Equity Value (Formula A and B as per para. 4 of annexe 100(C)

3

A/B

A

1.2
2.7 Direct or Indirect Ownership in Excess of 15%

2

10%

 

0

Total

14

 

 

5.6

Bonus Points
2.8 Ownership by Black New Entrants

2

10%

5%

1
2.9 Ownership by ESOPs and Co-ops

1

10%

2.5%

0.25

Total Including Bonus Points

17

 

 

6.85

 

Illustrative example continued:

 

• On 1 June 2009 a portion of the deal matures and BEE (Pty) Ltd elects to sells 2 shares on the open market at R12 a share. The company is therefore valued at R1,440 as at that date
• BEE (Pty) Ltd now holds 8 shares and has received R24 for the 2 shares that were sold.

The debt outstanding amounted to R8 per share, i.e. the BEE shareholders realize R4 per share

• Bank A is a Level 3 Contributor excluding any ownership points
• On 1 January 2011, the lock-in period expires (the balance of the deal matures) and BEE (Pty) Ltd decides to sell their entire 8 shares on the open market for an average price of R12 per share, i.e. the company is still valued at R1,440
• The proceeds are used to settle the outstanding debt of R7 per share and the balance of R5 per share is realized by the shareholders of BEE (Pty) Ltd.

 

As per the Financial Sector Code any dilutions of Ownership that occur on or before 31 December 2010 may only be claimed to the extent of the Continuing Consequences Formula. Any dilutions that occur on or after 1 January 2011 may be claimed as per the protections afforded for dilutions occurring:

• As a result of regulatory requirement and/or;
• As a result of deals maturing and BEE shareholders electing to sell to Non-BEE parties