This week has been one of the highlights of the Broad-Based BEE process through the release of the

BEE Codes of Good Practice. These codes of good practice provide guidance to the implementers of BEE initiatives in order to ensure that these initiatives have substance and are sustainable. The codes are numbered in different series such as series 000 that deals with the BEE framework, series 100 deals with ownership issues, series 200 deals with management issues, series 300 employment equity issues, etc What is the big deal with these codes? The big deal with the codes is that they regulate the recognition of BEE initiatives and will be the final word on how BEE initiatives are to be dealt with. I would like to explore some of the pertinent implications of the provisions that are contained within the BEE Codes of Good Practice. In Code series 000, there is a statement on the Transformation Charter process. The Broad-based BEE Act specifies that before the Minister of Trade and Industry can gazette a charter he must satisfy himself that the process was consultative enough and that the charter meets the objectives of the Act. Therefore all charters must adhere to the principles and scoring mechanisms that are outlined in the codes of good practice before they could be gazzetted. The implications of this are that the Financial Services Charter, the ICT Charter, more so the Liquid Fuel Charter, and all other charters would have to be adjusted to align them to the codes if the Minister has to gazette them. For some of the charter the adjustments would cosmetics ones, whereas for others it would a major rehaul of the charter. Statement 010 also outlines the measures to be taken to harmonise the different charter so as to make them comparable and consistent. I remember a comment from a Minister saying that you cannot have an economy riddled with widely different targets for the different sectors as that is likely to create confusion in the economy. The major problem that is facing companies is that if you have different types of business within your company or group you may have to comply with the different charters which increases the administrative burden on the companies. The statement 010 deals with the issue through the harmonization of charters but it does not necessarily decrease the administrative burden of companies. The mammoth of a statement to unpack is Statement 100, which covers the ownership principles. The bottom line underlying this statement is the following Voting rights matter Economic interest accruing to black people in equity ownership is essential The level of unrestricted ownership is critical for BEE to work and That black women should be direct owners of equity in enterprises and not just a after-thought as evidenced in deals that have been concluded to date. The statement has specific targets for women in relation to voting rights and economic interest. What makes this significant is that these targets ado not result in bonus points but are an inherent part of the score. Therefore if a company does not have black women shareholders to the tune of 10 percent, they can never score full points on the ownership element. The points attached to black women ownership is collectively 4 points of the

entire scorecard, which will make a huge difference in giving competitive advantage to those companies with black women shareholders. The other significant principle arising from the code is that there must be unrestricted ownership of shares by black people. This measurement helps align the interests of the companies and their BEE partners. If a BEE partner borrows money from whatever source there will be a restriction if the BEE partner does not pay off the capital portion and if there are no significant capital gains accruing to that shareholding. Therefore it would be in the interest of companies to ensure that the terms of funding for their BEE partners is not prohibitive to the extent that they are not able to pay off their loans and furthermore that the dividend yields or other type of earnings accruing to BEE partner can be used to lift the level of restriction on the BEE partners shares. This is the most crucial clause in the statement that would ensure that BEE is not a bubble. If this clause were to be taken away there would be a lot of manipulation that would render the BEE partner perpetually encumbered with debt to the extent that they would never be empowered. A balances approach was taken in the allocation of the points in such a manner that companies who have put together BEE deals get points for it but not enough if the result of those deals do not allow black unrestricted access to the rights attached to the deals Overall one can now shout out a resounding AMEN!!! to the Hymn of Black Economic Empowerment especially as it relates to black women.