The previous two years were the defining years for the BEE in that there were a string

of charters that were initiated. One commentator called this flurry of charters a charter festival with different transformation tones ranging from kwaito and mbaqanga to classical music. With the release of the Codes of Good Practice on BEE there are certain requirements that need to be met before a charter can be gazetted by the Department of Trade and Industry. The primary litmus test set by the BEE Act is that the Trade and Industry Minister has to satisfy himself that the charter was developed by the major stakeholders in the sector and advances the objectives of the BEE Act. A charter that has been hailed as the mother of all charters, the Financial Services Charter (FSC) deserves further comparative analysis to the Codes of Good Practice on BEE. A note of congratulations from the President in his State of the Nation Address on Friday around the R85 billion commitment from the banking sector for empowerment financing underscores the importance of this charter in driving the transformation process forward. There are key points of departure between the FSC and the Codes of Good Practice that deserves a closer look. The first one relates to the ownership element of the Broad-based BEE Scorecard. The financial services charter recognizes ownership that has upfront economic interest, thus not recognizing immediately the ownership schemes that have deferred economic interest until that interest accrues to black people. The Codes of Good Practice agree with that principle but goes on further to state that the economic interest held by black people must be unrestricted for companies to get full credit. This ensures that economic interest by black people is recognized when it actually accrues to black people free of any restriction. Secondly the definition of black people differs, where in the FSC black people are defined as Africans, Indians, Coloured who are South African citizens, which the Codes further restricts by adding that they must be South African born citizens or those who attained their citizenship prior to 27 April 1994. The message from the Codes is that to those people who were disadvantaged by apartheid are the beneficiaries of BEE. The FSC has further refinement to the definition of black people to include permanent residents for the purposes of calculating the scores of the management, employment equity and skills development component of the BEE Scorecard, whereas the Codes do not allow for that refinement. When it comes to tracking the flow of economic benefits to black people, the Codes provide for only counting those benefits that accrue to black people who natural persons and not juristic persons. The FSC definition of black includes a black owned company. The implication of this is that in tracking the flow of economic benefits, those that flow to companies that are more than 51% owned and managed by black people, there is no need for further tracking. This may distort the tracking of how much of the real economic benefits flow to black people. The targets for the ownership element are the same, however the composition of the target is different. The FSC has a target of 10% direct black ownership and 15% indirect, whereas the overall target of the Codes is 25% for all black people. But the Codes go

further in outlining how the 25% needs to be split between the different black beneficiaries for companies to score full points on the BEE Scorecard. It specifies that at least 10% of the entire economic interest available in a company should go to black women, and 2.5% to designated black groups, leaving a 12.5% stake for black men, if a company wants to maximize its ownership points of the scorecard. This type of split suddenly puts women on the forefront of BEE deals instead of being just tag-alongs. The effect of this ownership split on the current financial services deals will be immense, perhaps to a lesser extent on the following deals, depending on the ultimate economic interest accruing to women: Firstrand deal due to the Women Development Bank involvement, ABSA due to Mthobi Angels involvement in the consortium, Brait with an involvement of women grouping and the recent Deutsche Bank deal with Xoliswa Kakana involvement. There is no distinction of voting rights accruing to shareholders as opposed to those vested with management in the FSC, whilst there is a clear distinction of these in the Codes. The key question is, given these differences, will the FSC be gazetted by the Trade and Industry Minister as a Code of Good Practice in its current form which will give it legal effect or will it be gazetted for information purposes with no legal effect on the organs of State?