This document outlines three options for multinational companies operating in South Africa to facilitate black economic empowerment (BEE) ownership as required: 1) Selling equity in the local business to BEE investors. This provides representation and voting rights but the company cannot participate in an equity equivalent program. 2) Selling assets, businesses, or equity instruments to associated BEE enterprises. Points are based on the value and growth of assets sold. The company cannot participate in an equity equivalent program if using this option. 3) Contributing financially to approved BEE development programs through an Equity Equivalent Investment Program. Contributions are calculated as a percentage of revenue or value and provide ownership points over time. This allows

1. BEEOWNERSHIPOPTIONS
FOR MULTINATIONALS
OPERATING INSOUTH
AFRICA
By Maxi-lee Machado ©

2. BEE
OWNERSHIP
OPTIONS
A multinational is defined as an enterprise with a business in the
RSA and elsewhere, which maintains its international
headquarters outside the RSA.
A multinational enterprise can facilitate BEE ownership and
control of economic assets through either one of the following
options:
1. The sale of equity in the local business to BEE investors;
or
2. Sale of assets, equity instruments and businesses to
associated BEE enterprises, e.g. sale and lease back; or
3. The Equity Equivalent Investment Programmes
applicable for Multinationals only.
BEE Ownership is a Priority element and failure to comply
with minimums will cause the organisation to be discounted
by 1 level on the overall scorecard.

3. THE
OWNERSHIP
SCORECARD
(FOR LARGE
ENTITIES)

4. THE BEE
SCORECARD
(FOR LARGE
ENTITIES)
ELELMENT WEIGHTING POINTS MINIMUM OBLIGATIONS
THRESHOLD
Ownership* 25 40% of 8 net value points =
3.2
Skills Development* 20+ 5 (BONUS) 40% x 20 = 8
Enterprise and Supplier
Development*
40 + 4 (BONUS) PP = 40% x 25 = 10
SD = 40% x 10 = 4
ED = 40% x 5 = 2
Management Control 19 Sectoral Employment Equity
Targets may apply per race
and gender sub-group
Social Development 5
Total 109 + 9 (BONUS) *Non compliance with
Priority elements =
discounting by 1 level
Level 4 Points Required 80-90

5. BEE
PROCUREMENT
RECOGNITION
LEVELS

6. SAGOVT
PROCUREMENT
REGULATIONS
SA Government Use a Preference Point System when awarding tenders.
Tenders over R 50 million use a 90/10 preference point system.
- 90 points for Price, Functionality and other NB points
- 10 points for BEE, as follows:
NB
For every BEE Level
improvement – the
higher the entity
can price the tender

7. OPTION 1:SALEOF
EQUITY/SHARES IN
LOCAL ENTITY
Selling shares in the local entity

8. SALEOF
EQUITY-
VOTING
RIGHTSAND
ECONOMIC
INTEREST
 Ownership refers to the right of the owner to influence
the use of assets and resources of the enterprise
(VOTING RIGHTS) and the right to enjoy economic
benefits that accrue as a result of the owners’
participation in the enterprise (ECONOMIC
INTEREST). Both elements need to be present for BEE
participation
 Voting rights: Is the ability of owners to influence the
use of assets and resources under the control of the
business, and is determined by the black
shareholders ability to exercise voting rights at
shareholders meetings.
 Economic Interest: Refers to the entitlement of black
participants to dividends, capital gains and other
economic rights of shareholders

9. NETVALUE
REALISATION
POINTS
 Measures the value of debt-free or unencumbered ownership rights
held by black people;
 It is the market value of the black person’s equity above the
acquisition debt specific to ownership of that equity. This is termed
deemed net value.
 Net value allocates points for economic interest, and when
calculating points for net value there is an assumption that the
unencumbered ownership target of 25% should be achieved
within 10 years of the date of purchase of ownership rights.
 In order for this 10 year target we use a graduation factor, which
allows recognition for full net value where the reduction of debt is in
line with the following requirements:
 10% of black shareholder’s debt should be paid by the end of year 1;
 20% by the end of year 2;
 40% by the end of year 4;
 60% by the end of year 6;
 80% by the end of year 8; and
 100% by end of year 10.

10. SALEOF
EQUITY-
SCORECARD
TARGETS
 Voting Rights:
 Black people should hold at least 25% + 1 vote.The extra vote
ensures that BEE shareholders can influence or prevent a special
resolution from being passed.
 Black women should hold at least 10% of the voting rights
within the organisation
 Economic Interest:
 Black people should be entitled to 25% of the economic interest
in order for the organisation to score points for this indicator, and
black women should receive 10%.
 Realisation Points - NetValue:
 this is where the discounting principle for the Ownership Element is
based and 40% of the NetValue points (8) must be achieved annually to
avoid discounting
 Priority Element compliance:
 Failure to achieve at least 40% of the 8 net value points (i.e. 3,2)
will result in the organisation being discounted by 1 level.
POST COVID Devaluations may potentially impact the
valuations and making the priority element difficult to achieve
(discounting may apply)

11. SALEOF
EQUITY-
SCORECARD
POINTS
 An organisation scores points based on it’s ability to meet the scorecard
targets.
 For example, the sale 20% equity in the business to a BEE participant will
yield the following scoring:
 Voting Rights
 Actual Position = 20% (1)
 Target Position = 25,1% (2)
 Points Available = 4 (3)
 Calculation = 1/ 2 x 3
 20% / 25,1% x 4 = 3,18 points (out of 4)
 Economic Interest
 Actual Position = 20% (1)
 Target Position = 25% (2)
 Points Available = 4 (3)
 Calculation = 1/ 2 x 3
 20% / 25% x 4 = 3,2 points (out of 4)

12. SALEOF
EQUITY-
SUMMARY
 This option requires the sale of shares in the local entity
to BEE participants.The BEE participants must have
representation at local level.This includes appointing
directors to the board (MOI dependant) and voting
right at shareholder/ board meetings
 If the transaction value is R25million plus –registration
with the BEE Commissioner is mandatory
 If the entity sells shares in its local operation it will not
be able to participate in an Equity Equivalent
Programme
 Ownership can be recognised after the BEE participant
has exited (Once Empowered Always Empowered) -
subject to certain criteria

13. THESALEOFASSETS
Selling operational assets (i.e. property), a business, or equity
instruments in another business owned by the local company

14. SALEOF
ASSETS -
INTRO
 Allows a company to sell
 operational assets (i.e. land and buildings via lease
back),
 a business (i.e. franchisee to franchisee or sale of a
business unit/division), or
 equity instruments in another business to black people
as an alternative to selling an equity stake in its
company.
 The seller can claim the ownership points without
selling equity in the business.
 If the black party is able to create a sustainable
business from that asset – meets the objectives of
ownership and, therefore, recognisable
 NBThe black party that purchased the asset is
known as the Associated Enterprise

15. SALEOF
ASSETS –
POINTS
CALCULATION
 Points are based on the current value of the sold
assets vs. current value of the organisation
 Therefore, the organisation must sell assets capable of
growing at a rate in accordance with its own growth OR
better if it wants to maintain a consistent score
 If the asset devalues quicker than the ME then the
ownership score will decrease.
 Use Equivalency percentage to measure the
proportion of the value of assets sold to black people
in relation to the value of the ME.
 The Seller uses the equivalency % in the ownership
calculations for voting rights and economic interest of
black people

16. SALEOF
ASSETS –
POINTS
CALCULATION
A = B/C x D
 A = Equivalency % forVoting Rights and Economic
Interest
 B =Value of Qualifying transaction
 C =Value of the Seller
 D = Indicator Percentage of the separately identifiable
related Business (% black participation/ownership in
the associated enterprise)

17. SALEOF
ASSETS –
POINTS
CALCULATION
 Sale of Property via lease back example:
 Property value = R 100m (1)
 Business value = R 900m (2)
 Assumed associated enterprise is 100% black owned
and 50% black women owned (3)
 100/900 x 100% = 11,11% Black Owned and
 100/900 x 50% = 5,56% BlackWomen Owned
The entity will score approx. 10 points on the scorecard and
may avoid being discounted by 1 level as a result on non
compliance with sub minimum obligations

18. SALEOF
ASSETS -
CRITERIA
 Must result in the creation of a sustainable business
opportunity
 Must result in the transfer of critical and specialised skills,
managerial skills, and productive capacity;
 Must involve a separately identifiable related Business
which:
 Has no unreasonable limitation on its clients;
 Has clients or suppliers other than the ME;
 B-BBEE shareholders or their successors if the BEE
shareholding is the same or improved holding the asset
for a minimum of three years
 Any outsourcing relationship must be negotiated at
arm’s length on a fair and reasonable basis.
 Transaction subjected to independent verification value by
expert

19. SALEOF
ASSETS -
EXCLUSIONS
 Transfer of business rights by way of licence, lease or
legal arrangements not conferring unrestricted
ownership;
 Franchising is also excluded – selling franchises is part
of their normal business.
 A franchisee selling to another black franchisee will
count for recognition if it meets the criteria;
 No QualifyingTransaction could be claimed as BEE
ownership if a repurchase transaction is entered into
within a three year period after transaction
implementation, even if transaction implementation is
deferred post year 3. A seller cannot have any right to
enforce such a repurchase;
 Ownership points are subject to existing contracts
between the parties to remain in effect on market
related terms, subject to market norm service levels.

20. SALEOF
ASSETS-
SUMMARY
 Subject to some conditions - this option allows for BEE
Equity recognition without selling equity in the local
business.
 The BEE Equivalent % increases or decreases based on
the increase or decrease in the value of the underlying
asset
 The transaction value is R25million plus –registration
with the BEE Commissioner is mandatory
 If the entity sells assets it will not be able to participate
in an Equity Equivalent Programme
 Ownership can be recognised after the BEE participant
has exited (Once Empowered Always Empowered) –
subject to certain criteria

21. OPTION 3: EQUITY
EQUIVALENT
INVESTMENT
PROGRAMME (EEIP)
Contributing financially to BEE programmes in lieu of selling
equity or assets and scoring Ownership Points for
contributions made

22. EEIP - INTRO
 In order to qualify for the Equity Equivalent the multinational
must have an established global practice of not selling
equity.
 The EEI Programme must promote and advance:
 Enterprise and Supplier Development
 Research and Development
 Critical and Core Skills

23. EEIP
FINANCIAL
TARGETS
 The ProgrammeTargets are calculated as actual contributions
made against either:
 25% of the value of the South African Operations (paid
as ad-hoc contributions)
OR
 4% of total Revenue from its South African Operations
(paid annually over the period of continued
measurement)

24. EEIP
4% of
Turnover
Model
4% of total Revenue from its South African Operations -
paid annually over the period of continued measurement
as follows:
A = B / C x 25
A = Ownership points in year arising from its equity
equivalent contribution.
B = Total value of contributions made in that year
C = Financial value of 4%Total Revenue from its South
African operations

25. EEIP
25% ofValue
Model
This option provides for a lump sum payment or an annual
contribution based on a time based graduation factor, relating
to a percentage of the market value of SA operations, being
25%.
A = B/C x (1/25% x D) x 25
A = Ownership points
B =Total value of contributions made
C = Financial value of 25% of SA operations
D =Time based graduation factor

26. EEIP
FINANCIAL
TARGETS
 Topping Up allows for entities to top up their contributions
during the programme
 Sub Minimum contributions and discounting -> Minimum
Partial contributions – must be at least 40% of the compliance
target for the Ownership Scorecard
 Investment Periods:
 Total Contributions more than R 100 million considered for
an investment period of up to 10 years.
 Total Contributions between R75 million and R100 million -
up to 7 years.
 Total Contributions between R50 million and R75 million-
up to 5 years.
 Total Contributions less than R50 million- up to 3 years

27. EEIP
OUTSOURCING
The Programme Administration can be outsourced to a suitably
qualified person or entity. If outsourced the administrator must
be:
 at least 51% Black owned
 B-BBEE compliant and Superior contributor (Level 1 to 3)
 Administration fee must not exceed 15%
 Must have skills and experience
 Programme Manager must be in possession of B-BBEE MDP
 Programme Manager must sign off on all reports
 All goods and services must be sourced from BEE compliant
Level 4 suppliers.
 Dti reserves rights to request BEEE Certificate of administrator
and suppliers

28. EEIP
SUMMARY
 The Equity Equivalent Investment Programme allow
Multinationals to contribute financially towards
pre-approved BEE Development Programmes and it
will receiveOwnership Points in proportion to
contributions made
 Programmes must be approved by Line Ministry and
registered with the Dti
 Subminimum compliance obligations and
discounting will apply
 Entities can top up their contributions in exchange
for further Ownership points recognition
 Programme management and administration can be
outsourced subject to certain criteria

29. Questions?
MAXI-LEE MACHADO
Bcom Law (UJ) and B-BBEE MDP (Wits)
maxi@etconsult.co.za
0842092331