Broad-Based Black Economic Empowerment & Public Benefit Organisations

Increasingly, businesses are being called upon to harness the positive power of their enterprise to contribute to addressing pressing socio-economic and environmental challenges. In South Africa, certain aspects of this type of thinking are codified in legislation and regulation. QED Solutions takes the view that if capitalism is to prosper, it needs to earn and maintain its social licence to operate. Let us help you to chart a course that works, is legally complaint and is impactful.

QED Solutions has undertaken a thorough examination of the Codes of Good Practice issued in terms of the Broad-Based Black Economic Empowerment Act (B-BBEE). We are well placed to assist firms wanting to apply the sometime complex and difficult-to-understand rules contained in the Codes.

A particular focus of QED Solutions is the way in which the rules of B-BBEE can be used to address environmental, social and corporate governance (ESG) issues under the guise of what is generally known as socially responsible investing. This has particular application in those industries operating in a licensed environment such as mining or telecommunication. Seen in this way, B-BBEE is a sub-set of ESG. The Codes of Good Practice recognise a particular structure known as a broad-based scheme that qualifies as a black owned entity and provides a solution for measured entities seeking to achieve points of ownership and Non-Governmental Organisations (“NGO’s”) or community based organisations seeking a sustainable source of funding. Where a business has a high risk/high return profile or a firm which is highly operational, broad-based schemes are less appropriate, but in licensed businesses with a lower risk profile and where benefits are likely to be spread across generations, Broad-Based Schemes should be preferred.

QED Solutions takes the view that social returns should be the premise of B-BBEE if empowerment is to be “broad” using the common-sense meaning of the word. Demographics and economic inequality in South Africa dictate that any public benefit initiatives logically target Black South Africans. Seen differently, most of the BEE rules mandate a requirement to have local social returns in any ownership mix. This type of stakeholder-capitalism model makes intuitive sense in today’s environment and is especially true in the context of Public Private Partnerships. We all need business to increasingly address social issues and for capitalism to serve the ends of promoting greater equality.

In general terms, Broad Based Schemes provide for specific structures to hold equity and wealth on behalf of a designated community. The proceeds or benefits that flow from such equity holdings must then be spent in a manner that best addresses the socio-economic challenges confronting the community concerned. Funding the operations of a Non-Governmental Organisation or a Public Benefit Organisation to do these things is one way of spending such benefits in an appropriate way.

Broad-based schemes are themselves often set up as a trust structure and the result of this is that NGOs and community members are often required to serve as trustees. While it is true that the responsibilities of a trustee are not set out in as much detail as those of a director of a company, in law Trustee responsibilities have a higher standard. QED Solutions can assist with trustee skills development so that community representatives are able to fulfil their obligations and perform their duties more effectively.