B-BBEE Ownership Glossary

The terms

Terms are listed alphabetically. Each links, where relevant, to the guide that explains it in full.

51% rule (modified flow-through)

A concession that lets a company in your ownership chain that is at least 51% black-held be treated as if it were 100% black — but only once in the whole structure, and only for two scorecard lines (the votes and the economic interest of black people). It cannot be used for black women, new entrants, the designated-groups line, or net value. See the rules that surprise people.

Acquisition debt

The debt (or financial obligation) a black shareholder took on to acquire their shares. It is deducted in the net-value calculation, which is why a cash purchase — with no acquisition debt — is the strongest position on net value.

Annexe 100(B) / 100(C) / 100(D)

The parts of Statement 100 that set the rules for, respectively, broad-based ownership schemes (100(B), the toughest), employee share ownership programmes (100(C)) and trusts (100(D)). Which annexe applies decides the governance a vehicle must meet and whether it is capped at 40% of your ownership points. See schemes, trusts & NPCs.

B-BBEE

Broad-Based Black Economic Empowerment — the law (the B-BBEE Act 53 of 2003, as amended) that measures how far a business has brought black South Africans into ownership, management, skills and the supply chain, and attaches commercial consequences to the result.

Black people

A defined term: Africans, Coloureds and Indians who are South African citizens by birth or descent, or who became citizens by naturalisation before 27 April 1994 (or would have been entitled to before that date).

Broad-based ownership scheme

A scheme holding shares for a defined group of black beneficiaries who are not necessarily your employees (for example a community). Governed by Annexe 100(B): at least 85% of benefits to black people, a 15% management-fee cap, independent trustees and an independent chair.

Current equity interest date

The date the net-value clock starts — the later of the date Statement 100 came into force and the date your ownership transaction became effective and unconditional. Agree it with your verification agency at the outset.

Designated groups

Black youth, black people with disabilities, unemployed black people, black people in rural areas and black military veterans. The 3-point designated-groups line (item 2.2.3) has a low 3% target and is often collected through a small employee scheme.

Economic interest

A claim against the company representing a return on ownership, similar to a dividend right — worth 11 of the 25 ownership points. It must be a claim against the company (not a personal promise from you), and a return on ownership (not a share-price bonus). See the ownership scorecard.

EME — Exempted Micro-Enterprise

A business with turnover of R10 million or less. It is exempt from measurement and automatically a Level 4 contributor, proven by a sworn affidavit; 51% black ownership lifts it to Level 2 and 100% to Level 1.

Equity equivalent

A programme the SA arm of a multinational may apply to the Minister to run instead of selling equity — measured against 25% of the value of its SA operations or 4% of SA revenue. Limited to multinationals with a genuine, pre-2004 “Global Practice” against selling equity.

Exercisable voting rights

The votes that count for the scorecard: a voting right “not subject to any limit”. A vote suspended until a loan is repaid, or handed to a lender under a pledge, or given away by an irrevocable proxy, is not exercisable — and does not score.

Flow-through principle

The look-through rule: where a black shareholder is itself a company or trust, the Codes trace through to the black natural persons behind it and multiply the percentages down the chain. A company holding 30% of your business that is itself 60% black counts as 18%, not 30%.

Fronting practice

Any arrangement that directly or indirectly undermines or frustrates the objectives of the B-BBEE Act — most commonly giving a black person the label of ownership without the substance. Knowingly engaging in it is a criminal offence. See fronting and the law.

Generic (large) enterprise

A business with turnover of R50 million or more. Measured on the full scorecard, with all three priority elements applying — and no automatic level for black ownership.

"Knowingly"

For the fronting and misrepresentation offences, this includes not only actual knowledge but the position of a person who ought reasonably to have known or ought to have investigated. Deciding not to ask questions is not a defence.

Net value

The third ownership question — how much black shareholders genuinely own after deducting their acquisition debt, measured against a target that rises to 100% by year nine. Worth 8 points and carrying the 40% (3.2-point) sub-minimum that can drop your whole level. See net value explained.

New entrants

Black people who, before acquiring their shares in your business, had not held equity instruments worth more than R50 million. The test looks at the value of the company they held shares in, not the value of their shareholding.

Notional vendor finance

A funding route where shares are transferred outright but, instead of a real loan, the parties record a notional balance that grows at an agreed rate and is reduced by dividends. Nobody funds anything and the shareholder can never owe money — but the balance is expected to reduce net value like a real loan. See selling shares.

Once empowered, always empowered

A phrase that overstates the position. Continued recognition after a black shareholder exits is allowed only if they held the shares at least three years, real value was created, and transformation actually happened — and then it is capped at 40% of your ownership score and cannot last longer than they held.

Priority element

One of the three scorecard elements (ownership is one) that carry a sub-minimum you must clear. Miss the ownership sub-minimum — 40% of the net-value points — and your whole B-BBEE level drops by one.

QSE — Qualifying Small Enterprise

A business with turnover above R10 million but below R50 million. Measured on the QSE scorecard (Statement 601), unless it is at least 51% black-owned, in which case it may use a sworn affidavit and is elevated to Level 2 (or Level 1 at 100%).

Recognition level (1–8)

Your total score places you on a level from 1 to 8, each carrying a “recognition percentage” your customer uses when working out what your invoices are worth on its scorecard. Level 1 is the best.

Sector code

A gazetted B-BBEE code for a particular industry. If one applies to you, you are measured under it — not the generic Codes — and its thresholds, weightings and targets may differ. Always check first.

Sub-minimum

The floor on a priority element. For ownership it is 40% of the net-value points (3.2 of 8). Missing it drops your level by one — but you are only discounted one level even if you miss more than one sub-minimum.

Vendor finance

Selling shares at a fair price and lending the buyer the money, usually with the shares pledged as security and a small cash “trickle” each year. Full votes and economic interest from day one; net value builds only as the shares outgrow the loan.

Keep reading

Start with the ownership scorecard for how the three questions fit together, net value explained for the line most deals fail on, and fronting and the law for where a paper structure crosses into a criminal offence. Every source is listed on the sources page.