The Ownership Scorecard: Three Questions, Not One

Three questions, not one

The single most useful thing to understand about the ownership scorecard is that it is not asking one question. It is asking three, and they are scored separately. If you know which of the three a structure is answering — and which one it is quietly failing — almost everything else falls into place.

Almost every structure that fails, fails on the third question. It is easy to hand over votes. It is easy to write “50%” on a share certificate. It is much harder to arrange things so that a black shareholder genuinely owns something, free of the debt they took on to acquire it. That is what the third question measures — and, as you will see below, it carries the minimum that can reduce your whole level. The deep mechanics of net value have their own page; here we set out how the three questions fit together.

The ownership scorecard: 25 points

Here is the generic ownership scorecard, as it appears in the Codes. It applies to enterprises with turnover of R50 million or more. The three questions above map straight onto it: voting rights (6 points), economic interest (11 points), and the realisation points — net value — (8 points), for 25 in total.

Two things to read off the table. First, each line is capped at its points: overshooting a target earns nothing extra — you cannot turn a 4-point line into 6 by holding 40% instead of 25%. Second, the net-value target cell does not print a number in the gazette; it says “Refer to Annexe C”. What that means, and the rising target behind it, is the subject of the net-value page.

Voting rights: who controls the company?

The Codes do not count votes. They count “exercisable voting rights”, and the definition is a single line long.

That is a short definition and you should not read more into it than it says. It does not use the words “condition”, “restriction” or “encumbrance”. The test is simply whether the vote is subject to a limit.

But there is no safe harbour in the Codes, and you should not assume one. The Codes say nothing to exempt shareholders’ agreements, reserved-matters lists, lock-in periods, pledges, proxies or default provisions. Nor does every commercial protection destroy recognition. Each provision has to be tested on its own wording: who may exercise the vote, when, and subject to whose veto, consent, suspension, proxy or pledge? A list of decisions requiring a special majority determines how a matter is decided; a clause suspending a shareholder’s vote until a loan is repaid takes the vote away. The first is unlikely to be a limit, the second plainly is — but the answer comes from reading the clause, not from the category it belongs to.

Economic interest: who gets the money?

The second question — and the biggest single block of points, at 11 — is about the money. “Economic interest” is defined this way.

Three things follow from that wording, and each of them catches out a common arrangement.

1. It must be a claim against the company — not against you

A promise by you, personally, to pay your black partner a share of what you receive is not a claim against the company; it is a claim against you. It is not economic interest. Where the shares are held through another company or a trust, the claim is against that vehicle and is then traced through to the black natural persons behind it under the flow-through rules.

2. It must be a return on ownership — not a share-price bonus

A bonus calculated by reference to the share price is not a return on ownership — the person owns nothing. It is a contractual claim, and it may be commercially valuable, but without the underlying equity it is not ownership for the purposes of Statement 100. This is the single idea behind phantom shares, profit shares and stripped shares, all of which are dealt with under what does not work.

3. It does not require you to have paid anything yet

Economic interest attaches to the right to receive dividends, not to distributions actually made. The Minister has confirmed this in the Practice Note on Discretionary Collective Enterprises (GenN 428, GG 44591, 18 May 2021, para 2.10) — and confirmed that a business cannot be penalised simply for not having made distributions. So a young or cash-preserving business that has genuinely allocated ownership but not yet declared a dividend does not lose its economic-interest points on that ground alone. The caveat: a structure that never pays anybody anything attracts a different kind of scrutiny — see fronting, and read the Practice Note in full on the sources.

The cheap points: designated groups & new entrants

Two lines inside the economic-interest block are worth understanding on their own, because that is where points come cheaply — and where a lot of sensible structures put a modest second vehicle alongside the main black shareholder.

Designated groups & schemes (item 2.2.3) — 3 points at a 3% target

On the generic scorecard, item 2.2.3 is worth 3 points and the target is only 3%. It is reached by black youth, black people with disabilities, unemployed black people, black people in rural areas, black military veterans, or by participants in an employee or broad-based scheme, or members of a co-operative. A small employee scheme holding 3% can collect all three points, provided it satisfies the scheme requirements and its participants are black. That is why a main black shareholder is often paired with a modest employee scheme.

Black new entrants (item 2.2.4) — read the test carefully

“Black new entrants” means black people who, before acquiring their shares in your business, had not held equity instruments in any entity with a total value of more than R50 million, measured using a standard valuation method. Read the test carefully: it looks at the value of the company they held shares in, not at the value of their shareholding.

The 40% floor that drops your level

Ownership is a “priority element”. That means there is a floor you have to clear. Under Statement 100, paragraph 3.2.1, you must score at least 40% of the net-value points — that is, 3.2 of the 8 points. You can read the provision in full on the sources.

If you miss it, your whole level drops by one. Not your ownership score — your level. A business that would have been Level 4 becomes Level 5, no matter how well it did on skills development or procurement. This is why net value is the line that quietly decides everything, and it is dealt with in full on its own page.

One clarification that trips people up: do not confuse what you are measured on with what you must not fail. A qualifying small enterprise must comply with all five B-BBEE elements for the purposes of measurement. What is different for a QSE is the priority-element rule: a large enterprise must meet the 40% sub-minimum for all three priority elements, while a QSE must meet it for ownership plus either skills development or enterprise and supplier development. That is a rule about which floors you must clear — not about which elements are scored.

The net-value calculation itself — the debt deduction, the rising target, the two formulas, and why a funded deal can pass for eight years and then fail in year nine — is set out on the net-value page.

Frequently asked questions