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Measuring the socio-economic development element of BEE

25 Jun 2014

San-Reece RoelfTo comply with the latest Codes of Good Practice on Black Economic Empowerment (BEE), business owners have to be better informed about each element. Here is a basic outline of key principles relating to the Socio-economic Development (SED) element of the Generic Broad-Based Black Economic Empowerment Scorecard.

Upon the release of the new Codes of Good Practice on BEE in October 2013, it became clear that the Codes have become more stringent and that numerous additional principles have been introduced.

SED contributions focus on specific initiatives by a business entity aimed at encouraging sustainable access to the economy for Blacks (as defined in the Codes of Good Practice Gazette no 36928). These initiatives may also be in the form of sector-specific programmes that will contribute to the purpose of SED.

SED contributions may be in the form of monetary or non-monetary contributions that are initiated and implemented in favour of beneficiaries with the specific objective of assisting with income-earning activities. At least 75% of the total number of people benefitting from these contributions ought to be black. If there is a shortfall on the 75% target, the calculation is adjusted on a pro rata basis: The percentage beneficiaries specified is divided by 75%, then multiplied by the amount contributed. If the number of black beneficiaries exceeds 75%, the amount is limited to 100% of the 75% target.

In order to obtain the maximum points, the SED compliance target is set at 1% of an entity’s net profit after tax. If a business has not made a profit during the most recent year or, on average, over the last five years, the target is based on the indicative profit margin. Subject to the indicative profit margin being used, the percentage must be more than a quarter of the industry norm (as released quarterly by Statistics South Africa).

Annexe 500 (A): Benefit Factor Matrix contains a list of qualifying contributions. Also relevant is the fact that the transitional period for the implementation of the newly gazetted Code has been postponed from 11 October 2013 to 30 April 2015

 

For more information contact San-Reece Roelf of Exceed Tax and Advisory Services on 021 882 8140

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