Trade and Industry Minister Rob Davies. Picture: GCIS
Trade and Industry Minister Rob Davies. Picture: GCIS

Trade and Industry Minister Rob Davies has explained why the threshold for the registration of black economic empowerment transactions with the Broad-Based Black Economic Empowerment (BEE) Commission was lowered from the initially proposed R100m to R25m.

The minister’s explanation came by way of a written response to a parliamentary question by DA spokesman on trade and industry Dean Macpherson.

The R100m threshold was published in the Government Gazette last year and was based on the combined annual turnover and/or combined asset value of the parties to the transaction.

"Amongst others, the rationale for the R100m was that it will ensure that all transactions by mainly large entities (those with annual revenue greater than R50m) in terms of the codes (of good practice) are covered," Davies said. The drawback of this proposal however was that it would exclude small and medium entities which had a combined annual turnover below R100m.

"In addition, the majority of the comments received during the public commentary period focused on the use of the combined turnover and/or asset value as not being an appropriate measure to determine a threshold," Davies said.

"The argument is that if the combined turnover and/or asset value are used, any transaction, regardless of the actual size of the transaction, when the proposed threshold based on the parties’ assets or turnover is exceeded, will have to be registered.

"This would have effectively meant that all changes in the shareholding traded on the JSE for listed companies, will have to be measured to identify the compliance impact on the ownership element (of the scorecard). Should such transaction have an impact as mentioned above, it should be reported to the BEE Commission."

This would have had the unintended consequence that the ownership element of the scorecard would have to be assessed for each trade on the JSE and reported upon.

Using the transaction value as a measure would also assist in dealing with fronting practices, Davies said.

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