ONE of the new issues highlighted in the trade and industry department’s BEE codes released in December last year is the level of net equity interest that an empowerment partner achieves in an enterprise during the transaction.
Kevin Kerr, joint head of corporate finance at Investec, says the release of the new codes in December last year clarified a number of empowerment issues, especially those around ownership.
Broad-based empowerment, equity in the hands of women, net equity value, as well as the voting power associated with the stake, are all factors that will be measured in determining ownership points.
Kerr says the codes do not penalise transactions being funded by debt, an issue that concerned many industry players in a prior draft of the code.
However, the net equity interest (effective value) created during the transaction will be measured — the realisation points — and eight scorecard points are allocated to the realisation points.
“The department has a 10-year period over which this is measured,” Kerr says.
He says companies that have been structuring deals that are sustainable transactions have already created significant value for participants, given strong equity markets.
“There will be more emphasis on achieving value over 10 years, as value created after this will not count for ownership points.”