BEE Partnerships
For a partnership to work, both parties must derive benefit. If either party feels there is no benefit, then the partnership or the entire business will fail. Most businesses look for an empowerment partner who can bring new benefit to the business, such as access to political influence, increased finance, and increased operational capacity, access to new markets or new product lines.
There are three types of BEE partners
- Influential partners
- Operational partners
- Broad-based groups
Influential Partners
During the apartheid era, Blacks were discouraged from entering the business arena and as a result, they channelled their energy into the political struggle.
Operational Partners
Operation partners come from a business background, having run their own businesses independently. In most instances, they originate from the same sector as the business they merge with or buy into.
Broad-based Groups
Broad-based BEE partners comprise broad-based structures such as development trusts, union funds and business association funds. They use investment management companies to effect BEE transaction.
Finding a committed BEE partner
The best way is to network and get involved in organisations where you can meet black or white professionals. There are a number of avenues you can pursue to find a committed BEE partner. There are a number of avenues you can pursue to find a committed BEE partner. Here are a few ideas:
When looking for a partner networking with bankers, local business organisations and chambers of commerce may help point you in the right direction. Your local chamber is an excellent way for business owners to participate in business advocacy and lobbying efforts. One must go into a partnership with a company or group that you trust, and you believe will add value to your company which is why referrals from trusted associates are important.
Business-to-business networking is an effective way to share expertise and knowledge and to build relationships. Networking also helps to expand business services and provides opportunities to the other members of the network.
Scanning the industry you operate in is a good way to find a consistent, excellent performer who would qualify as a BEE partner. By doing this one also learns about reputations, reliability and how other companies conduct their businesses, which in turn can help you find a suitable partner.
It is important to get references from professional groups and the chambers of commerce are a good starting point and assist to verify potential BEE partners’ credentials.
There are independent consultants who specialise in putting together BEE deals of all sizes. They are trained to look into the details of the transaction, investigate empowerment ratings and compliance, as well as make recommendations on what strategies you would be able to pursue.
Striking the right balance
Choosing the right BEE partner need not be difficult. The answer lies in both parties’ ability to identify their qualities and ensure that they do not overlap as there is little value in a partnership where skills and abilities are replicated.
To form a mutually beneficial BEE deal find out exactly what you need in a BEE partner:
- Do you need to empower employees?
- Do you need to find an active partner to share in the management of the business? In which case will both parties add value to the business?
- Do you just need a silent partner who will acquire equity in the company?
Merging a black and white company who share an operational interest will have a stronger change of creating new markets, be more efficient and be able to develop new products.
What are the legal considerations needed structuring a BEE partnership deal?
Taking a BEE partner means that enterprises must be based on solid ethical standards
Legislative compliance
Firstly, make sure you are well informed of the laws, Codes of Good Practice, Industry Charters and the relevant importance of each of them in relation to your own industry. Taking a BEE partner means that enterprises must be based on solid ethical standards and values, and follow full regulatory and legislative compliance.
BEE acquisition agreement
If your BEE partner is acquiring an interest in the ownership structure of your organisation, a suitable written agreement must be entered into. Agreements of this nature usually cover a purchase of existing shares or a subscription for new shares in your enterprise.
A shareholders’ agreement is usually entered into in terms of which the rights of the BEE partner and the existing shareholders in relation to the appointment of directors, its involvement at management level and detailed pre-emptive rights, come-along clauses and go-along clauses on the sale of business (by the majority) are dealt with in detail. Specific legal advice should be obtained in this regard before signing any agreement. This is in the interests of both the selling shareholder and the acquiring BEE shareholder.
Check your BBE status
There is no single method that can be applied to BEE evaluations. Every enterprise’s position should be suitably assessed with due regard to the Codes of Good Practice and the specific industry charters which may apply to the specific industry in which the enterprise is operating. Any enterprise which is uncertain as to its status, should obtain legal advice from law firms which specialise in this area of practice.
Attorneys who have been involved in numerous BEE deals will be able to assist companies in advising them on their legal BEE status. It is also advisable for companies to obtain a BEE rating from a suitably qualified rating agency, such as Empowerdex.
For more information
www.empowerdex.co.za