Broad-based Black Economic Empowerment

The IDC’s approach to broad-based black economic empowerment

The IDC continues to support new entrants into the business world through the identification of strategic BBBEE partners and the formation of financing arrangements that support broad-based groupings. This helps to ensure greater representation of all groups in the South African economy.

  Highlights of the year under review

• R5,9 billion of funding was approved for black-empowered companies, R1,8 billion of which was for transactions involving the transfer of shareholding;
• the IDC’s self-rated BBBEE score is up from level four to a level two contributor;
• clients were encouraged to improve their BBBEE scores through shareholder activism and the appointment of IDC directors to company boards; and
• the Transformation and Entrepreneurial Scheme was established to assist previously disadvantaged groups.

The IDC’s BBBEE objectives

• supporting the entry and growth of BBBEE companies and entrepreneurs by encouraging and supporting expansionary BBBEE transactions;
• enabling black entrepreneurs to gain access to real economic opportunities through the transfer of ownership, management and control of new and established industrial enterprises;
• encouraging active participation by entrepreneurs in companies;
• supporting all spheres of government in their BBBEE initiatives;
• collaborating with and providing support to the BBBEE programmes and projects initiated by regional and provincial development finance institutions, as well as the private sector;
• positioning the IDC to provide leadership in industrial development finance for BBBEE;
• encouraging broad-based participation in managing, owning and controlling enterprises;
• advancing black women entrepreneurs in economic activities;
• supporting SME initiatives;
• participating in thought leadership and innovation; and
• encouraging the participation of black new entrants in IDC-funded transactions.

• financially sound business enterprises within the priority growth sectors of the South African economy;
• facilitation of investments in sectors with high barriers to entry;
• a business plan that meets the IDC funding criteria;
• equity participation by qualifying black entrepreneurs;
• involvement of black entrepreneurs in the proposed business at a board and management level, and as far as possible at an operational, financial, technical or production level;
• acceptance of the IDC’s BBBEE levers, key development goals and measurement criteria;
• risk-sharing as demonstrated in financial risk and career risk taken by BBBEE candidates; and
• adherence to relevant legislation.

Implementation of BBBEE policy

• equity funding;
• loan financing (including bridging finance);
• wholesale finance;
• guarantees;
• preference shares;
• export/import finance; and
• share warehousing.

• adopting, over time, the generic balanced scorecard (or relevant scorecard) outlined in the Codes of Good Practice;
• working towards compliance with all pieces of relevant legislation if they are not currently achieving the expected norms; and
• complying with all labour-related legislation.

This process is monitored by the responsible account manager, who is also responsible for ensuring that the risks of fronting and misrepresentation are mitigated.

Our goal is for all IDC clients who benefit from BBBEE financing to achieve a score of at least 55 (level five) on the relevant scorecard when the IDC exits. Those who do not benefit from BBBEE financing should nevertheless show an intent to achieve a transformation in a reasonable time.

BBBEE targets and goals are agreed upon with the client. Should the client not comply with the conditions as specified in the funding agreement, they will face penalties or termination of the agreement.

The IDC’s BBBEE score

During the year the IDC has implemented various changes to achieve a score reflective of its compliance with the codes.

Table: IDC’s BBBEE Scorecared