Charter: business size clarified

The Department of Trade and Industry (DTI) should announce how it intends determining whether a farming business is characterised as large, medium or small for the purposes of AgriBEE by the end of the month



Issue Date: 2 February 2007

The Department of Trade and Industry (DTI) should announce how it intends determining whether a farming business is characterised as large, medium or small for the purposes of AgriBEE by the end of the month, said Department of Trade and Industry BEE policy director Jeffrey Ndumo. Ndumo was addressing a conference in Midrand to discuss recommendations made by government’s AgriBEE steering committee.

These are set out in the second draft AgriBEE charter released last month. The size of a business is important for BEE purposes, as there will be concessions for micro, small and medium-sized enterprises. A lack of thresholds for determining the size of enterprises has been a major factor preventing the finalisation of the charter. While reluctant to give details on thresholds, Ndumo did say employee numbers and annual turnover would be important considerations. He brushed aside a recommendation that family enterprises be given special treatment. “All businesses started at a level between families and friends. This category isn’t helpful. Rather, one should look at how the business contributes to the economy.”

A member of the steering committee speculated that if the DTI uses the same turnover criteria as were used in the previous agricultural census to catergorise agribusinesses, the threshold for small businesses could be set at an annual turnover of R300 000 and medium-sized businesses at R5 million. Ndumo also intimated that mediumsized businesses will likely receive similar treatment to large-scale businesses.

Both categories will be required to meet the “mainstream BEE targets” and both will be called upon to subsidise the costs of verifying BEE credentials of small and micro-enterprises. Other factors that still need to be finalised in the draft charter include whether there should be separate charters and scorecards for primary and secondary agribusinesses and the effect of land reform and restitution on farmers’ AgriBEE obligations. Willie Lewies, the president of TAU SA, the former Transvaal Agricultural Union, called for the restitution process to be completed before the charter could come into effect.

He also argued that BEE’s impact on the cost of farming businesses had not been thought through, in particular whether BEE would compound the effects of taxes such as the land tax and whether it would hamper farmers’ ability to obtain credit and grow their businesses. But Department of Agriculture director general Masiphula Mbongwa said the Forum of South African Director Generals, of which he was a member, would assess the impact of BEE regulations across all sectors of the economy.

“We at BEE across the entire economy and considers that most charters have set a black ownership target of 25% within 10 years, that means about R1,3 trillion worth of assets will be transferred. This is not unsubstantial. Rather, the problem lies with finding the funds to transfer those resources.”

Recommendations made at the Midrand meeting will be considered by the steering committee and amendments may be made to the current draft charter before it is sent to the ministers of trade and industry and agriculture and land affairs for approval. If there are no major hitches in the approval process, the charter should come into effect by next April. There will then be a 12-month transition period to enable businesses, which have entered into BEE transactions before the charter was finalised, to make any changes to those transactions to align them to the charter.