BEE Ownership Strategy | Sale of Assets (SOA) to Black Investors

By Bruce Hunt | 27 September 2022

Companies in South Africa can recognise ownership points on their BEE scorecard by selling a property, business or subsidiary to Black investors – just as they would if they concluded a BEE deal. This is called a Sale of Assets (SOA) transaction. This is called a Statement 102 Transaction.

Our multinational and listed clients have experienced firsthand the success of using Statement 102 transactions as an effective transformational method to achieve their BEE ownership goals.

We have successfully concluded over R900 million in Sale of Asset property transactions.

Why Is the Sale of Assets (SOA) To Black Investors Such an Effective BEE Ownership Technique? 

The Statement 102 of the Codes of Good Practice Black Economic Empowerment 2013 allow for the sale of assets or businesses to contribute to ownership points. For instance, companies may sell off divisions, brands, property, industrial facilities, equity shares in subsidiaries, or a businesses as a going concern. 

These transactions may not include:

    • Transfers of business rights by way of license, lease or other similar legal arrangements, or

    • The sale of franchises by franchisors to franchisees (if a franchisor helps a Black entrepreneur to invest in a franchise, this is not an SOA, but Enterprise Development).

A seller claims a Sale of Asset Black ownership credit when selling a productive asset to a Black investor. The seller or “measured entity” who concludes the transaction may then claim the benefits in its ownership scorecard. The practical effect of SOA on BEE ownership is measured by:

    • • The value of the asset sold in proportion to the value of the seller

    • • The Black ownership credentials of the purchaser.

If the value of the asset increases over time and the purchaser’s ownership credentials improve, so too does the percentage of BEE ownership for the seller, but this also works in reverse. 

BEE Ownership in the Economy

SOA transactions are supported by the dti and the BEE Commissioner as they increase Black Ownership and participation in the economy through ownership and control of assets and businesses.

The legislation provides companies with evergreen Black ownership credits when they facilitate and grow Black-owned businesses subject to certain conditions. 

In traditional BEE ownership structures, the BEE investor is often a minority investor and has limited influence on the strategy and management of the investee company. But when a BEE investor buys and controls an asset, there is often full operational control. 

This allows for BEE entrepreneurialism and enables the BEE entrepreneur to continue to build the business by running a well-established Black-owned entity.

The Origins of SOA Transactions

The Mining Industry

Mines required 26% Black ownership to extend mining rights, so the Department of Mineral Resources allowed mines to claim credit through: 

    • • Direct Black ownership or 

    • • The sale of units of production. 

They initiated the selling of mines, either entirely or in part, to 51%-Black-owned emerging mining companies – and the mines received Black ownership credit as if they had introduced minority shareholders. In fact, so successful was this strategy that a number of significant Black-owned mining companies were created. 

Learn more about the Sale of Assets

A Sale of Asset, Statement 102 Transaction in Practice

Example: Selling property to a Black investor

A seller sells a property to a Black investor and enters into a long-term lease.

To facilitate the transaction, the seller can provide vendor support, via:

  • A slightly higher-than-market-price lease (or a discounted purchase price) 

  • A longer-than-usual lease; typically 7 to10 years 

  • A form of deposit and vendor loan from the seller, often accompanied by an interest roll-up for the first five years 

In return, the seller of the property would require: 

  • Certainty when it comes to BEE points (so that the BEE investor does not sell the property to a non-BEE investor within the lock-in period)

  • Certainty as to who the property owner is (to build a sense of partnership)  

  • First right of refusal on the property, matching any offer the BEE investor gets (to secure the right of use over the longer term)

Calculating Points and Credit

The asset must be valued and compared to the value of the entire business, because this is the basis for recognition.

In essence, therefore, if the asset is worth 10% of the business, the company can be regarded as having sold 10% of its business. If the new owner is 100%-Black-owned, the company will get a BEE ownership credit of 10/100X100%, but if the new owner is only 51%-Black-owned, the company will get 10/100x51% = 5.1%.

This ownership is re-measured for three years and then locked in.

Annual Revaluations and Lock In of Points After 3 Years

The codes are drafted so that companies are rewarded for selling assets that are likely to appreciate – or at least hold their value relative to the value of the seller. This is achieved by annually revaluing the asset sold, relative to the seller, for three years.

If the asset sold is what you might call a “dog” and reduces in value compared the seller, the credit decreases through the calculation.

We advise that there is a lock-in period of at least three years in which the Black ownership of the buyer must be annually recalculated. This also ensures that the asset is not “flipped” for a profit, and the seller loses its BEE ownership credit. After three years the BEE ownership credits are locked in, giving the buyer flexibility to manage the asset without impacting the seller’s BEE credits.

The significant benefits that accrue to the seller often result in the seller providing more vendor support than in many other transactions. In fact, in Transcend’s extensive experience, a Sale of Asset transaction costs the seller only 1/3 of a traditional BEE minority transaction, while creating significantly more value for the Black investor.

Defining a “Separately Identifiable Related Business”

The codes define a “separately identifiable related business” as a business that is related to the seller by virtue of being a subsidiary, joint venture, associate, business division, business unit or any other similar related arrangement. 

The business should have: 

    • No unreasonable limitations concerning its clients or customers (although generally accepted arm’s length limitations or restraints of trade may be imposed), 

    • • Clients, customers or suppliers other than the seller, and

    • • BEE shareholders holding the asset for at least three years. 

TIP: Be aware that, if your company has claimed benefits under the Ownership scorecard, it can’t claim under Enterprise or Supplier Development (this is “double-counting”).

Defining a “Qualifying Transaction”

The ownership points available following an SOA transaction will be recognised only in the case of a “qualifying transaction”; i.e. one that involves the sale of an asset, a business or shares, and that results in:

    • • the creation of practical and sustainable businesses or business opportunities for Black people, and

    • • the transfer of critical and specialised skills, managerial skills, and productive ability to Black people.

A qualifying transaction can’t be claimed as BEE ownership if a repurchase transaction is entered into within three years of transaction implementation.

Voting Rights & Economic Indicators

The seller must include equivalency percentages in its ownership scorecard, as if those percentages arose from the sale of equity instruments in the seller to Black people.

On transaction date and for the first three years:

    • • The recognisable Economic Interest will be the percentage of the value of the separately identifiable related business to the total value of the seller

    • • The percentage of Exercisable Voting Rights held by the new owners of the separately identifiable related business represents the recognisable right to Exercisable Voting Rights held by Black people

    • • Net Value points are based on net value accrued (value of the asset less carrying value of debt) at the verification date, divided by the value of the company. This is then compared to the graduation factor.

From year three onwards:

On each measurement date after the third year, the seller will recognise ownership points based on the ownership indicator percentages achieved in the third year post-transaction.

Example: Selling Property to a Black Investor

Here is how the sale of assets/business might be calculated:

Company X sells a division of its property to Y, a BEE company.

  • The value of Company X is R100 million (C). 

  • The value of the business to be sold to Company Y is R20 million (B).

  • The BEE party’s Black ownership percentage is 75% (D).

The equity equivalency percentage, A, is calculated with this formula:

  • A = B/C*D

  • A = R20m/R100m*75%

  • A = 15%

The company would be able to recognise 15% Black ownership.

Transcend Capital Services

Since 2005, Transcend Capital Services has served as a specialist BEE transaction advisor to multinationals and national entities, advising on 200+ transactions to date. Our in-depth understanding of the practical complexities of Black ownership, together with our experience of both corporate finance and regulatory environments, means that we combine best practice with innovative thinking to achieve true transformation.

Are You Considering an SOA?

Let Transcend help you. It is important to fully investigate and analyse the options and implications of a prospective SOA transaction, in order to identify what makes the most sense for your business – and which route will yield optimal BEE compliance for you.

Contact Transcend


Bruce is the Managing Director at Transcend Capital, structuring multinational BEE transactions for black operational partners, employee and broad-based ownership schemes.

Bruce Hunt