B-BBEE equity equivalents give a multinational a way to earn ownership recognition without selling shares in its South African business, provided head office genuinely cannot sell them. Ownership is one of the five scorecard elements, and for a wholly foreign-owned subsidiary it is usually the element that pulls the whole level down.
The mechanism sits in Statement 103 of the Codes of Good Practice. Instead of transferring shareholding to Black South Africans, the multinational funds an approved programme of enterprise development, supplier development, critical skills or research. The Minister of Trade, Industry and Competition signs it off, and the subsidiary is then measured as if it had met its ownership target.
It is not a shortcut. The contribution is large, approval runs through a dtic committee and a signed agreement, and the reporting lasts for the life of the programme. This guide covers who qualifies, how the contribution is valued, and what keeps the points in place.
Quick Answer
B-BBEE equity equivalents are contributions a multinational makes instead of selling shares in its local operation, recognised under Statement 103 through an Equity Equivalent Investment Programme (EEIP). The value is measured against 25% of the value of the South African operations, or 4% of their annual South African revenue over the programme period. Once the Minister approves the programme and an agreement is signed, the subsidiary receives the full 25 ownership points for the agreed period, which can run up to ten years for contributions above R100 million.
Head office has said no to selling local shares and the verification is coming up? Talk to us about whether an EEIP is a realistic plan B →
What B-BBEE Equity Equivalents Are and Why the Codes Allow Them
Picture a US industrial group with a profitable subsidiary in Midrand. Group policy says every operating company is wholly owned, with no local partners anywhere. The subsidiary sells to state-owned companies and large corporates that score their suppliers, and without ownership points it starts every tender behind.
The Codes have recognised this problem since the original 2007 version. A multinational that cannot sell shares because of a genuine global practice may instead make a contribution of equivalent value to programmes that build Black-owned businesses and skills. The earliest programme on the dtic’s published list, for Hewlett Packard, was approved in 2007.
The stakes are high because ownership is a priority element. A subsidiary with no ownership points also fails the sub-minimum and drops a further level, as our guide to priority elements and sub-minimums explains. For many foreign-owned businesses, that discount is why the certificate looks weaker than the transformation work behind it.
Who Qualifies for B-BBEE Equity Equivalents
The gate is narrower than most companies expect. The dtic’s guidelines and its briefings to Parliament set out the core test: the multinational must prove that selling shares in its local operation is against its global practice, and that it has not entered into ownership partnership arrangements in other countries.
That second condition is where many applications fail. If the group took a local partner anywhere else in the world, the claim will not survive. The guidelines call for an independent audit of share sales across the group, and an exemption can be lost if undisclosed sales surface later.
The guidelines add three further tests. The proposal must be commercially viable and sustainable over the long term, measurable against the local operations, and include a transfer of accredited business or technical skills. Applicants also need in-principle support from the line ministry for their sector.
The evidence pack for the exemption request
The first submission is a letter requesting exemption from the ownership element. The dtic’s guidelines expect it to explain why the group cannot sell shares locally, list the countries where it operates, disclose any country where shares were sold and why, and compare the local operation’s size with the rest of the group. The independent audit and the line ministry letter complete the pack. A thin letter here costs months later.
The Contribution: 25% of Value or 4% of Revenue
Once the exemption is granted, the conversation turns to money. Statement 103 measures the contribution against one of two targets: 25% of the value of the multinational’s South African operations, determined by a standard valuation method, or 4% of the total revenue from those operations, paid annually over the period of measurement.
The two targets suit different businesses. For a high-revenue, thin-margin distributor, 4% of revenue every year can swallow a large share of profit, so the valuation route may be lighter. A high-margin business with a rich valuation may find the opposite. Model both before you choose, because the gap can be large.
The size of the total contribution also sets how long the programme can run. The dtic applies the following bands, as presented to the Portfolio Committee on Trade and Industry in 2022.
| Total contribution | Maximum investment period |
|---|---|
| More than R100 million | Up to 10 years |
| R75 million to R100 million | Up to 7 years |
| R50 million to R75 million | Up to 5 years |
| Less than R50 million | Up to 3 years |
The valuation is not a formality. The guidelines prefer a discounted cash flow method verified by independent auditors, backed by three years of audited financial statements, forecasts, current management accounts and the economic assumptions behind them. The committee tests the numbers for reasonableness, so every assumption needs a defensible source.
The valuation sets the size of the cheque
Every assumption in the valuation model flows straight into the rand value of the commitment. A slightly optimistic growth rate or a low discount rate can add tens of millions to a ten-year programme. Scrutinise it as you would a transaction, because you are pricing the shareholding you are not selling.
Want to see what the 25% and 4% routes would mean for your own numbers? Ask us for an indicative contribution range →
From Exemption Request to Ministerial Sign-Off
The dtic’s published guidelines describe three phases, each needing different preparation. How long they take depends on the committee’s calendar and on how complete your submissions are.
Phase one: the exemption. You apply to the dtic’s B-BBEE Unit, which houses the Equity Equivalent Secretariat. A committee drawn from the dtic’s empowerment and industrial participation units and the Industrial Development Corporation assesses whether an exemption applies, and recommends approval or rejection. If it rejects the request, the dtic must give its reasons in writing.
Phase two: the valuation and business plan. After the exemption, you submit the valuation and, within 60 days, a detailed business plan linked to it. The valuation must be agreed before approval. The parties then negotiate and sign a Memorandum of Agreement, and only then does the recommendation go to the Minister.
Phase three: delivery and reporting. Ownership points are awarded only once the Minister has approved the programme and the agreement is signed. From that point, the obligation shifts to delivery against the milestones in the business plan, reported to the dtic for the life of the programme.
What the dtic Has Approved So Far
By February 2022, the dtic told Parliament that 22 multinationals had received final approval and that more than R8 billion had been committed. The published examples cover technology, manufacturing, logistics, financial services and the motor industry, and they show how varied a programme can be.
| Programme | Approved | Value | Main focus |
|---|---|---|---|
| IBM South Africa | 2015 | R700 million over 10 years | Enterprise and supplier development, critical skills, research |
| Caterpillar | 2017 | R1.3 billion over 10 years | Supplier development |
| Amazon | 2019 | R365 million over 10 years | Wholly Black-owned small businesses |
| Seven automotive manufacturers | 2021 | R6 billion over 10 years | A transformation fund for Black automotive entrepreneurs |
| J.P. Morgan South Africa | 2021 | R340 million over 8 years | A fund for small businesses, managed by a Black-owned fund manager |
| Microsoft | 2024 | R1.32 billion | Enterprise and supplier development, skills, research |
The larger programmes tend to use a ring-fenced fund or a structured supplier programme rather than a list of grants, which makes delivery easier to measure. The strongest sit close to the multinational’s own value chain, so the businesses it develops can later sell to it.
How B-BBEE Equity Equivalents Earn Ownership Points
The reward is the whole ownership element. The dtic’s 2022 briefing states that participants receive the full 25 ownership points for the duration of the programme, and the resulting ownership points certificate is valid for the agreed investment period. Our explainer on the ownership element shows how those 25 points are normally built up through voting rights, economic interest and net value.
Two rules shape how the points behave. A multinational in an EEIP cannot also claim ownership points under any other statement in Code Series 100, so you cannot combine a partial share sale with an equivalent programme. And the programme’s spend may not form part of any other element, which stops the same rand from scoring twice.
Partial programmes need care. The dtic’s earlier guidelines stated that pro-rata points did not apply, while a 2017 dtic presentation on Statement 103 referred to multinationals investing a portion of the 25% target. If you are considering anything less than the full contribution, get the scoring position confirmed in writing before the business plan is finalised.
When the programme ends, so do the points. The 2017 presentation allowed for topping up, so a multinational may reinvest at the end of its first programme. A 2026 ministerial reply to a parliamentary question noted that one early participant’s programme had expired, so plan the next cycle early.
Sector codes can change the detail
Some sector codes, including the ICT Sector Code, carry their own version of Statement 103, and regulators can add rules on top. In 2025 the communications minister gazetted a policy direction asking ICASA to align its licensing rules with the ICT Sector Code, which remains politically contested. Check your sector position first.
Monitoring, Reporting and What Keeps the Points Alive
Approval is the start of the obligation. The dtic’s monitoring and evaluation guidelines make reporting a condition of the Memorandum of Agreement.
Expect quarterly and annual progress reports listing each project activity, and quarterly financial reports showing how much of the fund has been spent. Progress must be reported against measurable financial and activity milestones, with explanations for every variance. A consolidated report is due at the end of each year, with a final consolidated report at the end of the measurement period.
The dtic conducts reviews every year for the first two years and every two years after that. It may inspect or audit the programme during office hours on five days’ written notice. Audited annual financial statements are due within six months of year-end, and the guidelines suggest keeping monthly summaries so that an unannounced audit between quarters is never a scramble.
Read this as an evidence standard. Every rand that leaves the fund needs a trail back to an approved activity, and every outcome claimed needs proof that a third party could check. Programmes that report in narrative rather than numbers are the ones that struggle at review.
The Tax and Accounting Questions to Settle Early
A programme worth hundreds of millions creates tax and accounting questions, and they are far easier to answer before the agreement is signed than after. The answers depend on your structure, so take these questions to your tax adviser rather than assuming.
How will the contribution be classified? Depending on the design, it may be an operating expense, a loan, an investment in a fund or a grant. Each one is treated differently in the financial statements and may be treated differently for tax. The classification also affects how the contribution appears in group reporting.
Who owns the vehicle? If the money flows into a trust, company or fund, you need to know who controls it, whether it consolidates into your results, and how its own income is taxed. The dtic will care too, because control of the vehicle shows how the programme is run.
Who funds it, and in which currency? When a foreign parent funds part of the programme, recharges and intercompany arrangements need to be set up deliberately. Exchange rate movements can also change the rand value of a commitment made in another currency. Our overview of tax implications of empowerment transactions covers the wider questions to raise.
Where EEIPs Go Wrong
The failures we see are rarely about bad intentions. They are about evidence, timing and design choices made too quickly.
Weak proof of the global practice. A policy document written after the decision to apply, or one contradicted by a partnership elsewhere in the group, undermines the whole application. The exemption can be withdrawn if undisclosed share sales surface later.
Relabelled spend. Moving an existing supplier development budget into the EEIP leaves a hole in the enterprise and supplier development element, and breaches the rule that the programme must not displace other scorecard initiatives. Our enterprise and supplier development guide shows what that element needs on its own.
Beneficiaries that do not hold up. If the businesses supported are not genuinely Black-owned and controlled, the programme carries the same fronting risk as any empowerment structure. Due diligence on beneficiaries belongs in the business plan, not after the first payment.
Public scrutiny. Large programmes attract parliamentary questions. A delivery gap that looks minor in a quarterly report can look very different in a newspaper.
An EEIP in Numbers: An Illustrative Composite
The figures below are an illustrative composite, not a real client. They describe a wholly foreign-owned industrial subsidiary in Gauteng with annual local revenue of about R900 million, a solid record on skills and supplier development, and no ownership points.
| Measure | Before the EEIP | After approval |
|---|---|---|
| Ownership points | 0 of 25 | 25 of 25 for the programme period |
| Ownership sub-minimum | Missed, one-level discount applied | Met, discount removed |
| Annual programme contribution | None ring-fenced | R36 million, 4% of local revenue |
| Total commitment | Not applicable | R360 million over 10 years |
| Overall rating | Level 8 after the discount | Level 4 |
| Procurement recognition for customers | 10% | 100% |
The level change comes from 25 new points and the removal of the priority-element discount. Customers can now recognise ten times as much of their spend with the subsidiary, which is often what persuades a sceptical global finance team.
The board will ask what it is buying
A ten-year commitment needs a business case beyond the certificate. The strongest proposals show what the programme builds that the company will use itself: local suppliers, a skills pipeline, research capacity. Then the scorecard gain is a by-product, not the whole justification.
Who This Is NOT For
Groups that have taken local partners elsewhere. If the group holds a minority partner anywhere in the world, the global practice test is very hard to pass. A conventional ownership deal is likely the more realistic route.
Locally owned companies that would rather not sell. The programme exists for multinationals with a genuine global policy. A preference to keep control is not a basis for exemption.
Teams hoping to rename existing spend. If the plan is to move current supplier development or social spend into the programme, it will fail the displacement rule and weaken another element.
Anyone needing points before the next verification. Exemption, valuation, business plan, agreement and Ministerial approval take time. If your certificate expires in three months, fix what you can on the other elements first.
Who this does suit: wholly foreign-owned subsidiaries with a documented global policy against local shareholding, material local operations, customers who score their suppliers, and a parent willing to commit to a multi-year programme with formal reporting.
How Insignis Structures an EEIP Proposal the Minister Can Approve
We start with the measurement, not the mission statement. Before anyone drafts the purpose of the programme, we agree how its value will be calculated, which milestones will prove delivery, and what evidence each quarterly report will carry. A proposal built that way answers the committee’s questions before they are asked.
From there we test the global practice evidence the way a reviewer would, review the valuation alongside your auditors, and design a programme close to your value chain so the businesses it develops have a market. We also map how the contribution will be classified and reported, so finance is not surprised in year three.
Because the work combines a valuation, a ministerial submission and a ten-year evidence trail, we run it with the discipline of a financial review. Our ownership solutions team supports multinationals from the first exemption letter through to the final consolidated report.
If the EEIP is only one part of your compliance picture, our guide for multinational subsidiaries covers the rest of the scorecard for foreign-owned businesses. For the official requirements, contacts and guidelines, the dtic’s programme page for multinationals is the primary source.
Preparing the exemption letter for the dtic and want a second pair of eyes? Have us review it before it goes in →
Frequently Asked Questions
What is an EEIP?
An Equity Equivalent Investment Programme is an approved programme that a multinational funds instead of selling shares in its local operation. It is recognised under Statement 103 of the Codes and, once approved by the Minister, earns the full ownership points for the agreed period.
Which companies can apply for an EEIP?
Multinationals that can prove selling shares in their local operation is against their global practice, and that they have not entered into ownership partnerships in other countries. Applicants also need in-principle support from the relevant line ministry.
How much does a multinational have to contribute?
The contribution is measured against either 25% of the value of the local operations, using a standard valuation, or 4% of local revenue each year over the programme period. The valuation must be agreed with the dtic before approval.
How long does an EEIP last?
It depends on the total contribution. Contributions above R100 million can run for up to ten years, R75 million to R100 million for up to seven, R50 million to R75 million for up to five, and below R50 million for up to three.
Who approves an EEIP?
A dtic committee assesses the exemption request and the business plan and makes recommendations. A Memorandum of Agreement is signed, and the Minister of Trade, Industry and Competition gives final approval. Points are awarded only after both are in place.
What reporting does an approved programme require?
Quarterly and annual progress reports, quarterly financial reports, a consolidated report each year and a final report at the end. The dtic reviews progress annually for the first two years, then every two years, and may inspect on five days’ notice.
Find out whether an EEIP is the right route for you
An EEIP feasibility assessment tests your global practice evidence against the dtic’s criteria, compares the 25% value and 4% revenue routes using your own financials, sets out the likely contribution and programme period, and shows the level impact. You get a clear yes, no or not yet before any submission is made.
No obligation. We will get back to you within 24 hours.
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Dr. Este Welman, CA(SA)
Founding Partner, Insignis Solutions
Dr. Welman is a Chartered Accountant holding a PhD in Economic Transformation from the Da Vinci Institute, an M.Comm in Tax from North-West University, and a B-BBEE Management Diploma from Wits. Her tax training shapes how she reads a proposal: she settles how a programme’s value will be measured and evidenced before anyone writes down what it is for.