18 Oct 2021

Ownership Calculations in terms of BBBEE Statement 102: Sale of Assets

by Erika Holmes, Partner, Durban,
Practice Area(s): Corporate & Commercial |

The BBBEE Codes of Good Practice contains Statement 102: Sale of Assets, which was updated in 2019.  This statement allows a seller to obtain ownership points to the extent that it sells a separately identifiable business division or unit to another entity that has black ownership.

Statement 102 requires the sale to result in the creation of a viable, sustainable business or business opportunity for black people.  It must involve the transfer of critical and specialized skills and managerial skills and the transfer of productive capacity.  The transaction may not include any unreasonable limitations or conditions regarding the business’ client or customers and the business must have client, customers and supplier other than the seller.  If there are any on-going contracts between the seller and the business, they must be on fair and reasonable terms and negotiated at arms’ length.  The black ownership of the purchaser must stay the same or improve over a period of 3 years following the sale.  The fairness of the value and terms of the sale transaction must be confirmed by an opinion by an independent expert.  The seller must not have the ability to buy back the business within 3 years of the transaction.  Certain transactions are specifically excluded from qualifying as a Statement 102 sale, such as the sale of a franchise by a franchisor to a franchisee.

The term “separately identifiable related business” has led to confusion regarding the nature of the purchaser; particularly whether it must be unrelated to the seller and whether it must be at least 51% black-owned.  However, neither of these requirements are contained in the wording of the Codes of Good Practice.

There is a clear distinction in the calculation of the seller’s ownership points for economic interest and voting rights compared to the calculation of Net Value points.  The formula included as Annexe 102(A) to Statement 102 only applies to the calculation of economic interest and voting rights and not Net Value points, which requires another calculation method.

The points for economic interest and voting rights are determined by multiplying the ratio that the asset sold represents of the Seller’s total value by the indicator percentages of the buyer entity.  This is determined by the formula in Annexe 102(A) of Statement 102.  This is a once-off calculation that is done at the time of the transaction and the percentages continue to apply as if the seller had concluded a sale of shares transaction, irrespective of the changing values of the asset and the measured entity and the changing black ownership of the buyer.

These equivalency percentages continue to apply for the Economic Interest and Voting Rights points and these are not re-calculated, but continue to apply as if the ME had concluded a once-off sale of shares transaction.

The Net Value points however are recalculated each year for the first 3 years and then the percentage achieved in year 3 continues to apply. 

For the first 3 years from the transaction, the calculation of the Net Value points on the ownership scorecard in terms of Statement 102 must be based on (i) the total value of the asset sold; (ii) the value of Equity Instruments held by Black people in the separately identifiable related business/buyer; and (ii) the carrying value of the Acquisition Debt of Black people in the separate identifiable related business/buyer.  Thereafter, the indicator percentages achieved in the third year will continue to apply.  The measured entity must use a Standard Valuation method when calculating the values and an independent expert must provide an opinion on the fairness of the Net Value calculation.


  1. Let’s assume that at the date of transaction, the value of the asset being sold is R10m, the value of acquisition debt is R10m and the value of the measured entity (ME) is R100m and the buyer is 100% black-person-owned.
  2. The Equivalency Percentage for economic interest and voting rights at the transaction date (Value of the asset sold/Value of ME at date of transaction) x black ownership credentials of buying entity, will be: R10m/R100m x 100% = 10%. [Note: this just measures black person voting rights and economic interest and separate calculations will need to be done for each sub-element].
  3. Net Value at transaction date (Value of black shares in Buyer - value of the acquisition debt)/Value of ME): R10m – R10m/R100m = 0%.
  4. This Net Value calculation must be repeated each year, with the fairness of the values confirmed by an independent expert.  Let’s assume that by the end of year 3, the value of the sold asset is R35m, the value of the acquisition debt is R10m and the value of the ME is R140m.  Then the Net Value calculation at the end of year 3 would be: R35m – R10m/R140m = 25%.

There are many specific requirements in Statement 102 that make complying with this Code quite difficult.  It is  critical to obtain professional advice on any sale transaction prior to concluding it to ensure that the relevant points will be obtained.

Please contact Erika Holmes on 031 5757410 or holmes@wylie.co.za for further information.