SOCIO-ECONOMIC DEVELOPMENT

Socio-Economic Development is one of the seven legs of BBBEE (Broad based black economic empowerment)

Socio-Economic Development - 5 points

Socio-Economic Development or Corporate Social Investment (CSI) is one of the most established routes used by companies to 'give back' to the society within which they operate and benefit, while building brand loyalty. This element of the Codes of Good Practice encourages companies to come up with initiatives aimed at directly providing black people with a means of becoming economically active or initiatives intended to facilitate access to the economy by black people.
The Socio-Economic Development scorecard measures:

The extent to which companies support socio-economic development.

Socio-Economic Development
Maximum points: 5
Compliance target: 1% of net profit after tax
The thinking behind the socio-economic element is rooted in the government's aim of bolstering corporate social investment (CSI), particularly in poor communities, and providing access to the economy for those previously excluded from participating formally.
Here the Department of Trade and Industry mirrors government aims to promote economic improvement and job creation in areas and to persons often left out of BEE's intended beneficiaries. By helping black people and communities with an opportunity to generate an income themselves, companies will be equipping these beneficiaries with the chance to participating positively in the economy.
Recognition of socio-economic development contributions:
Socio-Economic Development Contributions consist of monetary or non-monetary, recoverable or non-recoverable contributions actually initiated and implemented in favour of beneficiary entities with the specific objective of facilitating sustainable access to the economy.
Note that:

• The full value of Socio-Economic Development Contributions made beneficiaries is recognisable if at least 75% of the value directly benefits black people
• If less then 75% of the full value of Socio-Economic Development Contributions directly benefits black people, only the value of the contribution made multiplied by the percentage that benefits black people is recognisable.

Cumulative contributions:
In a similar way to the enterprise development, socio-economic development is measured on a cumulative basis rather than annually. By measuring contributions on a cumulative basis, the Department of Trade and Industry is ensuring that companies in a cyclical industry or vulnerable to fluctuations in profit will not be penalized if they don't manage to make a contribution in any given year.
Socio-Economic Development contributions are recognized on a cumulative basis:

• from the commencement date of the Codes
• or from an earlier date chosen by the company (inception date) until the date of measurement but the inception date chosen must not be earlier than five years before the commencement of the Codes.

Socio-Economic Development contributions include:

• grant contributions
• guarantees given or security provided for beneficiaries
• direct costs incurred by a company in assisting beneficiaries
• overhead costs of a company that are directly attributable to Socio-Economic Development contributions
• developmental capital advanced to beneficiary communities
• preferential terms granted by a company for its supply of goods or services to beneficiary communities
• payments made by a company to third parties to perform social development on its behalf
• provision of training or mentoring to beneficiary communities which will assist them to increase their financial capacity
• the maintenance by the company of a social development unit which focuses only on support of beneficiaries and beneficiary communities.

The Benefit Factor Matrix

The benefit factor matrix indicates contributions which are recognizable and the rate at which they are recognized.