From CompliNEWS | Financial Service Intelligence Watch

Baker McKenzie, a leading law firm, has recently published an extensive guide on the regulation of Broad-Based Black Economic Empowerment (B-BBEE) in South Africa. The guide offers detailed insights into the B-BBEE framework, which aims to address historical economic disparities caused by apartheid and promote the meaningful participation of black individuals in the country’s economy. The guide covers various aspects, including ownership and management structures, community and employee involvement in economic activities, and skills training.

Key Objectives of B-BBEE

At the core of the B-BBEE Act 53 of 2003, and its accompanying regulations, lies the objective of fostering economic transformation and providing opportunities for black people to engage actively in South Africa’s economy. This involves increasing their participation in ownership and management roles, encouraging community and employee involvement in economic activities, and promoting skills development.

Definition of ‘Black People’ and Legal Requirements

According to the B-BBEE Act, ‘black people’ refers to Africans, Coloureds, and Indians who are South African citizens by birth or descent. It also includes those who became citizens either before or after 27 April 1994 through naturalisation under specific conditions.

The B-BBEE Act places obligations on organs of state and public entities to apply relevant codes of good practice when determining criteria for issuing licences, permits, or authorisations, developing procurement policies, and establishing partnerships with the private sector. The Minister of Trade, Industry and Competition has the authority to publish codes of good practice to regulate B-BBEE measurement.

Understanding the B-BBEE Codes

The B-BBEE Codes serve as a reference for measuring B-BBEE compliance. They define key terms, outline the elements against which enterprises are evaluated, and provide methods for measuring each element. Additionally, sector-specific codes of good practice apply to specific industries such as the Information and Communication Technology (ICT) Sector Codes and the Financial Services Sector Codes.

Implications for the Private Sector

While private sector entities are not directly legally obligated to comply with B-BBEE policy, there is indirect pressure to maintain high levels of B-BBEE compliance due to the requirements imposed on state organs and public entities. Meeting B-BBEE compliance levels can have a significant impact on securing business and remaining competitive in the South African market. The scoring system in the B-BBEE Codes, which considers procurement from compliant entities, plays a crucial role in determining compliance levels.

Considerations for Foreign Entities

Foreign entities conducting business in South Africa through branches or subsidiaries are subject to the B-BBEE Act. Compliance may be necessary depending on the nature of their operations. The B-BBEE Codes also introduce alternative ownership structuring options for multinational corporations.

The Role of the B-BBEE Commission

The regulatory body responsible for overseeing adherence to the B-BBEE Act is the B-BBEE Commission. It exercises its assigned functions as outlined in the Act and any directives issued by the Minister of Trade, Industry and Competition.

Importance of Legal Guidance

Obtaining B-BBEE compliance levels involves understanding the scoring mechanism outlined in the guidebook. However, seeking legal advice is crucial, particularly in matters related to ownership structures and general compliance, to ensure adherence to the B-BBEE Act.

The guidebook by Baker McKenzie serves as a valuable resource for businesses navigating the complex landscape of B-BBEE, empowering them to navigate regulatory requirements and contribute to South Africa’s economic transformation.

Read the Full Baker McKenzie report here