Unpacking The New BBBEE Act

The Broad-Based Black Economic Empowerment Amendment Act, No 46 of 2013 (BEE Amendment Act) which amended the Broad-Based Black Economic Empowerment Act, No 53 of 2003 (BEE Act) to, amongst others thing, make the BEE Amendment Act the principal legislation in South Africa with regard to BBBEE, to make it obligatory for all governmental bodies to apply the generic BBBEE Codes of Good Practice or other relevant code of good practice gazetted in terms of the BEE Amendment Act when procuring goods or services or issuing licences or other authorisations under any other laws, and to penalise fronting or misrepresentation of BBBEE information, came into force and effect on 24 October 2014.

The “trumping” clause contained in s3 (2), will become effective on 24 October 2015 one year after the rest of the BEE Amendment Act comes into force.

The below are several highpoints of the amendments announced by the BEE Amendment Act:

Status of Sector Codes and generic BBBEE Codes

Section 10(1) now provides that every organ of state and public entity MUST apply any relevant code of good practice issued in terms of the BEE Amendment Act when, amongst other things, determining qualification criteria for the issuing of licences, concessions, grants or other authorisations in respect of economic activity in terms of any law and or developing and implementing a preferential procurement policy. This provision makes it clear that organs of state and public entities are obliged to apply a code of good practice gazetted in terms of the BEE Act and not to simply, “take into account and as far as is reasonably possible apply” such code of good practice as was previously the case.

The new s10 (2)(a) provides that the Minister of Trade and Industry may after consultation with the relevant organ of state or public entity, exempt the organ of state or public entity from the requirement to apply a code of good practice in terms of s10(1) or allow a deviation therefrom if particular objectively verifiable facts or circumstances applicable to the organ of state or public entity necessitate a deviation.

The BEE Amendment Act also requires that such an exemption or deviation is published in the government gazette. Therefore an organ of state or public entity would not be entitled to deviate from the requirement to apply a code of good practice unless it has first obtained the approval of the Minister of Trade and Industry to do so and it is gazetted in the government gazette.

Section 9(5) makes it clear that where a Sector Code has been issued for a particular sector, the compliance of entities within that sector must be measured in terms of the Sector Code. This is subject to the provisions of s9 (6) which provides that if an organ of state or public entity wishes to specify qualification criteria for procurement and other economic activities which exceed those set out in a code of good practice, such organ of state or public entity must make a request in that regard to the Minister of Trade and Industry and any such consent must be published in the government gazette.

The BEE Amendment Act also makes it clear that a code of good practice remains in effect until amended, replaced or repealed. This is pertinent in the case of Sector Codes which are currently undergoing an alignment process with the revised generic BEE Codes.

The “trumping” provision means that any legislation which contains its own BBBEE provisions will have to instead defer to the BEE Act and codes of good practice and the organs of state or public entities issuing licenses or authorisation or procuring goods or services in terms of such legislation will be compelled to apply the BEE Act and applicable code of good practice instead of the BBBEE provisions set out in such legislation. This will have great impact on the Preferential Procurement Policy Framework Act 05 of 2000 (PPPFA) and Municipal Finance Management Act 56 of 2003 (MFMA) when it comes into effect and is likely to see an enhanced focus on BBBEE for government contracts.

Fronting

The concept of fronting is now broadly defined in the BEE Amendment Act as:

  • A person commits an offence if he knowingly engages in fronting, or knowingly misrepresents his BBBEE status or provides false information to secure a particular BBBEE status or outcome.
  • An offender may be subjected to a fine or imprisonment not exceeding 10 years or to both a fine and imprisonment.
  • If the offender is an enterprise and not a natural person it could be subject to a fine of up to 10% of its turnover.

BEE Commission

The BEE Amendment Act empowers the creation of a BEE Commission to amongst other things, oversee, supervise and promote adherence with the Act in the interest of the public; receive complaints relating to BBBEE; investigate, either of its own initiative or in response to complaints received, any matter concerning BBBEE and to promote good governance and accountability by creating an effective and efficient environment for the promotion and implementation of BEE.

The Commission may issue non-binding opinions on the interpretation of any provision of the BEE Act.

The Commission may make a finding as to whether any BEE initiative involves a fronting practice.

The Commission may institute proceedings in a court to restrain any breach of the BEE Act, including any fronting practice, or to obtain appropriate remedial relief.

If the Commission is of the view that any matter it has investigated may involve the commission of a criminal offence in terms of the BEE Act or any other law, it will refer the matter to the National Prosecuting Authority or an appropriate division of the South African Police Service.

The Commission is also entitled to refer a matter to the South African Revenue Services (SARS) or to any other regulatory authority if it is of the view that the provisions of relevant legislation have been breached.

In simple terms it means that BBBEE is now far reaching and almost impossible to ignore or circumvent because if a private organisation needs a license, grants, accreditation or recognition from government such as a Liquor license, Import license, FSP license, CIBD accreditation, Banking license, etc. then BBBEE applies to them whether or not they are buying or selling directly or indirectly to government. Not doing business with government is no longer an exemption.

But private organisations are not forced to comply and if they so wish they do not have to do anything because change like business survival is not mandatory.

For expert assistance contact me Nelson Sebati, Pr EAd.

happy wheels

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