The final Broad-Based Black Economic Empowerment Regulations in terms of the Broad-Based Black Economic Empowerment Act (BEE Act) are set to regulate the administration and implementation of the Act and the functions of the B-BBEE Commission as a whole. The Minister of Trade and Industry published the Regulations in the Government Gazette on 6 June 2016, and they came into effect on the same day.
The Regulations address the registration of major BEE transactions and annual BEE reporting requirements for listed companies and government entities. The B-BBEE Commission (Commission) will maintain a registry of “major” BEE transactions, which are defined as those that fall above a certain threshold. While the Minister is required to publish this threshold notice, this has not yet taken place. Unfortunately, this lack of information translates into an inability to comply with this registration requirement, despite the BEE Regulations having taken effect. A definition of a “B-BBEE transaction” is also yet to be expanded on in the Regulations.
Going forward, a party that enters into a major BEE transaction is required to register the transaction with the Commission by completing and submitting a prescribed form. No underlying transaction documents are required. If the Commission is of the view that the transaction does not adhere to the BEE Act on submission, it must advise the submitting party of its concerns in writing and the submitting party must take steps to remedy the issues identified “within a reasonable period”. If they do not remedy the issues to their satisfaction, the Commission can begin an investigation that focuses on the possible fronting practices. It is not yet clear how adherence to the BEE Act will be assessed by the Commission as the information required to be submitted to the Commission is very limited.
While the Regulations specifically state that the registration requirement does not constitute a requirement to obtain approval from the Commission before the transaction can be implemented, those taking part in a major BEE transaction take steps to seek appropriate advice prior to concluding the transaction, including through the advisory services of the Commission. The Commission’s role in assessing the BEE transaction can therefore be interpreted as an indirect approval process.
As far as reporting is concerned, JSE-listed companies and government entities must submit a compliance report to the Commission on an annual basis. This must be within 90 days of the end of its financial year, or within 30 days of the approval of its audited financial statements and annual report. Government entities have to submit their reports within 30 days of the approval of their audited financial statements and annual reports.
Reporting companies will state the score obtained by the company for each of the BEE elements, from empowering suppliers and achieving the priority element thresholds of ownership, skills development and enterprise and supplier development. The Commission has 90 days to respond to the compliance report, describing the state of compliance with the BEE Act and highlighting areas of improvement.
If the Commission finds “non-compliance” with the BEE Act, the company is notified and then required to correct its report and ensure compliance within 30 days. In the case on non-compliance, the Commission must reject any submitted compliance report and indicate its reasons for doing so. The Commission may allow a company that has submitted a report to appear before it in either an open or closed meeting, to respond to any questions the Commission may have in relation to its report.
In addition to BEE transactions and reporting, the Regulations also outline the power vested in the Commission should an entity fail to comply with the applicable reporting obligations such as site visits and investigations as well as the process for applications for exemption or deviation from the Amended Codes. Organs of state or public entities wishing to apply to exceed the qualification criteria for procurement and other economic activities set out in the Amended Codes for purposes of accelerating transformation will find details on how to make an application to the Minister.
Read the notice in the Government Gazette here.