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,
make the BEE Act the overarching legislation in South Africa with regard to BBBEE,
to make it mandatory 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 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 BEE 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 Act when, amongst other things, determining qualification
criteria for the issuing of licences, concessions, or other authorisations in
respect of economic activity in terms of any law; or/and 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 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 consent 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 Act also makes it clear that a code of good
practice remains in effect until amended, replaced or repealed. This is
relevant 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 BEE 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 BEE 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.
Fronting
The concept of fronting is now widely defined in
the BEE Amendment Act.
- A person commits an offence if he knowingly
engages in fronting, or knowingly misrepresents his BEE status, or
provides false information to secure a particular BEE 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 BEE; investigate, either of its own initiative or in response to
complaints received, any matter concerning BEE 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 now means that
BBBEE is far reaching and almost impossible to ignore because if you need a
license, accreditation or recognition such as a Liquor license, Import license,
FSP license, CIBD accreditation, Banking license, etc. then BBBEE applies to
you whether or not you are buying or selling directly or indirectly to
government. Not doing business with government is no longer an exemption.
But companies 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.
