Government rebukes BEE non-compliance

Thursday, March 15, 2018

Government will crack down on those who circumvent black economic empowerment legislation, says Trade and Industry Minister Rob Davies.

Speaking at the Broad-Based Black Economic Empowerment (B-BBEE) Commission’s conference in Midrand, Minister Davies said government is aware of the complicated practices companies engaged in to avoid complying with the BEE Act.

“We’ve seen all sorts of new practices which are an attempt to get around the legislation and codes of conduct emerging. In the new Act we’ve put down sub minimums - if you don’t score the minimum you go down one place [in terms of the BEE scorecard],” said Minister Davies on Thursday.

Historically, black empowerment in South Africa involved share transactions to individuals who were in a minority and were not represented on the board or management of the company. 

“From that we could see that BEE in that sense of creating space for black people to come into the economy to play roles as owners, controllers and management of entities on the productive economy to contribute towards the economic development of our country was rather constrained.

“The conclusion we reached then was that that was a form of fraud,” Minister Davies said in his address to delegates at Gallagher Estates.

This led to the amendment of the 2003 BEE Act in 2013. Changes to the Act included the formation of the B-BBEE Commission and the introduction of a statute definition of fronting. Mechanism to ensure that cases of fronting are dealt with were introduced. These included appropriate penalties such as fines and prison time.

Among the other abuses noted by the Minister are companies’ use of intermediaries. “We are going to tighten up on that. We will act. We are going to become tougher, we want to see the Commission becoming tougher.”

In addition, there are instances where verification agencies give businesses verification scores they are not entitled to.

“We need to send a strong message to these agencies who manipulate scores,” he said.

Of the 195 compliance reports received by the Commission, nine were from public entities while there were none from government departments and SETAs.

BEE Exemption

Minister Davies dispelled the notion that the BEE Act does not apply to the public service. “The Clause now says all entities must implement the Act. Everybody in the public sector must implement the BEE legislation. A very small number of public entities have submitted their reports.”

Government is forging ahead with black economic empowerment so as to transform South Africa’s economic landscape.

“If we are going to use the tool of black economic empowerment as a tool of transformation we need to ensure that when we offer a benefit against some or other level of performance of BEE that we can be confident that it’s real and means something significant economically,” said the Minister.

Government incentives bring about radical economic transformation while also supporting the emergence of business that is more representative of the demographic of South Africa. 

He said implementation of the BEE legislation is not optional. Government wants to see large companies relating to black owned companies.

Parliament’s Portfolio Committee of Trade and Industry Chairperson Joan Fubbs said while businesses are keen to make money, they must also share their skills, talent and wealth.

She urged business to contribute to radical economic transformation by observing BEE legislation.

Acting Chief Procurement Officer at National Treasury, Willie Mathebula, said the new Public Procurement Bill, which repeals the Preferential Procurement Policy Framework Act (PPPFMA), will become the single regulatory law for procurement.

He urged companies to pay small businesses on time.

The Commission is an entity of the Department of Trade and Industry. -


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