Leading an Act of Transformation

Thirteen years after the enactment of the Broad-Based Black Economic Empowerment (B-BBEE) Act of 2003, the government has finally put in place the legislative framework for the establishment of a Broad-Based Black Economic Empowerment Commission, which has a massive mandate to monitor implementation and oversee the process of economic transformation across all sectors of the economy.

The new B-BBEE Commission will be a game changer in the country’s evolving empowerment landscape.

For the first time, there will be an entity to ensure that empowerment laws are implemented. If one looks at other laws for business regulation – such as the Companies Act, the Consumer Protection Act or the National Credit Act – there was an entity specifically established to implement and regulate them. Examples include the Companies and Intellectual Property Commission, the National Consumer Commission and the National Credit Regulator. These entities were established soon after the enactment of each law.

Zodwa Ntuli, acting commissioner for the B-BBEE Commission, who was responsible for driving and overseeing the above-mentioned processes and regulatory entities for Department of Trade and Industry (the dti), says: “In B-BBEE, a similar regulatory entity to monitor and guide the implementation was not created. As a result, many things went wrong, as there were no consequences for noncompliance, even in clear cases of fronting practices.

“It is due to this gap also that, as a country, we do not seem to have a single source of information about the progress we have made in implementing across all elements of B-BBEE. The main feature of the Amendment Act of 2013 is therefore the introduction of this robust monitoring mechanism, the B-BBEE Commission, with powers not only to facilitate the implementation, but also to act against fronting practices.

“We will now be able to receive and analyse reports from the public and private sector and, if necessary, request further information to determine progress on a regular basis, and propose interventions to accelerate transformation. Further, research conducted in respect of sectors will help us to issue regular briefs and reports about trends.”

The five elements of B-BBEE according to the revised B-BBEE Codes are ownership, management control, skills development, enterprise and supplier development, and socioeconomic development.

According the Amendment Act of 2013, all spheres of government and JSE-listed entities will have to submit implementation reports to the B-BBEE Commission. The Act requires the commission to keep a register of all B-BBEE transactions that are above a certain threshold.

“All I can say is that the threshold should not be too high, as that could limit the ability to monitor the flow of economic benefits to black people in these transactions,” advises Ntuli.

“We will look at the quality, impact and sustainability of transactions. When a deal is announced, we should still be talking about it in 10 years’ time, but that can’t happen if the sustainability elements are not in the deal from the onset.

“However, many deals appear to have been assembled in a haste to bid for a contract, with less emphasis on their long-term sustainability.

“This will help us analyse the impact of employee-share ownership schemes and lock-ins that often arrest the flow of economic benefits to black people. “So this will occur across all elements of B-BBEE, to ensure the contributions are sustainable and make real impact on the lives of black South Africans. For example, there must be analysis of value chains in the public and private sector to inform other government programmes, such as the Industrial Policy Action Plan, the Black Industrialists Programme and the initiatives of the Ministry of Small Business Development.” The other functions of the B-BBEE Commission include:

• fostering collaboration between the public and private sectors;
• receiving and investigating complaints about B-BBEE implementation;
• increasing public awareness about B-BBEE; and
• promoting good governance.

Ntuli says monitoring B-BBEE implementation is the duty of all South Africans. “We will have watertight protection for whistle-blowers. Previous experience tells us some people are afraid of reporting fronting for fear of losing their jobs, or losing the shareholding that merely appears on paper with no benefits. People must not be scared to alert us to these bad practices.

“The B-BBEE Commission has the power to act – even where complainants wish to remain anonymous. It will be able to handle these complaints and provide redress to complainants once regulations are passed by the minister of Trade and Industry.”

The commission will also provide the following services:

• advisory services for entities;
• issue explanatory notices and nonbinding opinions on the interpretation of B-BBEE: and
• release further best-practice guidelines for practitioners, which will help foster a much better understanding of the application of B-BBEE.

“With simplicity in the application and interpretation of the codes,” Ntuli says, “we can (now) record serious progress in transforming the economy.

“The guidelines will mean that consultants and practitioners within public and private sector organisations will not have to come to us all the time.”

Ntuli acknowledges that the B-BBEE Commission has a huge mandate. And government may not allocate a budget commensurate with the size of the B-BBEE Commission’s mandate.

For example, the Public Protector is always pleading with legislators and the National Treasury for more funds to deliver on its mandate. Nevertheless, Ntuli is optimistic: “The government will never develop a mandate and not provide the necessary funds, especially in an area as critical as this one. We will develop institutional capacity over time, as was the case with the Competition Commission, with the focus of laying a good foundation.

“A good institution will exist forever if it has the right foundation. If the fundamentals are there, an institution will survive changes in leadership and continue to exist after the founders have gone.”

Ntuli says the B-BBEE Commission is guided by the goals of the National Development Plan to eradicate poverty, unemployment and inequality.

“We need to create an inclusive economy, and black people must be part of this picture, not only as employees, but as the owners of productive assets and employers in their own right. Effective monitoring of B-BBEE should give us these results,” she concludes.

B-BBEE commission snapshot

• Established in terms of section 13B of the B-BBEE Act;
• Funded by money appropriated by Parliament and other lawful sources;
• Must act without fear, favour or prejudice;
• Can investigate fronting practices and prosecute perpetrators;
• May publish findings and recommendations;
• Contravening entities can be fined up to 10% of annual turnover;
• Individuals face imprisonment for up to 10 years, fines, or both;
• Contravening entities can be excluded from doing business with government for up to 10 years; and
• Government contracts awarded to fronting practices can be cancelled.

Contact number: 012 394 1535