Broad-Based Black Economic Empowerment (B-BBEE) legislation is important for businesses and has an impact on the operations of businesses. It is intended to stimulate the process of participation of previously disadvantage groups in the economy and lead to increased economic growth.
It is important to note that BEE compliance is technically not compulsory for privately-owned businesses, but it is important for businesses to participate in BEE as it has a big financial impact on the business. Businesses who have a valid BEE certificate will have more business opportunities than businesses without a BEE Certificate.
The BEE Act indeed has made it compulsory for all listed entities and also public entities to report on their BEE status to the newly created BEE commission. This reporting requirement came into effect on 6 June 2016 and must be done on an annual basis.
The following measures act as drivers of B-BBEE, and promote its implementation:
- The BEE status of enterprises has become part of the criteria for license applications in a number of regulated industries.
- In terms of the King III framework, good corporate governance requires specific attention to social sustainability, for example through contributions to BEE.
- BEE certificates are taken into consideration with the consideration of tenders or any applications in terms of the Preferential Procurement Policy Framework Act (PPPFA).
- In terms of the BEE Act, as well as the PPPFA Act, State Departments are also required to use entities with valid BEE certificates in their supply chain.
The B-BBEE status of suppliers is highly considered as an application criteria when applying for government tender projects.
To receive points for the element of preferential procurement, entities hoping to improve their BEEscores have to procure goods and services from suppliers with acceptable BEE scores.
There is an increase in consumer awareness around ethical trade requirements and thus doing business without a valid BEE certificate may lead to commercial suicide for many entities in South Africa.
ABOUT THE AUTHOR
Dominique van Deventer obtained his LLB qualification from the University of the Freestate and is currently a SEESA BEE legal advisor. He has been working for SEESA for 3 years.