Memorandum Of Understanding: The B-BBEE Commission

Memorandum Of Understanding: The B-BBEE Commission

At this point in time, it should be common knowledge that the B-BBEE Commission (hereafter referred to as ‘Commission’) has been established to ensure compliance with the rules and regulations of the Broad-Based Black Economic Empowerment Act of 2003 (BEE Act).

Section 13 of the BEE Act governs all aspects pertaining to the Commission, including its establishment and functions. A few of these functions can be listed as follow:

  1. To oversee, supervise and promote adherence to the BEE Act in the interest of the public.
  2. To strengthen and foster collaboration between the public and private sector in order to promote and safeguard the objectives of BEE.
  3. To receive complaints relating to BEE in accordance with the BEE Act.
  4. To investigate, either on its own initiative or in response to complaints received, any matter concerning BEE.

It is, therefore, important for all entities that can be affected by the BEE Act, such as making use of a BEE certificate, not to act in contravention of the BEE Act in example, obtaining the certificate based on false information. It could result in a fine being issued to the entity as well as a fine issued to the individual or imprisonment if found guilty of circumventing the BEE Act, Possible fronting is a vital factor that should always be considered when proceeding with any transactions which fall in the scope of the BEE Act.

It is vital to note that the Commission has initiated investigations against specific entities for possible violation of the BEE Act. This often relates to the BEE ownership structures and non-compliance with the BEE Act with regards to the verification of BEE certificates. The Commission can also make the entities that it is investigating public.

It must also be noted that the Commission can investigate on its own initiative and can approach the relevant courts of South Africa to give effect to its findings.

The role of the Commission and the impact it has seems to be expanding. Since 2017, the Commission has entered into a Memorandum of Understanding with the Competition Commission, Commission for Employment Equity, the Companies and Intellectual Property Commission, South African National Accreditations System as well as the National Gambling Board.

The latest 2 agreements which have been gazetted, has been with SARS in 2018 and the Department of Economic Development, Tourism and Environmental Affairs in 2019 (EDTEA).

In terms of the Memorandum of Understanding with SARS, the Commission will be notified by SARS of any fronting practices detected and in return, the Commission will notify SARS of any suspicious or unlawful dealings which could result in the collection of taxes. The Commission will also assist with information upon request with regards to major BEE transactions and any other related transactions. The Commission will, in addition, assist where possible with tax compliance checks relating to such suspicious activities.

The latest agreement as mentioned above with EDTEA is based on the same premise as that with SARS, namely the investigation of BEE fronting practices and how both parties can assist each other in the performance of their functions.

The said agreement provides for the disclosure between the parties of information, training, investigations and all aspects related to fronting. EDTEA performs a close role to that of the commission in that they, amongst other things, proceed with mediation between businesses where fronting cases has been reported as well as the investigation and collection of evidence or acts and omissions relevant to fronting cases which have been lodged.

It is clear through these Memorandum of Understandings that the Commission is actively performing its functions and actively pursuing methods to obtain assistance and gaining wider access to information of possible fronting practices.


Edmund Drake has been appointed as a Legal Advisor at SEESA BEE in January 2016. He completed his BCom (law) degree in 2011 and his LLB degree in 2013. He thereafter completed his articles at Greyvensteins Inc. and was admitted as an Attorney and Notary of the High Court of South Africa.


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