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Comment on the BEE Amendment Act

The Broad-Based Black Economic Empowerment Amendment Act, 2013 (the 'Amendment Act') was gazetted earlier this year on 27 January 2014 (Gazette 37271). This followed a year long public commentary process where interested parties were also encouraged to make submissions to the parliamentary portfolio committee on transformation.

The Amendment Act is an amendment to the Broad-Based Black Economic Empowerment Act 53 of 2003, which came into existence on 1 January 2004. Act 53 of 2007 was an enabling framework which gave wide powers and authority to the minister of trade and industry to issue Codes of Good Practice, which currently contains the scorecards and calculation methodology companies use in order to measure their B-BBEE status. The Amendment Act must therefor not be confused with Revised Codes of Good Practice that was also gazetted recently on 11 October 2013.

Over the next 3 weeks we will highlight some of the most important amendments contained in the Amendment Act.

Reporting Requirements

Although compliance with the B-BBEE Codes of Good Practice remains voluntary the Amendment Act now introduces an obligation on certain businesses to report on their B-BBEE status, whether it is non-compliant or not. Refusal to report in cases where such an obligation exists is an offense and can incur penalties. It is therefor important to understand what your businesses' reporting obligations are.

Section 10(4) of the amended act now states that any enterprise that operates within a sector for which the minister has issued a sector code, must report annually on their compliance with B-BBEE to the sector council which may have been established for that sector. The problem with this provision is that the method of reporting is not prescribed and it would seem that this is left to the particular sector council. However, not all the sector codes have managed to establish fully fledged sectoral councils. So where some sectoral councils may be well organised and positioned to manage and monitor this reporting obligation others are not. Non-compliance with this reporting obligation will however be a contravention of this provision with potential penalties ensuing as a result of non reporting.

Section 13G of the amended act also introduces the following reporting obligations:

  1. All public entities and organs of state must annually report on their compliance with B-BBEE in their audited annual financial statements and annual reports.
  2. All companies listed on the JSE, must report on their compliance in terms of B-BBEE, to the newly introduced B-BBEE Commission. The format of reporting is yet to be prescribed but given the requirement on public entities to do so in their annual reports one can expect a similar requirement on JSE listed companies.
  3. All SETA's must report to the Commission on skills development spending and programmes.

We believe that the reporting requirements were included firstly to monitor progress, but also to encourage some level of compliance with those entities compelled to report. Although the Amended Act does not require a particular level of compliance listed companies would for example be reluctant to report annually that they remain non-compliant.

Look out for next week's commentary: Punitive measures

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