May your choices reflect your hopes, not your fears.
– President Nelson Mandela
One of the measures implemented by the new government in South Africa to seek to redress the manifest racial imbalances in business life and foster the creation of black capital ownership in South Africa was the policy of Broad-Based Black Economic Empowerment ("BBBEE") encapsulated in a legislative framework (the Broad-Based Black Economic Empowerment Act 53 of 2003 (as amended) ("the BBBEE Act").
The BBBEE Act, in the generic "Codes of Good Practice" promulgated thereunder, adopts a scorecard approach, the 5 elements (initially 7 prior to amendment of the BBBEE Act in 2013) of which the BBBEE performance of an enterprise is evaluated is evaluated against.
While there is no legal requirement for an entity to implement BBBEE unless the entity is an organ of state such as Government departments and state owned enterpries, an entity's BBBEE status (as calculated by applying the scorecard) will be a key consideration for any entity wishing to:
- supply goods or services to an organ of state at its various levels; or
- enter into a public private partnership with the state;
- wishing to obtain a licences (such as mining rights); or
- wishing to buy a state-owned asset;
- furthermore, any company that wishes to supply goods or services to an entity that is affected by the factors in (i) to (iv) above will find itself at a disadvantage (if not outright excluded) if it does not have an acceptable BBBEE score due to preference by entities desirous of a favourable BBBEE score to maximise their own scorecard points by procuring from entities with a high BBBEE score.
Our lawyers have considerable practical experience of advising South African and international businesses seeking to implement BBBEE compliance within the legislative framework. We are able to:
- Advise on the effects of BBBEE ownership and management control structures;
- Draft the legal documents for implementing BBBEE structures;
- Review our clients' compliance with BBBEE scorecard and advice on improving compliance;
- Advise on implementation of transaction structures that are BBBEE compliant; and
- Assist clients with Formulating BBBEE strategy.