Broad-Based Black Economic Empowerment Amendment Act, No 46 of 2013

Posted by Transcend
Thursday, 6 February 2014  |  Comments

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On 27 January 2014, the President of the Republic of South Africa assented to the much awaited Broad-Based Black Economic Empowerment Amendment Act, No 46 of 2013 (the "Amendment Act"). Issued under government gazette no. 37271, the Amendment Act does not differ in many material respects from the Broad-Based Black Economic Empowerment Amendment Bill that was issued for comment in 2012 (the "Amendment Bill"). The Amendment Act does, however, provide for significant amendments to the principal Act, the Broad-Based Black Economic Empowerment Act, No 53 of 2003 (the "B-BBEE Act"). We have, for purposes of this communication, highlighted the main differences between the Amendment Bill and the Amendment Act.

References made to "local content procurement" and/or "local content production" in the Amendment Bill have been removed in the Amendment Act. The removal of such references, in particular the removal of the proposed new section 9 which provided for codes of good practice issued by the Minister of the Department of Trade and Industry (the "Minister") to provide for the "interpretation and definitions of and indicators to measure local production and content" is surprising and unfortunate. The revised of generic Codes of Good Practice promulgated on the 11th of October 2013 (under government gazette 36928 of 2013) (the "Revised Codes") only permit measured entities to recognise procurement spend from suppliers that are "empowering suppliers". Although the Revised Codes list the criteria to be met for a supplier to be recognised as a "empowering supplier", such criteria are unclear and no indicators to measure these criteria, which directly speak to local production and content, have  been provided for. A disjoint thus exists between the emphasis of local procurement and content in the Revised Codes and the lack of such emphasis In the Amendment Act.

Currently, the B-BBEE Act provides for organs of state and public entities to apply the relevant codes of good practice "as far as is reasonably possible". The Amendment Act now obliges organs of state and public entities to apply the provisions of the amended B-BBEE Act, something the Amendment Bill did not propose to do. The Amendment Act does, however, empower the Minister to, following a process of consultation, except an organ of state and/or a public entity, as the case may be, or allow it to deviate from the provisions of the relevant codes if particular objective and verifiable facts or circumstances or necessitates such exemption or deviation.

In the new section 13F of the B-BBEE Act, the Amendment Act also now provides for any complaints submitted to the BEE Commission to be submitted in a prescribed form and to be substantiated by "evidence justifying an investigation by the Commission". Whereas one may assume that the reason for this new amendment is to mitigate the possibilities of frivolous complaints, it will be interesting to note what the Commission will accept as evidence justifying an investigation.

It is interesting to note that all provisions of the Amendment Act, other than section 3(b), come into operation on the date of the Amendment Act's gazetting. Section 3(b) of the Amendment Act amends section 3 of the B-BBEE Act and provides that the provisions of the B-BBEE Act (as amended) will supersede the provisions of any other law in force prior to the commencement of the Amendment Act, where a conflict may arise between the provisions of the B-BBEE Act and such law(s).  The "supervening" status of the B-BBEE Act will only become effective from the 27th of January 2015, thereby creating opportunity for all laws which relate to and/or impact the effective implementation of the B-BBEE Act (not only its written provisions but also its general objectives and purposes) to be amended and harmonised with the provisions of the B-BBEE Act. The harmonisation of such laws (for example the Employment Equity Act, No 55 of 1988 (as amended and with its regulations) and the Preferential Procurement Policy Framework Act, No. 1 of 1999 (as amended and with its regulations)) is a move in the right direction to removing often confusing and frustrating contradictions that entities are confronted with in their attempts to comply with BEE legislation.

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