More rules for BEE

Posted by Transcend
Wednesday, 26 September 2012  |  Comments

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More rules for business
Troye Lund | 19 September 2012

Government is revisiting B-BBEE as it tries to spread wealth, but there is a fear it will further complicate the empowerment landscape

Proposed changes to the state's black economic empowerment (BEE) laws and codes aim to improve company compliance and crack down on fronting by making it a criminal offence.

While government says these changes are critical to extend the benefits of empowerment beyond a few wealthy individuals, it's not certain these will have the intended effect. Critics believe the legal amendments on the table will do little more than present businesses with more administrative hoops to jump through in order to secure empowerment ratings.

Changes to the five-year old Broad-Based Black Economic Empowerment Act (B-BBEE) are expected to be tabled in parliament for discussion by the trade & industry portfolio committee next month. These will operate in tandem with a revision of the codes of good practice, including a revised scorecard for B-BBEE to measure compliance. The codes and scorecard will be gazetted and released for public comment in the next few weeks and will, for the first time, be included as part of the primary legislation.

Trade & industry's chief director in charge of BEE, Nomonde Mesatywa, says government is concerned that BEE compliance has been driven by a "tick box" approach without putting substantive transformation interventions in place.

"Companies have been obsessed with the notion of maximum point scoring, aided by unscrupulous verification agencies. This new trajectory is about productive BEE. It's about companies diversifying their value chains, improving skills, developing suppliers and aligning to government's programme around re-industrialisation and creating black local capacity in key sectors of the economy."

The B-BBEE amendment bill aims to set up a commission that will police companies to make sure they are meeting all empowerment regulations. The commission will also investigate fronting and refer any cases to the Special Investigating Unit for prosecution. Company directors guilty of this offence will face prison and/or hefty fines (up to 10% of the guilty company's annual turnover). All companies listed on the JSE will be required to report to the commission on their B-BBEE compliance annually if the amendment bill is passed as it is. This has already sparked debate among MPs about the regulatory burden on SA businesses, especially if a commission is also able to call companies for information in between reporting deadlines.

Proposed legal changes also aim to bring verification agencies in line by introducing a new Independent Regulatory Board of Auditors. This is because getting an empowerment verification certificate has become a game of shopping around for the agency with the right interpretation of the regulations. There can be up to 20 points' difference between agencies.

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