In the past few years South Africa has seen a significant shift in focus regarding Transformation. From initially focusing on the procurement relationship between the state and its suppliers, to now emphasizing B-BBEE compliance as a prerequisite irrespective of the state’s involvement.
Considering the slow progress made towards transformation, this shift in focus was surely to be expected as based on the B-BBEE Commissioner’s 2020 transformation report, there was a mere increase in Black Ownership from 29% in 2018 to 31% in 2020.
Deputy Finance Minister David Masondo further highlighted this shift in focus while speaking at a Business Day webinar stating that “From the side of the state, what motivates us, what informs what we’re doing is a constitutional imperative for transformation. The equality clause in the constitution requires the state to undertake measures to transform South Africa in all facets of our society. We are also motivated by inclusive growth.”
This shift in focus is specifically seen across the following industries which now require the applicable industry entities to prove their B-BBEE compliance in order to obtain or maintain their trading or operating licences:
The Finance Sector:
As per the 2017 Amended Financial Services Sector Code, each entity conducting business in the South African financial sector is required to report annually to the Financial Sector Transformation Council (FSTC) on its progress made in implementing the provisions of this Amended Sector Code. Failure to submit this annual report, results in the entity being deemed Non-compliant and furthermore impacts the outcome of their upcoming B-BBEE Verification as their overall B-BBEE Level will automatically be discounted with one level. The soon to be implemented Conduct of Financial Institutions Bill will further impact the way financial institutions plan to achieve their transformation goals.
The Gambling Sector:
The National Gambling Board is involved in the process of ensuring that the entire gambling industry achieves at least a Level 2 B-BBEE status in line with the 2013 General Amended Codes. This in itself, hampers new or international companies from entering the local South African Gambling market.
The Alcohol Sector:
Entities operating within this industry who are applying for a new trade licence, liquor distribution licence or a renewal of a current liquor license must undergo a process whereby their B-BBEE Compliance is established. Currently, there are no stringent requirements regarding Black Ownership and even a Non-compliant Certificate is deemed sufficient, however this may change in future.
The ICT Sector:
ICASA’s “Regulations on the limitations of Control and Equity ownership by Historically Disadvantaged Groups and the application of the ICT Sector Code” issued on 31 March 2021 specifically refer to Individual & Class Licences as defined in the 2005 Electronic Communications Act.
For Class Licenses, Licensees will need to have a Level 4 B-BBEE status whereas for Individual Licenses, Licensees will need to comply with the following:
Obtain or maintain a Level 4 B-BBEE Status with 30% Black Ownership using the flow-through principle and
If in a 24-month period, there are any changes which will decrease Black shareholding or Ownership with 5% or more OR which will decrease Black People’s Voting Rights, the Individual Licensee needs to notify ICASA.
For compliance, these Regulations do make provision for a transitional period which depends on when ICASA received a Licensee’s Application and/or if the Licensee is a current License Holder.
The Agri Sector:
As per Government Gazette No. 43910 dated 18 November 2020, the issuing of export permits for exporting to the European Union will be subject to compliance with the 2017 Amended AgriBEE Sector Codes. This Sector Code is applicable to any entity which derives more than 50% of its turnover from the following activities:
The primary production of agricultural products;
The provision of inputs and services to enterprises engaged in the production of agricultural products;
The beneficiation of agricultural products whether of a primary or semi-beneficiation form; and
The storage, distribution, and/or trading and allied activities related to non-beneficiated agricultural products.
The above elevated focus on transformation is further supported by the Employment Equity Amendment Bill which, once gazetted, will empower the Minister of Labour to regulate and set different sector specific numerical targets for different occupational levels, sub-sectors or regions.
Some of the factors which the Minister will consider when setting sector targets include:
The qualification, skills and experience required to be employed in a particular occupational level;
The rate of turn-over and natural attrition in a sector; and
The recruitment and promotional trends within a sector.
The above shift in focus is a clear indication of how B-BBEE requirements are changing. As such, more stringent requirements are going to be enforced across multiple industries requiring B-BBEE compliance by industry entities in order to receive or renew their trade licences needed to continue with daily business operations.
Should you need assistance in becoming compliant with B-BBEE and Employment Equity legislation, kindly contact LabourNet.
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