South Africa: B-BBEE Compliance: B-BBEE Commission Approval And Transaction Thresholds

In South Africa Broad-based Black Economic Empowerment (B-BBEE) transactions are an integral part of achieving the collective objective of fostering a more inclusive economic environment that champions economic transformation through the effective participation of the vast majority of South Africans.

For businesses to be legitimate participants in commercial transactions, they need to ensure that they are B-BBEE compliant. In doing so the question often arises as to the necessity of obtaining approval from the Broad-Based Black Economic Empowerment Commission (“B-BBEE Commission”). It is imperative to understand if, and when a transaction triggers the requirement of the registration of a transaction with the B-BBEE Commission.

The B-BBEE Commission is established in terms of the Broad-Based Black Economic Empowerment Commission Act 53 of 2003 as amended by Act 46 of 2013 (“B-BBEE Act”). According to section 13F, its functions include overseeing, supervising and promoting the adherence to the Act in the interest of the public. Furthermore, the B-BBEE Commission is to maintain a registry of major B-BBEE transactions that are above the threshold determined and gazetted by the Minister of Trade and Industry.

Any transaction between entities or parties that results in Ownership Recognition in terms of Statement 100, where the Transaction Value equals or exceeds R25 million must be registered with the B-BBEE Commission within 15 days.

“Transaction Value” is taken to mean the value of the Sale of Asset /Business /Equity Instrument which is the subject of the transaction in question that resulted in the Ownership Recognition and excludes administration, professional and legal fees.

While there appears to be no sanction in the B-BEE Act or in the B-BBEE Regulations for failing to report a major B-BBEE transaction within the prescribed time period, it is possible that the B-BBEE Commission could initiate an investigation into the transaction. It is also worth considering that a failure to do so may cause difficulties on exit since potential buyers are likely to request evidence of compliance with this legislative requirement.

It is essential to seek the guidance of experienced legal professionals in order to implement proactive measures to ensure adherence to the prescripts of Broad-Based Black Economic Empowerment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.