Loopholes set to undermine new empowerment regime

South Africa’s minister of trade and industry last month unveiled the key changes contained in the draft revised broad-based black economic empowerment (BBBEE) codes. The draft codes are intended to amend the BBBEE regime which took effect in 2007.

Under the existing regime, businesses in South Africa are offered incentives to optimize their BBBEE compliance levels. The immediate potential upside for such businesses is access to government work, public-private partnerships and state assets.

Elements of compliance

BBBEE compliance levels are currently measured across seven elements: black ownership, black management, black employees, skills development of black employees, the procurement of goods and services from BBBEE-compliant suppliers, support provided to black enterprises, and socioeconomic development contributions. Despite the sophisticated rating regime and diligence of verification agents established under the BBBEE laws, critics say that too few people have benefited from BBBEE and that it has failed to transform corporate South Africa and ultimately the South African economy. Through careful and clever structuring businesses are able to achieve high compliance levels without real transformation having necessarily occurred.

Safiyya Patel is a partner at Webber Wentzel. Webber Wentzel is one of the leading corporate law firms in Africa and the South African member of ALN, an established group of Africa’s 12 foremost law firms.