The BEE Amendment Act

The Broad-Based Black Economic Empowerment Amendment Act, No. 46 of 2013 was published in the Government Gazette on 27 January 2014 (the BEE Amendment Act).  It amends the Broad-Based Black Economic Empowerment Act No. 53 of 2003 (the BEE Act) and will be effective on a date still to be determined by the President.

The BEE Amendment Act has been brought into law in substantially the same format as the BEE Amendment Bill that was approved during 2013. It introduces a number of significant changes to the BEE Act and establishes a framework for the regulation of BEE and the appointment of a dedicated regulator to oversee BEE.

There are various offences and penalties in terms of the BEE Amendment Act, the most stringent one being that where any person misrepresents or attempts to misrepresent the BEE status of an enterprise or provide false information to a BEE verification professional to secure a particular BEE status or benefit, and is convicted, such person will be liable to a fine or imprisonment for a period not exceeding 10 years or both a fine and imprisonment or, if the person convicted is not a natural person, to a fine not exceeding 10% of annual turnover. In addition any person convicted of an offence in terms of the BEE Amendment Act may not contract or transact with any organ of state or public entity for a period of 10 years from the date of conviction.

The important amendments are summarised as follows:

  1. The definition of “black people” is now in line with the definition as contained in the Amended BEE Codes and means Africans, Coloured and Indians who are citizens of South Africa by birth or descent or who became citizens of South Africa by naturalisation before 27 April 1994 or on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date.
  2. A definition of “fronting practice” is now included in the BEE Act, meaning a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of the BEE Act or the implementation of any provision of the BEE Act.  The definition lists a number of practices that would be regarded as a fronting practice.
  3. The objects of the BEE Act have been amended to include a focus on black start-up businesses, small, medium and micro-enterprises, co-operatives and black entrepreneurs, including the informal sector.
  4. A significant change is that previously under the BEE Act organs of state and public entities were only required to take the BEE Codes into account, “as far as reasonably possible”.  However, now it is mandatory for organs of state and public entities to apply codes of good practice when determining qualification criteria for the issuing of licences, concessions or developing and implementing a preferential procurement policy.  This obligation also extends to determining qualification criteria for the sale of state-owned enterprises, developing criteria for public private partnerships and criteria for awarding incentives, grants and investment schemes in support of BEE, unless exempted by the Minister of Trade and Industry (the Minister) as published in the Government Gazette.
  5. Enterprises operating in a sector with a sector code must now report annually on their compliance with BEE to the sector council that has been established for that sector.
  6. The Minister may by notice in the Government Gazette, permit organs of state or public entities to specify qualification criteria for procurement and other economic activities which exceed those set by the Minister in terms of any code of good practice.
  7. The new sections introduced into the BEE Act can be summarised as follows:
    1.  Any contract or authorisation awarded on account of false information, knowingly furnished in respect of BEE, may be cancelled by the organ of state or public entity.
    2. A regulator to be known as the Broad-Based Black Economic Empowerment Commission (the BEE Commission) is to be established.
    3. The BEE Commission will be required to:
      1. oversee, supervise and promote adherence to the BEE Act;
      2. strengthen and foster collaboration with the public and private sector to promote and safeguard the objectives of BEE;
      3. receive complaints relating to BEE;
      4. investigate, either at its own initiative or in response to complaints received any matter concerning BEE;
      5. maintain a register of major BEE empowerment transactions above a threshold to be determined by the Minister;
      6. receive and analyse such reports concerning BEE compliance from organs of state, public entities and private sector enterprises;
      7. institute proceedings in any court to restrain any breach of the BEE Act, including a fronting practice or obtain appropriate remedial relief, and refer  any criminal matter to the National Prosecuting Authority or the appropriate division of the South African Police Service.
  8. All spheres of government, public entities and organs of state must report on their compliance with BEE in their audited financial statements and annual reports required under the Public Finance Management Act of No. 1 of 1999, and all public companies listed on the JSE must provide the BEE Commission with an annual report on their compliance with BEE.
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