The B-BBEE Commission’s view on the pace of transformation

“What should businesses take note of in the recently released National Status and Trends on B-BBEE Transformation Report (Transformation Report) released by the B-BBEE Commission in July 2022?”

The Transformation Report is based on B-BBEE data reported in the 2021 year by JSE listed entities, Organs of State, Public entities and Seta’s as well as from other entities uploading BEE Certificates to the B-BBEE Commission’s online portal. In the Transformation Report the B-BBEE Commission measures B-BBEE performance against each scorecard element. 

The total number of B-BBEE compliance reports submitted on the B-BBEE Certificate Portal System in 2021 (1 373) decreased with 76% from 2019 (5 818). According to the B-BBEE Commission, the decrease in reporting is due to a lack of consequences in the event of non-compliance in annually submitting its B-BBEE compliance reports.

To address this the B-BBEE Commission recommends that the B-BBEE Act be amended to include administrative penalties for such non-compliance and even criminal sanctions for repeat offenders. The Commission also recommended compulsory reporting of all B-BBEE certificates issued by SANAS accredited B-BBEE verification agencies to the B-BBEE Commission’s online portal.

Looking more at the Transformation Report results itself, the following notable trends in relation to specific scorecard elements was reported on by the B-BBEE Commission:

Ownership:

There has been little movement in the levels of transformation on Black ownership with 29.5% Black Ownership reported in 2021 versus 31% in 2020. The Transport and Tourism sectors have the highest average levels of Black Ownership at 78% and 52% respectively with the Agri and Financial sectors showing the lowest levels of black ownership at 17% each. Black woman ownership is growing at a slow pace in most sectors and the B-BBEE Commission proposes revising targets for Black women ownership. 

Management Control:

The percentage of Black board members on the boards of entities that reported decreased to 51.56% in 2021 from 57% reported in 2020. The report noted that most points under this scorecard element is still recorded under the Junior and Middle management levels and not Senior and Top management levels.

Enterprise and Supplier Development:

The average contributions towards Enterprise and Supplier Development decreased from 61% in 2020 to 46.5% in 2021, with a R 26 billion spend recorded in the 2021 year under this element. The B-BBEE Commission recommended the pooling of these funds in order to more effectively develop Black upcoming businesses, especially Black women owned businesses.

Skills Development:

Contributions towards Skills Development decreased as well, with 54.76% reported in 2021 versus 60% in the 2020 period.  

The Transformation Report identified numerous factors causing a decrease in Transformation initiatives and expenditure, resulting in the B-BBEE Commission concluding that the pace of transformation in general was insufficient. As a result, the Transformation Report contains a number of recommendations, including administrative penalties for non-compliance, which businesses should take note of should authorities move to implement stricter measures to accelerate the pace of transformation. 

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy has been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 

November 22, 2022
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