South Africa is seeing a new shift in BEE – here’s what to expect

15 June 2022

The government is expected to conclude the legislative process for the Employment Equity Amendment Bill in September 2022, in what is expected to be the vanguard of a new transformation push for the country.

In a research note outlining the planned changes, consultancy Songhai Advisory noted that the bill will allow the Employment and Labour minister Thulas Nxesi to set employment equity targets for different business sectors. The minister can set targets for different occupational levels, sub-sectors or regions.

The amendments would also require the government to issue contracts only to firms that have been certified as compliant with this law. The bill is currently before president Cyril Ramaphosa for consideration.

Council 

Meanwhile, Ramaphosa has set up a new Broad-based Black Economic Empowerment (B-BBEE) Advisory Council including members from the Competition Commission, labour unions and the black business community.

Their task will be to propose ways to improve representativeness in board and executive roles, create an equitable workforce, expand black skilled labour and increase the overall participation of black people in the economy.

“The challenge before the president and the new B-BBEE council is weighty. A 2020 report by the B-BBEE Commission says 80% of the unemployed in Q4 2019 were black – and unemployment has since risen from 29% to 34.5%. Increased black ownership of large companies has also not led to more representation in management or improved opportunities for black employees and suppliers,” Songhai Advisory said.

“This is attributed to fronting. For instance, construction, transport and property were the only assessed sectors where black ownership consistently rose from 2017 to 2019. However, these three sectors were also among the lowest performers in terms of board representation and preferential procurement during the same period.”

Further, the proportion of black people in executive roles among reporting entities fell to 39% in 2019 from 45% the previous year.

Regulatory push 

Regulators are also attempting to address this imbalance through other means, with Songhai Advisory pointing to the controversial Burger King deal as a recent example.

“In June 2021, the Competition Commission initially demanded black economic empowerment before approving the acquisition of Burger King’s local unit by US-based ECP Africa Fund.

“It was the first competitive merger to be prohibited only on public interest grounds since the Competition Act was first enacted in 1999. The commission cited a new clause in the amended law that it must prioritise ‘the promotion of a greater spread of ownership, in particular to increase the levels of ownership’ by historically disadvantaged people (HDP) and workers.

“The deal was consequently blocked on grounds that HDPs would lose their 68.56% stake in Burger King SA, but it was later cleared after counterparties agreed to terms including the formation of an employee ownership scheme.”

Looking forward 

The advisory firm said that it expects the legislative process for the Employment Equity Amendment Bill to be concluded before September 2022.

This is when current workforce equity plans set by employers themselves will elapse and the labour minister would be able to set new five-year targets in terms of the new law, it said.

“On a broader note, low economic growth will continue to limit the impact of B-BEE policies. The IMF projects GDP growth will be under 2% in the medium term and per capita growth has been mostly negative since 2014.

“However, structural reforms involving state-owned enterprises will quicken the economy and thereby facilitate empowerment, but the political process is uncertain with the ruling African National Congress scheduled to hold its national conference in December and Ramaphosa eying re-election.”

Source: Businesstech at https://businesstech.co.za/news/business-opinion/597574/south-africa-is-seeing-a-new-shift-in-bee-heres-what-to-expect/?fbclid=IwAR2fTJ4WeVf4z7YX1-PRcH6QdTU7sMbRfeAXoJqcM-lDAC4CZMeuMHAtRpI