BEE remains the cornerstone of the government’s economic transformation policy. It derives its authority from the Broad-Based Black Economic Empowerment Act, 2003, and is implemented through the Generic Codes of Good Practice and various sector-specific codes. BEE focuses on five main scorecard elements, namely:
- Ownership;
- Management control;
- Skills development;
- Enterprise and supplier development; and
- Socio-economic development.
Compliance is voluntary in the strict legal sense but is often essential for participation in government procurement, or to hold a commercial edge over competitors.
However, not all empowerment obligations fall under BEE and BEE is often tarnished by other empowerment regulatory complaints. Two common examples of empowerment that are confused with BEE are employment equity and the “once empowered, always empowered” concepts.
- Employment equity
Employment equity is governed by the Employment Equity Act, 1998 (EEA) and is a separate piece of legislation with its own objectives and falls within the scope of labour law. The EEA seeks to promote fair treatment and eliminate unfair discrimination in the workplace. Compliance with the EEA is mandatory for designated employers, and penalties for non-compliance include substantial fines. The Department of Employment and Labour enforces compliance independently of the Department of Trade, Industry and Competition (DTIC), which oversees BEE.
- “Once empowered, always empowered”
BEE does not have a concept of indefinitely recognised empowerment. The concept of “once empowered, always empowered” is a concept that was introduced by the Amendment of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2010. The 2010 Mining Charter (and including the later versions of it), are designed to transform the mining industry and compliance is required for purposes of mining operators to obtain and maintain their mining licences. The Department of Mineral Resources and Energy (DMRE) enforces compliance with the Mining Charters independently of the DTIC.
Most recently, there has been similar confusion in relation to the attempts to get Starlink licensed in South Africa. Most reports flag the BEE regime as the key issue in contention that prohibits Starlink from getting licensed. However, this is incorrect. In order to operate in South Africa, Starlink is required to be issued a license by Independent Communications Authority of South Africa (ICASA). In terms of ICASA’s licensing requirements, a holder of the licence Starlink would require to operate must have 30% ownership held by historically disadvantaged groups (HDGs). The licence condition requires actual ownership and does not permit the recognition of various alternative or deemed ownership arrangements (such as the equity equivalent programme). Notably, despite the unclear communication and terminology used, government’s proposal to align legislation to allow for Starlink to be licensed is to effectively amend the ICASA licensing requirements to (1) not require actual shareholding by HDGs, and (2) allow for the recognition of alternative or deemed ownership arrangements as permitted by BEE laws.
Empowerment remains a key objective for the South African government, and it is a principle being implemented strongly by regulators and public procurement policies. But a clear understanding of the distinct empowerment frameworks and the purpose and objectives of each is key when identifying and raising issues. This allows those issues to be directed against the correct empowerment framework and to the correct regulator of that framework.
Understanding that everything empowerment is not BEE goes a long way to not put the wrong empowerment baby in the wrong bathwater.