Broad-based BEE structures continue to play role in South Africa

Broad-based BEE structures continue to play role in South Africa 600 400 Tamela

Statements made by the Minister of Trade, Industry and Competition Ebrahim Patel…

Statements made by the Minister of Trade, Industry and Competition Ebrahim Patel at the launch of the Coca Cola Beverages SA Black Economic Empowerment (BEE) transaction, in which he confirmed that Broad-Based BEE (B-BBEE) structures continue to have a place in South Africa’s transformation landscape and have indeed made a positive impact, have been welcomed by the market.

For the past few years there has been uncertainty about the acceptability of B-BBEE structures, particularly with respect to BEE ownership transactions, which came about when the BEE Commission deemed that B-BBEE structures no longer qualified under the ownership element of the BEE Codes, if the shares are not eventually owned and controlled by an individual black person, despite such schemes being provided for in the Codes.

No clarity on B-BBEE schemes

This position, although stemming from a valid concern the Commission had that some broad-based schemes do not result in any benefit actually flowing to black beneficiaries, despite companies claiming ownership points under these schemes, was of particular worry for those companies with existing BEE partners in the form of B-BBEE structures, because those companies didn’t know if their BEE ownership points would be lost. Equally affected were companies that were contemplating BEE transactions with a broadbased element, which also then didn’t know if such structures would result in BEE ownership points.

Moreover, a number of existing well-known BEE investment vehicles, including Kagiso Tiso Holdings (KTH), the Mineworkers Investment Company (MIC), WDB Investment Holdings (WDB) and Thebe Investment Corporation (Thebe), among others, were potentially affected by the Commission’s views, which would mean their investee companies, among them some large JSE-listed corporates, could no longer claim BEE ownership points from their shareholding.

Although some market players approached the courts to challenge the Commission’s interpretation of the Codes, none of these cases have yet to be ventilated in court, there is therefore no clarity provided by the judiciary in this regard. Various parties also approached the Department of Trade, Industry and Competition (DTIC) directly, as the custodian of BEE legislation, requesting the DTIC to offer policy clarity on the matter.

The way forward

The announcement by the Minister, although not in itself legislation or binding on the BEE Commission, does therefore provide the market with some relief – at least in terms of the direction in which the DTIC is thinking. Following the announcement, the DTIC has been urged to follow up on Minister Patel’s statement, with the market hoping that further clarity will be provided by way of either an amendment to the Codes or some policy directives by the DTIC .

In the interim, CEOs who have been contemplating the implementing of a BEE transaction, but had been unable to make a firm commitment pending this policy clarity, can now put such plans back on track. Similarly, as part of the policy clarity, certain B-BBEE schemes that are still fatally flawed may need to be amended to align with any new such policy certainty.

How we can help

Tamela has implemented numerous BEE ownership transactions over the past 12 years and has experience in structuring sustainable BEE structures. We can advise, review and consult to corporates on their ownership structures and whether they comply or require amendments in line with any policy update from the DTIC. For more information, please contact Tshepisho Makofane, 083 287 2651 /

error: Content is protected !!