South Africa: New B-BBEE Regulations Demand Greater Transparency And Scrutiny

Last Updated: 9 August 2016
Article by Sanjay Kassen and Parusha Desai Valodia

Most Read Contributor in South Africa, September 2019

Over the past year, the broad-based black economic empowerment ("B-BBEE") landscape in South Africa has been completely overhauled and has become more stringent. Among the most significant changes are the:

  • criminalisation of fronting practices
  • establishment of the B-BBEE Commission
  • promulgation of the new B-BBEE Regulations (the "Regulations"), which came into force on 6 June 2016

Criminalisation of fronting

A fronting practice is defined in the Broad-Based Black Economic Empowerment Act, 2003, as amended (the "B-BBEE Act"), as a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of the B-BBEE Act and/or the Codes of Good Practice (the "Codes").

A person found guilty of a fronting practice could face a fine and/or a prison sentence of up to 10 years. If the guilty party is a juristic person, such as a company, it could face a fine of up to 10% of its annual turnover. In addition, such an enterprise may not contract or transact any business with any state body or public entity for 10 years. It must also be entered into the register of tender defaulters, which the National Treasury may maintain for that purpose. Lastly, an enterprise involved in a fronting practice could suffer significant reputational harm.

Establishment of the B-BBEE Commission

Zodwa Ntuli has been appointed by the Department of Trade and Industry ("DTI") as the first acting B-BBEE Commissioner. The B-BBEE Commission's primary tasks are to:

  • oversee, supervise and promote adherence with the B-BBEE Act in the interests of the public
  • investigate any matter concerning B-BBEE, including summoning people to appear before it, to answer questions and to produce any relevant document
  • maintain a registry of major B-BBEE transactions

The B-BBEE Commission has made several observations about fronting practices, including that "fronting undermines transformation and is unacceptable". No doubt, acting Commissioner Ntuli's primary focus is to eradicate fronting practices and put in place safeguards to prevent these occurring in future, to enable true economic transformation.

Registration of major B-BBEE transactions

Parties to a major B-BBEE transaction now have 15 days from the date of conclusion (not implementation) of the transaction to register it with the B-BBEE Commission by completing and submitting a prescribed form (together with the underlying documents of the transaction). In terms of the Regulations, a transaction would constitute a major B-BBEE transaction if it falls above a certain threshold, which is yet to be determined and published by the Minister of Trade and Industry.

Upon submission of the prescribed form and other related documents, the B-BBEE Commission must, within 10 days, issue a certificate of registration, provided the requirements for registration have been met. Unfortunately, the Regulations do not clearly stipulate what these are.

The B-BBEE Commission is entitled to assess the adherence of a major B-BBEE transaction with the B-BBEE Act and advise the parties of any concerns it may have about the registered transaction within 90 days of its registration. If the B-BBEE Commission has identified any concerns, the parties must take such steps as may be required to remedy the transaction within a reasonable period. Failure to do so may lead the B-BBEE Commission to initiate an investigation in terms of the B-BBEE Act. Unfortunately, it is not clear from the Regulations as to what constitutes a "reasonable period" and this will have to be determined on a case-by-case basis. However, it would be in the interests of the parties to the transaction to ensure that they cease, as soon as possible, to perpetuate a B-BBEE transaction that the B-BBEE Commission believes could be contrary to the B-BBEE Act.

The Regulations further recommend that parties to a major B-BBEE transaction take steps to seek appropriate advice prior to concluding the transaction, including through the advisory services of the B-BBEE Commission.

Importantly, the obligation to now register a major B-BBEE transaction does not in any way prohibit or prevent the parties from implementing the transaction. The risk is that the B-BBEE Commission may require the unwinding or restructuring of a transaction that has been implemented if there is non-compliance with the B-BBEE Act, which is likely to result in severe timing and cost implications. To circumvent the risk of "unscrambling" a transaction (particularly a complex one), it would need to be assessed (on a case-by-case basis) whether it is prudent to delay implementing the transaction until the B-BBEE Commission has not raised any concerns following the 90-day review period. It is also highly recommended that all parties to a major B-BBEE transaction seek appropriate advice from their advisors in order to satisfy the requirements of the Regulations.

Reporting duties

The Regulations, read with the Act, also place a mandatory obligation on all companies listed on the Johannesburg Stock Exchange ("JSE") and government entities to submit a compliance report to the B-BBEE Commission annually. The report must detail the state of compliance with the B-BBEE elements as set out in the Codes, and how each element contributes to the outcome of the scorecard in terms of the Codes.

A JSE-listed company is obliged to submit its compliance report to the B-BBEE Commission within 90 days of the end of its financial year, or within 30 days of the approval of its audited financial statements and annual report, where the annual compliance report is included in its annual report. Government entities must submit their reports within 30 days of the approval of their audited financial statements and annual reports. Upon receipt of a compliance report, the B-BBEE Commission must, within 90 days thereof, assess the compliance report, describe the state of compliance with the B-BBEE Act and highlight any areas of improvement.

If the B-BBEE Commission is of the view that the reporting entity is not compliant with the B-BBEE Act, it must notify the reporting entity accordingly and provide it with 30 days to remedy the non-compliance. Should the reporting entity fail to remedy the non-compliance within 30 days, the B-BBEE Commission must reject the compliance report. The remedial period of 30 days appears to be very short, and we suspect that many entities will seek a longer remedial period. In this regard, the Regulations provide for certain condonations.

The consequences of a so-called "rejected compliance report" are not clear from the Regulations. However, the intention and objectives of the new B-BBEE regime make it clear that one of the major consequences of a rejected compliance report is that the B-BBEE Commission may initiate an investigation.

It is important to note that a similar obligation is placed on measured entities operating in particular sectors for which a sector code has been gazetted.

Formal complaint procedure

In terms of the Regulations and the B-BBEE Act, either the B-BBEE Commission or a third party is permitted to initiate an investigation into any measured entity. The B-BBEE Commission is further empowered to:

  • institute proceedings in any court to restrain any breach of the B-BBEE Act, including a fronting practice
  • obtain appropriate remedial relief
  • refer a matter to the National Prosecuting Authority or the appropriate division of the South African Police Service

B-BBEE has not really achieved what was originally intended. One of the most unfortunate consequences has been the emergence of different types of fronting practices, which appear to have become the norm. Accordingly, regulators of B-BBEE, such as the B-BBEE Commission, are determined to regularly scrutinise B-BBEE transactions and monitor the compliance of measured entities with applicable B-BBEE legislation.

Stakeholders are hopeful that the registration of major B-BBEE transactions and the reporting duties placed on certain measured entities will provide a certain degree of transparency and enable the B-BBEE Commission to identify and remedy the unintended consequences of B-BBEE.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions