B-BBEE has a huge impact on the way we do business. As a company, it is important to know why B-BBEE was introduced, what it means for the country, how it affects your business and how your business can benefit from it. B-BBEE was implemented by Government to restore what has been lost and to contribute to the transformation in South Africa. B-BBEE motivates companies to integrate black people into the workspace, invest in their education, support black businesses, and give back to the poor communities across the country. Some positive outcomes, amongst others, of B-BBEE, includes career advancements, skills and education development, employment etc., for previously disadvantaged black people in South Africa.
To proceed with and obtain a successful B-BBEE rating, your company needs to meet the criteria to advance economic transformation and enhance the economic participation of Black people. The level of compliance will be based on the points accumulated for meeting the criteria. The five standard B-BBEEE scorecard elements that companies are rated on are, Ownership, Management and Control (Including Employment Equity), Skills Development, Enterprise and Supplier Development and Socio-Economic Development.
B-BBEE is categorised into different sectors, and there is a Code of Good Practice, which applies to each sector. Each sector has its own scorecard, calculation and targets for the relevant elements. There are differences in the additional elements which might be applicable to a different Sector Code.
One of the B-BBEE Sectors is the Financial Sector. The Financial Sector Charter commits its participants to actively promoting a transformed, vibrant, and a globally competitive financial sector that reflects the demographics of South Africa and contributes to the establishment of an equitable society by effectively providing accessible financial services to black people and by directing investment into targeted sectors of the economy.[1]
The amended Financial Sector Code came into effect on 1 December 2017. The Financial Sector includes but is not limited to Banking; Long-term insurance; Short terms insurance; Re-insurance; Retirement fund administration; The management of collective investment scheme assets; Public entities involved in the financial sector, e.g. DBSA; Asset management, consulting and administration; Private equity, venture capitalist and impact investors, etc.
On 7 April 2021, the Financial Sector Transformation Council issued a letter requiring each entity conducting business in the South African financial sector to report annually to the Financial Sector Transformation Council on its progress in implementing the provisions of the Financial Sector Code.
It is required that qualified professionals should verify B-BBEE compliance of Financial Institutions, and a copy of the B-BBEE certificate and the full verification report of the measured entity must be submitted to the Financial Sector Transformation Council within 30 days of issuing the verification certificate.
All FSPs are required to submit a transformation report to the Financial Sector Transformation Council by 7 June 2021. Companies failing to submit a transformation report to the Financial Sector Transformation Council will risk being flagged as non-compliant or risk their BEE status level being discounted in the following year’s B-BBEE scorecard. [2] Discounting can also result in non-compliance.
Discounting and non-compliance will mostly affect large enterprises and QSFIs that is rated on scorecards, but it still makes sense for all FSPs to comply. A list of non-reporting entities will be put together, and therefore FSPs should consider the reputational damaged of ending up on such a list. There is a possibility that non-reporting could have an impact on the issue or reissue of your FSCA license. Being discounted or becoming non-compliant might even result in you losing tenders and losing business. The B-BBEE Act requires “every organ of state and public entity” to consider “codes of good practise issued in terms of this Act in determining qualification criteria for the issuing of licenses, concessions or other authorisation in terms of any law”.[3]
It is clear that the Financial Code is a revised version of existing codes, but the criteria just became stricter to meet. It would be in your company’s best interest to consult a BEE professional in order to provide you with the necessary information and ensure your company is prepared for verification under the relevant sector. SEESA has exceptional legal advisors who are highly qualified. Contact SEESA to avoid being discounted or flagged as non-compliant.
About the Author:
Cherise Goeveija is a BEE Legal Advisor at SEESA Pretoria Office. She obtained her LLB law degree at the University of Pretoria in 2020 and has been working at SEESA since January 2021.
Resources:
B-BBEE Amendment Number Act 46 of 2013
Broad-based Black Economic Empowerment [BBBEE] Act 53 of 2003
The Banking Association South Africa – Introduction to The Financial Sector Charter
Gareth Stokes “And the next compliance
report is due…”, 27 May 2021. https://www.fanews.co.za/article/compliance-regulatory/2/general/1082/and-the-next-compliance-report-is-due/31991
[1] The Banking Association South Africa – Introduction To The Financial Sector Charter
[2] Gareth Stokes “And the next compliance report is due…”, 27 May 2021.
[3] B-BBEE Act, No 53 of 2003.