Broad-Based Black Economic Empowerment (B-BBEE) Commission on work done since inception

NCOP Trade and International Relations

17 April 2018
Chairperson: Mr E Makue (ANC, Gauteng)
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Meeting Summary

The Broad Based Black Economic Empowerment Commission briefed the Committee on work done since inception.

The Committee was provided with background which led to the eventual establishment of the Commission. The Commission started operations in June 2016.The briefing continued with detail on operational implementation via the six Programmes of the Commission i.e. Compliance; Investigations and Enforcement; Research, Analysis and Reporting; Relationship Building/Stakeholder Relations and Administration.
The total number of complaints received by the Commission from June 2016 to 31 March 2018 was 334. The majority of complaints received related to fronting and Broad Based Black Economic Empowerment certificates. From a sectoral point of view most of the complaints emanated from the mining and transport sectors and related to issues around ownership. In conclusion the Commission provided Members with insight into some of the Alternative Dispute Resolution cases handled by the Commission. Alternative Dispute Resolution was only undertaken where the complainant would be better served.       

The Democratic Alliance pointed out that fraudulent compliance certificates on Broad Based Black Economic Empowerment had been supplied by Gupta family owned companies to Eskom in order to secure deals. The companies had zero black ownership. The Commission was asked whether it was investigating the matter. If investigations had been done the Commission was asked what the outcome of the investigations was. Members felt that there was a need to accelerate the implementation of Broad Based Black Economic Empowerment. The major problem was corruption. Members said the only way to drive out corruption was to have institutions run by persons with integrity. This applied to the Commission as well.

Members asked whether the staff of the Commission was vetted. Did the Commission carry out periodic lifestyle audits? Members were concerned about the staff of the Commission being susceptible to being bribed. The practice by the Commission was that after it had investigated a matter and criminality was found it referred such matter to the National Prosecuting Authority. Members asked why the matter was only referred to the NPA after the conclusion of the investigation. The Commission was asked why a multi-disciplinary approach could not be followed. The Commission and the National Prosecuting Authority should be working together from the outset. The Broad Based Black Economic Empowerment Act criminalised the practice of fronting and the Commission together with the National Prosecuting Authority needed to take action.

Members appreciated the fact that the Commission workshopped government departments where there was non-compliance.  Members urged the Commission to work closely with the Office of the Public Protector. The Office of the Public Protector was after all tasked with investigating conduct in state affairs. Members felt that it would have been better if the Commission had been established when the Broad Based Black Economic Empowerment Act was first passed. Members suggested that perhaps something could be done via regulations in order for the Commission to take actions on infringements that had taken place in the past.
Members would have liked the briefing to have spoken to what was happening in the provinces. Given how employees of companies were being taken advantage of by fronting, Members suggested that perhaps in regulations provision should be made for the exclusion of employees from the Broad Based Black Economic Empowerment process. Bearing in mind the financial constraints that the Commission was faced with members asked why the Commission could not be allowed to keep a percentage of penalties that it collected. All penalties collected by entities went into the National Revenue Fund.

The Commission was asked whether it had a programme in place which made provision for site visits to provinces and whether it had a programme to educate persons in rural areas. Were there initiatives implemented to overcome barriers of language? Given the lack of political buy in on Broad Based Black Economic Empowerment, Members felt that it was important for government departments and entities to take the lead and set an example to others. The Commission was urged to ask the Committee for assistance over the issue if the need should arise.

The Chairperson noted the importance of procurement of goods and services from Broad Based Black Economic Empowerment compliant businesses by national, provincial and local government. The Commission was asked what its plans on intergovernmental relations were and how targets were set in the Memorandums of Understanding that the Commission had entered into. The Chairperson also emphasised that in the economic sphere there was a skewed distribution of wealth. Of great concern was the fact that women ownership was less than 30%. Was the Commission looking at the distribution of economic wealth to women?

 

Meeting report

Briefing by the Broad Based Black Economic Empowerment (B-BBEE) Commission

Ms Zodwa Ntuli, Commissioner, stated that in 2013 the B-BBEE Act of 2003 was amended by Parliament. On 1 August 2015 Ms Ntuli and a task team was assigned to establish the B-BBEE Commission. In June 2016 the Commission started operations.

Ms Busisiwe Ngwenya, Director: Compliance, continued with detail on operational implementation via the Commission’s Programmes:

Programme 1: Compliance

On advice provided to clients for 2016/17 and 2017/18 the Commission did 94 advisory opinions and 1603 written clarifications. For 2016/17 and 2017/18 the Commission respectively issued 48 and 105 letters regarding invalid certificates. On the assessment of compliance reports received, 190 of a total of 202 compliance reports received were assessed.

Programme 2: Investigations & Enforcement

On proactive and reactive investigations for 2016/17 and 2017/18 a total of 334 complaints were handled with 83% of them being about fronting. 101 investigations were conducted. A total of 35 investigations were proactive. There were 63 notices of non-investigation. Findings were issued for 45 cases and 13 summonses had been issued. On the resolution of disputes 4 cases were resolved through Alternative Dispute Resolution (ADR) processes in redress to complainants’ grievances.

Programme 3: Research, Analysis & Reporting

A total of 4 sector reports were produced for 2016/17 and 2017/18. On the number of National Status and Trend Reports produced for 2016/17 and 2017/18, 1 Baseline Study had been produced and 1 National Status and Trend Report had been produced.

Programme 4: Relationship Building/Stakeholder Relations

On building mutual relationships with selected partners, the Commission in 2016/17 and 2017/18 managed to conclude Memorandums of Understanding (MOUs) with, amongst others, the National Gambling Board (NGB) and the Competition Commission. MOUs with the South African Revenue Service (SARS) and the National Prosecuting Authority (NPA) had been negotiated but were still to be signed.

Programme 5: Administration

On the development of an Information Communication Technology (ICT) Strategy for 2016/17 and 2017/18, an ICT Strategy and Plan had been developed and was being implemented. On developing the staff of the Commission for 2016/17 and 2017/18 100% of staff had been trained on investigations and on other skills.

The Commission undertook annual awareness events. These included a conference on fronting in 2015/16 and a seminar for verification of professionals in 2016/17. The total number of complaints received by the Commission from June 2016 to 31 March 2018 was 334. The majority of complaints received related to fronting and B-BBEE certificates. From a sectoral point of view most of the complaints emanated from the mining and transport sectors and related to issues around ownership.

Mr Joseph Melodi, Commissioner, briefly spoke to ADR and provided Members with insight into some of the cases handled by the Commission. ADR was only undertaken where the complainant would be better served.

Discussion

The Chairperson stated that he and the Chairperson of the Portfolio Committee on Trade and Industry Mr J Fubbs (ANC) had attended the conference on fronting that was mentioned in the briefing. Both were overwhelmed by the challenge that lay ahead for SA on economic transformation. He noted that just the night before President Cyril Ramaphosa had spoken about initiatives for a new impetus for investment into SA. This however meant that the Commission had to up its ante to ensure that B-BBEE was upheld. The crux of the matter was how those who held the capital in SA were contributing to transformation.
Given time constraints the Commission was instructed to answer those questions of members that it could the rest could be responded to in writing and submitted to the Committee.

Mr W Faber (DA, Northern Cape) noted that the Commission was empowered by the B-BBEE Act of 2013. He pointed out that fraudulent compliance certificates on B-BBEE were supplied by Gupta family owned companies to Eskom in order to secure deals. To make matters worse, these companies had zero black ownership. The Commission was asked whether it was investigating the matter, and if there were investigations what were the outcomes thereof.

Ms Ntuli responded that the Commission was dealing with fraudulent B-BBEE certificates. The Commission picked up on fraudulent certificates and had withdrawn them. In total the Commission had withdrawn 100 fraudulent B-BBEE certificates. On the matter referred to specifically the Commission had received a complaint from a member of the Portfolio Committee on Trade and Industry Mr D MacPherson (DA). The Commission was dealing with the matter.

Mr L Magwebu (DA, Eastern Province) felt that there was a need to accelerate the implementation of B-BBEE. The major problem was corruption. To drive out corruption institutions had to be run by people with integrity. This applied to the Commission as well. He asked whether the staff of the Commission was vetted. The Commission was asked whether it did periodic lifestyle audits. He warned that the Commission’s staff could be vulnerable to being bribed. The Commission on investigations and enforcement had stated that where investigations were done and criminality was found the matter was referred to the National Prosecuting Authority (NPA).
The Commission also undertook Alternative Dispute Resolution (ADR) where it was in the interest of the complainant. Why were there an investigation and thereafter a referral done? He asked why a multi-disciplinary approach could not be followed. The Commission and the NPA needed to work together from the word go. Notwithstanding the work done ADR and complainants being financially reimbursed he said that the B-BBEE Act criminalised the practice of fronting. The Commission together with the NPA needed to take action. The Commission needed to maximise its mandate.
The Commission had also stated that it workshopped government departments where there was non-compliance. He suggested that the Commission on stakeholder relationships work closely with the Office of the Public Protector. The Office of the Public Protector was after all tasked with investigating conduct in state affairs.

Ms Ntuli noted that stakeholder relations were a priority for the Commission, especially relations with the NPA and the South African Police Services (SAPS). When the Commission realised that there was a criminal offence then the SAPS and the NPA came on board. The Commission explained its legislation and offences to entities that it dealt with. Entities needed a proper understanding. The Commission had already engaged with the NPA and wished to work with the SAPS as well. The Commission had referred one matter on fronting to the SAPS and had to explain what fronting was to the SAPS official involved. There was an MOU with the NPA in place; it just had to be signed. She stressed that stamping out corruption was highlighted in the values of the Commission. All staff members of the Commission were vetted. The receipt of gifts to staff members was also monitored. The Commission did not tolerate corruption.  She agreed that lifestyle audits were important and it was something that the Commission would consider.

Mr M Rayi (ANC, Eastern Cape) said it would have been better if the Commission had been established when the B-BBEE Act was first passed. Perhaps something could be done via regulations in order for the Commission to take action on infringements of the past. He appreciated the additional information that the Commission had provided to the Committee listing entities with allegations against them. The information did not however go further as to what was being done on these entities. He additionally felt that the briefing document should have covered what was happening in the provinces since Members represented provinces. Given what was happening with employees of companies on fronting, he felt that perhaps in regulations provision should be made for the exclusion of employees from the B-BBEE process.

He understood the financial challenges the Commission was facing on office space and human resources. He asked why institutions like the Competition Commission which collected penalties could not be allowed to keep a percentage of the penalties for themselves. All penalties paid were paid into the National Revenue Fund (NRF). The Commission too should perhaps be allowed to keep a percentage of penalties collected. 

Ms Ntuli explained that the retrospective application of legislation could not be rectified by regulations. The law had to permit the Commission to investigate matters before it had started operating. The Commission nevertheless tried to negotiate positive outcomes on older cases. She felt that excluding employees from having B-BBEE ownership stakes would be a disservice. The idea was for employees to have B-BBEE ownership stakes in the companies that they worked for.
The Commission was having challenges on office space but that the Department of Trade and Industries (DTI) was looking into the matter. She explained that the reason why regulators like the Competition Commission did not get a percentage of fines that it collected was that it would be a perverse incentive to them.  

Ms B Mathevula (EFF, Limpopo) asked if the Commission visited sites when it received tip offs when a programme was in place for site visits to provinces to take place. She added that people in rural areas were not educated and asked whether the Commission had a programme in this regard as well as initiatives to overcome barriers of language.

Ms Ntuli pointed out that the Commission had operated since 2016. The Commission ensured that resources were placed where they were needed. Outreach was top on the agenda of the Commission.

Ms Ngwenya responded that the Commission had done 80 outreaches. Limpopo Province had been covered as well. The Commission intended to roll out a media campaign to local areas. Community radio stations were one of the ways in which messages would be brought across. She pointed out that the Commission had budgetary constraints.

Mr J Londt (DA, Western Cape) said that the Commission had spoken about a lack of political buy in and support. Government departments and entities were where things should start on B-BBEE and should set the example for the rest.
He noted that the Presidency had a monitoring tool by way of assessing Ministers and their Heads of Departments. Implementing B-BBEE should form part of these assessments. He suggested that if the Commission needed assistance from the Committee or any one of its counterparts in Parliament it should feel free to ask for it.

Ms Ntuli, on political support, said the Commission would like to see all politicians speak in one language. She pointed out that sometimes inconsistencies in messages made things difficult. Non-compliance by departments and their entities was an issue. The Commission had requested the Committee to ask entities why they were not complying. She however understood perhaps why there was non-compliance. It was only the first year in which departments and entities were required to comply. Teething problems was understandable. The Department of Trade and Industry was the only department that had reported to the Commission thus far, and amongst the entities Denel was the only one to have done so. 

The Chairperson pointed out that the Gauteng Province had held a lekgotla where the Member of the Executive Committee (MEC) who dealt with the budget of Gauteng was given a challenge to pay small businesses timeously. The issue was also about what percentage of products and services was procured from B-BBEE compliant businesses. The idea of the challenge was for the Gauteng Provincial Government to meet targets set in this regard. He pointed out that this type of challenge should apply to national, provincial and local government.
The Commission was asked to provide the Committee as part of its Annual Performance Plan (APP) what its plans on intergovernmental relations were. On Memorandums of Understanding (MOUs) that the Commission had with entities like the Competition Commission how were targets set. He stated that in the economic sphere there was a skewed distribution of wealth. Of concern was that women ownership was less than 30%. Was the Commission looking at the distribution of economic wealth to women?

Committee Minutes

Minutes dated 28 March 2018 were adopted unamended.     

The meeting was adjourned.

 

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