Question NW1925 to the Minister of Trade and Industry

Reply:

Response (a)

Following consultations with institutions such as the Competition Commission, the BEE Commission, a threshold of R100m was determined based on Combined Annual Turnover and/or Combined Asset Value on 08 November 2016. The Minister subsequently issued Government Gazette No. 40410, Notice 748 of 2016, thresholds for Major B-BBEE Transactions for a 30-day public commentary period. Amongst others, the rationale for the R100m was that it will ensure all transactions by mainly large entities (those with annual revenue greater than R50m) in terms of the Codes are covered. However, with the exception of small and medium entities which if their combined annual turnover is below R100m, would be excluded and consequently for monitoring and reporting purposes would go un-tracked. Furthermore, the Notice highlighted the Documentary Requirements for Registering a Major B-BBEE Transaction.

In addition, the majority of the comments received during the public commentary period focused on the use of the combined Turnover and/or Asset Value not being an appropriate measure to determine a threshold. The argument is that if the combined Turnover and/or Asset Value are used, any transaction, regardless of the actual size of the transaction, when the proposed threshold based on the parties’ assets or turnover is exceeded, will have to be registered. This would have effectively meant that all changes in the shareholding traded on the Johannesburg Stock Exchange for listed companies, will have to be measured to identify the compliance impact on the Ownership element (Code 100). Should such transaction have an impact as mentioned above, it should be reported to the BEE Commission. This process would have an unintended consequence to assess the Ownership scorecard impact for each trade and to be then reported. Following this, the dti refined the principle by basing the measurement on the “Transaction Value” as this is more appropriate considering the context of what needs to be registered. The Threshold is R25 million based on Transaction Value which will be registered by parties to the Transaction as a collective. As mentioned above, the threshold was thus lowered to R25million in order to proactively alleviate any potential fronting practices even at small and medium sized enterprise level.

The registration of the mentioned deals is not with the Broad-Based Black Economic Empowerment Council but rather a Broad-Based Black Economic Empowerment Commission. The role of the B-BBEE Presidential Advisory Council is to advise the President and government on the design and implementation of the B-BBEE policy, amongst others.

Furthermore, the rationale for maintenance of a registry for major B-BBEE transactions is a matter of transformation imperative which is ideal for qualitative and quantitative valuable records keeping; data of these transactions might also be used to measure the extent of transformation in South Africa especially with regard to the Ownership and Control elements.

The threshold will enable the B-BBEE Commission to have a broad overview of all the transactions that are taking place in the country and to deal with potential fronting practices.

Response (b)

The B-BBEE Commission has been established in 2015 under the ambit of the dti to oversee the implementation of B-BBEE Legislation within South Africa.

The B-BBEE Regulations published on 06 June 2016, outlines the procedures of engaging with the B-BBEE Commission as well as indicates the process to follow when registering a Major Transaction with the B-BBEE Commission.

The B-BBEE Commission has already issued an Explanatory Notice 01 of 2017 indicating the documentation requirements in order to register a Major B-BBEE Transaction.

The B-BBEE Commission has competent staff members and the capacity to manage the process of registering all Major B-BBEE Transactions including those that will be registered retrospectively. The retrospective transactions are for registering only and not necessarily for assessment. However, the B-BBEE Commission has the discretion to assess any Major B-BBEE Transaction to ensure that it is aligned to B-BBEE Legislation. These include voluntarily registrations of any Major B-BBEE transaction consistent with the threshold, concluded before 24th October 2014 with the B-BBEE Commission.