On 9 November 2016, we reported on a notice published by the South African Department of Trade and Industry (the “DTI”), in terms of which the DTI proposed that all major broad-based black economic empowerment (“B-BBEE”) ownership transactions, as per code 100 of the B-BBEE Codes of Good Practice, which equal or exceed ZAR100-million, calculated by either combining the annual turnover of both entities or their asset values (the “Proposed Threshold”), must be registered with the B-BBEE Commission (the “2016 Notice”).
On 9 June 2017, the DTI released a further notice (the “2017 Notice”) confirming that all major B-BBEE transactions, as per code 100 of the B-BBEE Codes of Good Practice, with a transaction value equal to or exceeding ZAR25-million (the “Final Threshold”), must be registered with the B-BBEE Commission.
The 2017 Notice (similar to the 2016 Notice) goes a step further and provides retrospective application in that all major B-BBEE transactions concluded between 24 October 2014 (being the date on which the amended Broad-Based Black Economic Empowerment Act, 2003 came into effect) and the date of final publication of the thresholds for major B-BBEE transactions (9 June 2017) (the “pre-June 2017 Transactions”) must also be registered with the B-BBEE Commission within 60 days after such final publication.
Interestingly, the 2017 Notice differs from the 2016 Notice in four key aspects:
- the Final Threshold has decreased by ZAR75-million from the Proposed Threshold, thereby casting the application of regulation 18 of the new B-BBEE Regulations (the “Regulations”) far wider than what was initially proposed by the DTI;
- the methodology of determining whether a major B-BBEE transaction equals or exceed the Final Threshold now only refers to a “transaction value” as opposed to the “annual turnover of both entities or their asset values”;
- all parties involved in a major B-BBEE transaction must jointly register the transaction as a “collective”; and
- the period in which to register pre-June 2017 Transactions has increased from 30 days to 60 days, thereby affording such parties a longer period of time to comply with its obligations.
The registration of major B-BBEE transactions will effectively allow the B-BBEE Commission to vet the details of various transactions so as to ensure that it complies with and meets the spirit of the B-BBEE framework.
Going forward, it is important for entities to scrutinise their current and new B-BBEE transactions in order to avoid non-compliance with the Regulations and avoid potential penalties. To this end, it is highly recommended that all parties to a major B-BBEE transaction (including pre-June 2017 Transactions) seek appropriate advice from their advisors and the B-BBEE Commission in order to satisfy the requirements of the Regulations.
For details on the process of registering a major B-BBEE transaction, please click here.