Dr Rob Davies, the Minister of Trade and Industry, announced in the Government Gazette dated 8 November 2016 that the proposed threshold for registration of major B-BBEE ownership transactions would be R100 million, calculated by either combining the annual turnover of both entities or their asset value. Members of the public have 30 days from date of publication of Notice 748 of 2016 to submit comments in writing to the DTI on the contents of the Notice.
As required under the 2014 B-BBEE Amendment Act, Israel Noko, CEO of NPI Governance Consulting explains that the B-BBEE Commission must maintain a registry of “major” BEE transactions, being those that fall above a certain threshold. In terms of the Regulations to the B-BBEE Act, which were published on 6 June 2016, the parties to a major BEE transaction must submit the transaction to the B-BBEE Commission for registration within 15 business days after concluding the transaction. According to Noko, “it is anticipated that the BEE Commission will be inundated with BEE deals to review, and one need to question whether the BEE has both the capacity and expertise internally to review such deals, many of which are very complex and require financial modelling understanding”.
While the regulations specify that the requirement to register is not a requirement to obtain the B-BBEE Commission’s “approval”, the regulations nevertheless provide that the B-BBEE Commission can advise the parties of any concerns that the B-BBEE Commission has regarding the transaction, and that the parties must then take steps to address the B-BBEE Commission’s concerns. If adequate steps are not taken, the B-BBEE Commission can then initiate an investigation in terms of the B-BBEE Act into the transaction. From a BEE Verification perspective, if such an investigation is being undertaken, will this mean that the Verification Agencies will not award BEE points for those measured entities? Israel Noko seems to believe that “most Verification Agencies will take a very conservative approach to BEE deals and if there is doubt, then they will not award the Ownership points”.
The Gazette provides that all major deemed BEE ownership transactions, which equal or exceed R100 million must be registered with the B-BBEE Commission. The provision is not clear and raises several questions including:
- Why is the threshold not determined with reference to the value of the transaction to the BEE shareholder as opposed to the combined asset value or turnover of entities?
- How does this apply in the context of complex structures where the transaction is done at a higher level but for the benefit of entities lower down the chain?
- Are the two entities which are referred to the BEE shareholder and the entity in which it has acquired the interest?
The gazette also requires that B-BBEE ownership transactions concluded on or after October 24 2014, being the proclamation date of the B-BBEE Act, 2003, must be registered with the B-BBEE Commission within 30 days of the final publication date of the Notice. It is questionable whether the Minister has the power to make the registration requirement retrospective to the date of determination of the threshold.
For further information, contact:
Thato Malebane, Marketing & Communications Manager
Tel: (+27) 011 259 4018