The commission that monitors compliance with empowerment legislation on Tuesday said it had received 499 empowerment deals in the past three years.
The B-BBEE Act, which aims to increase black participation in the economy and redress the legacy of apartheid, provides for the establishment of the commission to monitor and promote adherence to empowerment legislation. It is compulsory for all broad-based BEE ownership transactions over R25m to be registered with it.
Ownership of a stake of 51% or more must carry the associated voting rights and representation on the board of directors to ensure that the black shareholders are actively involved in the decision-making of the company.
In most cases, however, voting rights do not match the percentage of ownership, especially for black women, commission head Zodwa Ntuli told a B-BBEE commission webinar on Tuesday.
The webinar was held for practitioners that are involved in B-BBEE ownership deals.
Ntuli said that if there are indications of fronting — a criminal offence — the commission will tell the entity and give them reasonable time to remedy the situation. If they fail to do so they will be referred for investigation. She noted that the commission had noticed a lot of misrepresentation of BBBEE status in the areas of tender and bidding processes,
Ntuli noted that black ownership of the economy overall stood at only 29% in 2019 while blacks comprised over 80% of the population and only 3.3% of JSE-listed entities were 100% black owned.
She said in prior years the majority of transactions with black shareholders were financed with vendor financing — either by the entity itself or by shareholders — followed by share swaps (18%) and bank loans (16%. Government funding in 2018/2019 was only 4.2%.
The commission’s acting executive manager for compliance, Lindiwe Madonsela, said another “alarming” problem with some BBBEE transactions is that the payment of dividends is made conditional on the share price reaching a level that it has never reached previously. The black empowerment partner often relies on dividends to repay the loan for the acquisition and with no dividends being paid they are left with a mountain of debt and perhaps are in breach of the financing or shareholding agreements.
During 2017 and 2018, 272 transactions were received by the commission with a total transaction value of R188bn. In the after year a total transaction value of R112bn was recorded by the commission, and in 2019/2020 a preliminary total of 106 transactions went through the commission. There have been 26 transactions for the current year. The value of transactions for 2019/2020 is not yet available.
Of the 499 deals received, 350 were registered and 144 were rejected for failing to comply with the basic registration requirements. A total of 83 transactions have been referred for investigation as the parties have failed to remedy the concerns raised by the commission.
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