Sudden BEE code change ‘could hurt business’

Some of the biggest companies in South Africa could fall foul of regulations and lose business after the government changed how it scores their compliance with BEE regulations.

The department of trade and industry published a notice on Tuesday in which it said that black empowerment programmes benefiting community and special interest trusts and employees will contribute less to a company’s compliance rating.

“It’s a really big issue,” Verushca Pillay, a director at Cliffe Dekker Hofmeyr, said yesterday. The black empowerment “compliance level is relevant to them winning business from other companies and from government”, she said.

South Africa’s black empowerment regulations are designed to boost participation in the economy by black citizens and other groups who were disadvantaged during apartheid. The rules had, alongside ownership, given companies benefit for training black managers, promoting women and helping develop communities near operations.

The change in regulations could mean empowerment programmes benefiting poorer parts of the population are unwound and end up going to black industrialists, Shaun Smit, a director with black empowerment advisory firm Transcend Capital, said.

The regulations could be challenged by companies, Pillay said. – Bloomberg