More attention on local content
Amendment bill suggests penalties may be introduced for non-compliance with the B-BBEE Act 53 of 2003
IN THE request for proposals issued by the Department of Energy to independent power producers (IPPS) great emphasis has been placed on local content requirements, ensuring that there are economic benefits to the communities where renewable energy facilities are located.
The implementation agreement for IPPS is dedicated to all elements associated with socioeconomic development. Through this the department aims to ensure that the renewable energy programmes introduce clean energy, while making a significant contribution towards enterprise development, local content procurement and skills development in all the areas where the renewable energy power stations are developed and established. The department will therefore attempt to meet a multiplicity of government policy under the single sweep of the request for proposals.
There is still legislation pending on local content and during December last year, the Department of Trade and Industry published the Broad-based Black Economic Empowerment Amendment Bill 2011 for public comment. In terms of the bill, new phrases and concepts are substituted to clarify particular terms used in the context of black economic empowerment (BEE).
The bill substitutes the definition of “broad-based black economic empowerment” as the sustainable economic empowerment of all black people, including, in particular, women, workers, youth, people with disabilities and people living in rural areas, through diverse but integrated socioeconomic strategies that include, but are not limited to:
Increasing the number of black people who manage, own and control enterprises and productive assets;
Facilitating ownership and management of enterprises and productive assets by communities, workers, co-operatives and other collective enterprises;
Achieving equitable representation in all occupational categories and levels in the workforce;
Human resource development;
Preferential procurement, including the promotion of local content procurement; and
Investment in enterprises that are owned or managed by black people.
With these definitions under the amendment bill project developers will have no reason to claim that there is ambiguity in the use of the concept “local content”.
Any ambivalence shown by project developers in complying with these local content requirements will not only prejudice the project company, but could lead to the disqualification of the bid submission. Project developers have to put in greater effort in meeting the requirements of local content or the manner in which they can comply with such requirements.
The amendment bill appears to be aimed at eliminating the “fronting” which has plagued the implementation of the policies and principles associated with B-BBEE since the B-BBEE Act 53 of 2003 came into force.
The B-BBEE Amendment Bill defines the phrase “fronting B-BBEE practice” as a transaction, arrangement or conduct that directly or indirectly undermines or frustrates the achievement of the objectives or the implementation of the B-BBEE Act. The practices in connection with BBBEE transactions contemplated by the B-BBEE Amendment Bill include, but are not limited to, B-BBEE transactions in terms of which:
Black persons who are appointed to an enterprise are discouraged or inhibited from substantially participating in the core activities of the enterprise;
The economic benefits received as a result of the B-BBEE status of an enterprise do not flow to black people in the ratio specified in the relevant legal documentation;
There is a conclusion of a legal relationship with a black person for the purpose of that enterprise achieving a certain level of B-BBEE compliance
skills and reasonable basis.
The amendment bill also contemplates that the B-BBEE commission will pro-actively address non-compliance with the B-BBEE Act 53 of 2003 by introducing penalties for such noncompliance. At the same time, the Amendment Bill also introduces the Independent Regulatory Board of Auditors (IRBA) in order to regulate the verification entities that currently verify B-BBEE credentials of entities and industry in general.
The IRBA will therefore serve the function of regulating the regulators, to ensure that the objectives of the BBBEE Act 53 of 2003 are achieved.