More at­ten­tion on lo­cal con­tent

Amend­ment bill sug­gests penal­ties may be in­tro­duced for non-com­pli­ance with the B-BBEE Act 53 of 2003

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - HAPPY MA­SONDO

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

and

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.

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