The B-BBEE Commission’s latest report on empowerment trends in 2019 shows an increase in black ownership, but this is not necessarily reflected in management control scores

The Broad-Based Black Economic Empowerment Commission (B-BBEE Commission) has released the annual broad-based black economic empowerment (B-BBEE) trends report (the Report) for the 2019 calendar year.

The purpose of the Report is to assist the B-BBEE Commission to determine how organs of state, public and private entities in South Africa are performing against the generic and sector Codes of Good Practice published by the Minister of Trade and Industry in terms of section 9(1) of the Broad-Based Black Economic Empowerment Act, 2003. The Report assesses ownership, management control, skills development, enterprise and supplier development and socio-economic development.

The Report is based on compliance reports received from 150 companies listed on the Johannesburg Stock Exchange (JSE), 43 organs of state and 5 818 other entities whose B-BBEE certificates were uploaded onto the B-BBEE Commission's portal.

The Report reveals some significant trends for B-BBEE compliance during the 2019 calendar year, and we have set out some of these below:

• Black ownership has increased from 25% in 2018 to 29% in 2019. There is also an increase in the number of JSE-listed entities which are 100% black-owned. The percentage of 100% black-owned JSE listed entities in 2018 was 1.2%, however in 2019, 3.3% of the entities listed on the JSE were 100% black-owned.
• The percentage of black South Africans holding directorships has decreased overall from 45% in 2018 to 39% in 2019, whereas black South Africans holding directorships in JSE-listed entities has increased from 38.3% in 2018 to 43.6% in 2019.  However, the B-BBEE Commission has highlighted the need to address the lack of black female and black male representation at board level to transform JSE-listed entities, including by invoking the relevant penalties in the JSE Listing Requirements.
• The B-BBEE Commission has raised concerns over trends observed between 2017-2019, which show that although black ownership indicates a slight positive change, this percentage does not always correlate with management control scores.  The B-BBEE Commission has stated that this gives the impression that despite improvements in black ownership, black people are not involved in the control and core operations of businesses.
• Contributions towards skills development, enterprise and supplier development and socio-economic development have decreased in 2019.  The B-BBEE Commission has acknowledged that although entities may struggle to achieve the skills development targets, the emphasis should increasingly be on the nature and quality of the training interventions in addition to the quantity of such training. In addition, the role of the service providers that provide skills development on behalf of the measured entity should be closely scrutinised.
• The B-BBEE Commission noted, with concern, that the enterprise and supplier development element has not achieved the desired outcome of developing sustainable black-owned businesses through the transformation of value chains. In addition, most enterprise and supplier development initiatives are increasingly implemented through third parties or intermediaries. Although this is allowed in the Codes of Good Practice, the B-BBEE Commission stated that a substantial part of  spending must be allocated for the benefit of the beneficiary entities and not the third party or intermediary entities that facilitate the initiatives.
• In both the private and public sectors, the B-BBEE Commission stated that many measured entities failed to file their reports for the 2019 calendar year, as required. In addition, those entities and organs of state which did file their reports with the B-BBEE Commission showed little improvement in their performance on average.

Written By Safiyya Patel, a Partner and Cindy Leibowitz, a Professional Support Lawyer at Webber Wentzel