On the 15th of June 2018, the Minister of Trade and Industry published draft amendments to the Preferential Procurement and Enterprise and Supplier Development element of the generic B-BBEE Codes, which will be open for public comment for a period of 60 days.
A key focus of the proposed amendments is procurement from, and enterprise and supplier development of, 51% Black-owned entities.
In summary, the proposed amendments provide as follows:
- an increase in the target for procurement from entities which are at least 51% Black-owned from 40% to 50% with an increased weighting from 9 to 11 points;
- an enhanced recognition of two times of actual spend for procurement spend on entities which are at least 51% Black-owned on a flow-through basis;
- beneficiaries of enterprise development or supplier development initiatives which are currently limited to exempted micro-enterprises and qualifying small enterprises that are 51% Black-owned, will include large entities which are 51% Black-owned on flow-through basis; and
- procurement from large entities which are 51% Black-owned on a flow-through basis will also qualify as procurement from exempted micro-enterprises or qualifying small enterprises.
These proposed amendments follow hot on the heels of the draft amendments to the B-BBEE Codes published on 29 March 2018, which amongst other things, propose a deemed level 2 B-BBEE status for large entities which are at least 51% Black-owned on a flow-through basis or a deemed level 1 B-BBEE status for large entities which are 100% Black-owned on a flow-through basis.
If finally incorporated into the B-BBEE Codes, the proposed amendments are likely to catalyse the implementation of 51% Black ownership transactions. Importantly, the structuring of these transactions could not be reliant on the modified flow-through principle, if the full benefits of the proposed amendments are to be reaped.
