Big changes to BEE in South Africa

South Africa’s Black Economic Empowerment (BEE) framework is set to undergo its most significant changes in years as new ways for businesses to comply are expected to be introduced. 

These changes are coupled with a two-phase review of BEE by the Department of Trade, Industry, and Competition to determine how relevant legislation can be amended to improve outcomes. 

This review is largely aimed at closing loopholes that are being exploited by bad actors, with BEE increasingly becoming associated with cronyism and corruption. 

The department also aims to determine whether existing BEE legislation has led to greater participation in the formal economy, or whether the benefits are going to a select few. 

At the end of January, Trade Minister Parks Tau published draft changes to the broad-based black economic empowerment (B-BBEE) Codes of Good Practice. 

These changes are specifically focused on funding the new Transformation Fund and changing the way preferential procurement is measured, experts at Webber Wentzel explained. 

The intention is for the fund to be capitalised through businesses’ enterprise and supplier development contributions and the equity equivalent contributions from multinational companies. 

Webber Wentzel’s experts explained that the Transformation Fund is intended to finance small- and medium-sized black-controlled businesses. 

Under current B-BBEE codes, all businesses must make contributions, in cash or in kind, to these types of businesses. Some of the black-controlled businesses must also be their suppliers. 

This helps companies score BEE points for enterprise and supplier development, giving them a greater chance at securing government contracts or deals with big businesses. 

The changes proposed by Tau will allow businesses to instead make contributions to a centralised fund, which will then deploy money to beneficiaries. 

This would mean that businesses would no longer have to identify their own enterprise and supplier development beneficiaries or go through third-party intermediaries.

Crucially, while the 3% net profit after tax spending target will remain unchanged, businesses could score more points by contributing to the fund than by making individual contributions to black-controlled companies. 

The proposal is to increase the total points businesses can score in the Enterprise and Supplier Development element from 46 to 53, including bonus points, if they contribute to the fund.

Preferential procurement changes

A second change proposed by the minister related to preferential procurement measurement, which aims to force companies to procure services from 100% black-owned companies. 

Under the current B-BBEE regulations, businesses are incentivised to procure goods and services from 51% black-owned suppliers. 

This is because spending on this category of suppliers carries the highest weighting, Webber Wentzel’s experts explained. 

The minister has now proposed introducing entirely new indicators to measure preferential procurement, as well as reorganising and reducing the point weightings for existing indicators. 

The proposals include a new target for 15% of a business’s total measured procurement spend (TMPS) to be with 100% black-owned qualifying small enterprises.

These small enterprises are defined as those with annual revenues between R10 million and R50 million. 

The procurement spend must also include a further 15% with 100% black-owned exempted micro-enterprises, which are those with annual revenues below R10 million. 

The proposals would reduce the points for buying from 51% black-owned businesses to three from 11 currently. 

They will also introduce new indicators for spending from 100% black-owned suppliers, targeting 25% of procurement spend for 7 points, and for spend from 100% black women-owned suppliers, targeting 12% of TMPS for 3 points. 

The draft amendments currently don’t include any type of transitional period before the proposed thresholds would come into effect, if they are adopted.

Webber Wentzel’s experts said that there are some elements of the proposed changes relating to the fund and procurement spending that require further clarification as to how they would work. 

Comments on the draft amendments must be submitted to the Department of Trade, Industry and Competition by 30 March 2026.