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Understanding the investigation process of the B-BBEE Commission, Part 1

Source: Explanatory Notice 1 of 2023 of the B-BBEE Commission

A couple of decades down the line anyone doing business in South Africa will by now have been exposed to the inner workings of B-BBEE in one form or another. Most, however, probably do not know or understand how the BEE Commission deals with complaints related to BEE practices. Whether B-BBEE is successful or not is not within the scope of this article and no opinion will be provided.

This first article, of a series, deals with the “who and why” of the BEE complaint investigation process. Subsequent articles will deal with the “how” to lodge a complaint.

The B-BBEE Commission is an entity established by the Broad-Based Black Economic Empowerment Act 53 of 2003 as amended by Act 46 of 2013 (“the Act”), to oversee the implementation of the Act, which includes the provision of practice guides, explanatory notices, non-binding advisory opinions and clarification services to improve the understanding of the Act.

In terms of section 13F(1)(c) the B-BBEE Commission is allowed to receive complaints relating to B-BBEE in the manner that the Act has provided for. The Act further in section 13F(1)(d) requires the B-BBEE Commission to investigate, either on its own initiative or in response to complaints received, any matter concerning B-BBEE. Regulation 15 of the B-BBEE Regulations outlines the process for lodging a complaint.

What is a B-BBEE complaint?

A complaint is a matter initiated by the B-BBEE Commissioner in terms of section 13J(1) of the Act, or that has been submitted to the Commission in terms of section 13F(1)(c) of the Act. For a complaint to be considered by the B-BBEE Commission, it has to relate to the contravention of the B-BBEE Act and can fall within the scope of any of the B-BBEE elements namely, ownership, management control, skills development, enterprise and supplier development, and socio-economic development, including any specific sector element.

Contravention of the Act would generally result in a fronting practice. A fronting practice involves a transaction, arrangement, or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of the B-BBEE Act or the implementation of any of the provisions of this Act, including but not limited to practices in connection with a B-BBEE initiative:

(a) in terms of which black persons who are appointed to an enterprise are discouraged or inhibited from substantially participating in the core activities of that enterprise;
(b) in terms of which the economic benefits received as a result of the broad-based black economic empowerment status of an enterprise do not flow to black people in the ratio specified in the relevant legal documentation of that enterprise;
(c) involving the conclusion of a legal relationship with a black person for the purpose of that enterprise achieving a certain level of broad-based black economic empowerment compliance without granting that black person the economic benefits that would reasonably be expected to be associated with the status or position held by that black person; or
(d) involving the conclusion of an agreement with another enterprise in order to achieve or enhance broad-based black economic empowerment status in circumstances in which:

    (i)     There are significant limitations, whether implicit or explicit, on the identity of suppliers, service providers, clients or customers; 
    (ii)    The maintenance of business operations is reasonably considered to be improbable, having regard to the resources available; 
    (iii)   The terms and conditions were not negotiated at arm’s length and on a fair and reasonable basis; (iv) not meeting the agreement obligations set for enterprise and supplier development and skills development.

A previous article explaining more about fronting is available via this link: https://beeratings.com/b-bbee-fronting/

Who can lodge a complaint?

Any person affected by a fronting practice or a concerned member of the public can lodge a complaint with the B-BBEE Commission at no cost. A party lodging the complaint can do so directly with the B-BBEE Commission or through legal or any other form of representation.

Use of legal or any other form of representation in order to lodge a complaint with the B-BBEE Commission is not mandatory, and any party who chooses to solicit such representation needs to do so out of their free will. A complaint lodged with or without any form of representation will receive the same level of attention and treatment from the B-BBEE Commission.

There are circumstances that may warrant a person to lodge a complaint, but not be willing to disclose their identity, that is allowed. However, where a person chooses to remain anonymous, the B-BBEE Commission will not be obliged to provide any update concerning
the status of the complaint, until such time that the anonymity is waved in writing to the B-BBEE Commission. On the other hand, where anonymity is not claimed, the person will be entitled to request an update on a complaint from time to time using the assigned case
number.

A complaint can also be withdrawn in writing to the B-BBEE Commission at any time before the B-BBEE Commission can make its finding(s) and recommendation(s). Despite the withdrawal of the complaint, the B-BBEE Commission may continue to investigate a complaint as if the B-BBEE Commission had initiated it in terms of section 13J(1) if it is justifiable to do so.

What are multiple complaints?

At any time after a complaint has been initiated by the B-BBEE Commission, or submitted by another person, the B-BBEE Commission may publish a notice disclosing the alleged contravention and inviting any person to file a complaint in respect of that matter who believes that they have been affected by the alleged practice or is affecting a material interest of that person.

There are also circumstances where the B-BBEE Commission may consolidate or join two or more complaints under a common investigation if the matter involves the same person(s) as a potential respondent(s). If the Commission consolidates two or more complaints as permitted by the Act, each complaint will continue to be separately identified by its case number. The consolidation does not change the status of the complainant, and each person who submitted one of the consolidated complaints will remain a complainant.

Where complaints have been consolidated, it is possible that an investigation may not be warranted in one or more of the complaints, and in such a case, the Commission will inform the affected person(s), and continue to investigate any of the remaining consolidated complaints, subject to notifying the complainant(s) and provided the one-year period of investigation has not lapsed.

Where the period to investigate has lapsed the Commission must within thirty (30) days send a notification to the complainant indicating the lapse of time, and request to extend the investigation period further by completing the prescribed FORM B-BBEE 21. Where the complainant is unable or refuses to grant the extension, the Commission may continue to investigate the matter as though it has initiated the investigation.

Any forms referred to in this series of articles may be found via the Commission’s link: https://www.bbbeecommission.co.za/b-bbee-forms/

The next article will discuss the forms used in the complaint process followed by a brief explanation of the process flow.

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