B-BBEE Commission expects reporting compliance to improve
The commission wants the JSE to charge penalties for the lack of B-BBEE disclosure as part of the listing regulations
The commission that monitors compliance with empowerment legislation has called on the JSE to ensure that companies conform as annual reporting is now a listing requirement.
The Broad-Based BEE (B-BBEE) Commission, called on the JSE to address non-compliance by charging penalties for the lack of disclosure, as part of the listing regulations. This, the commission said, will ensure increased transparency in the disclosure of the JSE-listed entities’ ownership structure.
The commission said B-BBEE priority elements are the key drivers for economic growth, which is needed to address the high levels of unemployment rate in SA.
This week, the commission released its annual report on the national status and trends of B-BBEE for 2018. The report shows no significant change in the levels of transformation with black ownership reflecting a decline to 25.2% from 27% in 2017. Black female ownership is at just more than 10%, which is down a percentage point from 2017.
The study, however, was limited due to low levels of reporting by listed entities. The report shows that only 43% of the JSE-listed entities (down from 51% in 2017) and 10% of the organs of state (up from 1% in 2017) submitted their annual compliance reports as required by the law.
The commission said this may be followed by referral for prosecution as “this worrying trend of non-compliance is clearly undermining the objectives of the B-BBEE Act”.
“The low level of reporting and the slow pace of improvement in B-BBEE elements is a concern, but the commission welcomes that ... compliance is now part of the audit scope of the auditor-general, and also that annual B-BBEE reporting is a listing requirement on the JSE,” the commission said.
“Therefore, with these interventions and the enforcement action of the commission, reporting and the extent of ... implementation is expected to improve.”
The commission added that it has started conducting site visits on the reports submitted as part of the verification process.
“The analysis of submissions for the period January 1 2018 to December 31 2018 shows a slow pace in the transformation and achievement of the B-BBEE for the priority elements: ownership, skills development, and enterprise and supplier development,” the commission said in its report. “The organs of state should [also] be leading in complying with the B-BBEE legislation as the custodian thereof.”
In 2017, only 38% (male, 21.63%; female, 16.76%) of JSE-listed entities’ board control was held by black people, [with] the majority, at 61.61%, is held by white people and foreign nationals. The 2016 report indicated 30% (male, 18%; female, 12%) black South Africans held directorship on listed entities.
The lack of black women and black male representation at board level is highlighted as a barrier to transformation of the JSE-listed entities, the commission said.
It said an intervention similar to the government’s Youth Employment Service programme, which focuses on grooming black managers above the age of 35, should be considered to accelerate transformation.
Furthermore, the commission said in its report that it may benefit from looking into an integrated model whereby a percentage is levied on entities that do not comply with the skills development target. The levy would be paid into the National Student Financial Aid Scheme fund, to fund free education.
Said the commission, “Through amendments in the codes, this amount can be potentially directed to reduce the current fiscal challenge in funding free tertiary education.”