Major BEE changes are coming for some of South Africa’s biggest industries

 ·13 Apr 2021

While there are various drivers of local empowerment and ownership requirements in Africa, one key driver appears to be gaining ground: ‘national interest’ empowerment.

This is according to an analysis of local empowerment and ownership trends in 14 African countries, by legal firm Bowmans.

The firm said that its analysis shows a growing emphasis on regulating ownership in economic sectors and activities that historically have not been regulated.

“Until relatively recently, restrictions on foreign participation on the continent tended to be limited and focused on a few big-ticket sectors, such as aviation, logistics, mining, oil and gas and broadcasting and telecommunications.

“Now, restrictions are also being found in sectors that were not previously regulated, and the trend appears to be spreading to more and more countries,” said Lerato Thahane, partner at Bowmans.

Thahane pointed to South Africa’s private security industry and the fact that the government has raised concerns that significant foreign ownership in private security companies could pose a threat to national security.

South Africa – which is said to have one of the largest private security industries in the world – is gearing up to introduce local ownership requirements in the industry.

“The Private Security Industry Regulation Amendment Bill proposes that at least 51% of the ownership of both existing and new security services providers must be held by South African citizens.

“That said, the bill has been pending since 2012 and has yet to be signed into law by the president. ”

Similar shifts seen in other industries 

Thahane said that there has also been a flurry of regulatory activity in the telecommunications and broadcasting services, with most of the changes designed to ensure local participation in new telecoms networks.

On 1 April, the Independent Communications Authority of South Africa (Icasa) announced new regulations aimed at promoting historically disadvantaged South Africans in the ICT sector.

Among the changes is a requirement for licensees to comply with the mandatory equity ownership requirements, 30% equity ownership by black people and level 4 BBEEE status.

The regulations also establish penalties of up to R5 million or 10% of the licensees annual turnover where a licensee fails to maintain the mandatory minimum requirement.

Thahane noted that South Africa is also revisiting its ownership requirements in broadcasting and telecommunications. Its draft regulations propose setting new broad-based black economic empowerment (B-BBEE) ownership for both those sectors.

“The variety of regulations and proposed changes can make investment decisions quite complicated, especially for investors with cross-border operations,” she said.

“In turn, African governments are generally aware that, amid intense domestic pressure to facilitate local citizen inclusion and participation, there is an important role for direct foreign investment to play in economic growth.

“A balance must be found to avoid the potential unintended consequence of constrained economic growth.”

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