Warning over ‘third wave BEE’ in South Africa
Business group Sakeliga has warned businesses across various industries in South Africa of what it calls the “third wave” of BEE enforcement.
This is characterised by the group as a move from passive ‘administrative’ BEE requirements on smaller businesses to active enforcement of BEE policies.
According to the group, this is distinct from the first wave (major corporates) and second wave (government contracts) implementation of BEE.
Recent developments with the Property Practitioners Regulatory Authority (PPRA) underscore this concern. Sakeliga views the PPRA’s actions as part of a calculated, multi-phase approach to deepening BEE’s reach across sectors.
In September, Sakeliga claimed a significant win for property practitioners when the PPRA reversed its decision to enforce heightened BEE compliance requirements.
Initially, the PPRA introduced changes in April 2024 that mandated BEE compliance as a condition for obtaining Fidelity Fund Certificates (FFCs), which are essential for property practitioners to operate legally.
Under this new policy, property practitioners unable to meet a minimum score of 40 points (BEE Level 8) were at risk of being denied these certificates, effectively barring non-compliant entities from the industry.
Although the need for a BEE certificate has existed since the Property Practitioners Act came into effect in 2022, certificates were previously issued based on possession rather than strict compliance.
The PPRA’s April update marked a decisive shift toward enforcement, with non-negotiable compliance requirements, as the authority put it.
However, the agency’s recent reversal signals a temporary respite for property practitioners and reveals underlying strategies that Sakeliga argues extend beyond the property industry.
Sakeliga frames the PPRA’s initial approach as part of what it calls the “third wave” of BEE enforcement, a strategic expansion that diverges from previous BEE policies targeting large corporates or businesses engaged in state contracts.
According to Sakeliga CEO Piet le Roux, this third wave enlists regulators across sectors to incrementally apply BEE demands on private businesses with no direct involvement in state projects, ultimately integrating BEE compliance into industries that may have previously been unaffected by such policies.
The “third wave” approach, as outlined by Le Roux, operates in two distinct phases.
In the first phase, regulators establish groundwork by redefining industries in a way that expands the jurisdiction of regulatory bodies, thus setting the stage for BEE policy integration.
Although this phase often begins with “compulsory” BEE reporting, it typically lacks punitive measures for non-compliance, giving the appearance of a mere data collection effort.
This stage subtly introduces businesses to BEE regulations without immediate pressure, framing it as a preliminary requirement.
However, in the second phase, regulators transition from passive reporting to active enforcement.
Having acclimated businesses to reporting practices, authorities then require BEE compliance as a condition of continued operation, often under the guise of regulatory necessity.
Businesses that fail to meet these heightened demands may face penalties or find themselves unable to continue operations within their sector.
Sakeliga contends that this progression is anything but incidental; rather, it is a calculated strategy designed to draw even independent businesses into the scope of BEE compliance without offering them alternatives or exclusions.
In this way, the policy “Trojan horse” conceals the gradual escalation of BEE demands within a structure initially presented as non-threatening or statistical in nature.
Sakeliga’s concern is that the third wave of BEE enforcement is becoming increasingly visible across multiple sectors beyond real estate.
“We [Sakeliga] call this latest two-phased approach the third wave of BEE because it is no longer focused just on big corporates like the first wave in the 1990s, nor is it focused on businesses with state contracts like the second wave thereafter,” said Le Roux.
Examples range from health product regulation and legal practice codes to agricultural businesses, water licensing, and even mergers and acquisitions.
The PPRA’s attempt to enforce BEE standards on property practitioners is emblematic of this larger pattern, demonstrating how the strategy gradually permeates various regulatory bodies and industries.
By expanding the scope of BEE requirements, South African regulators are effectively embedding BEE compliance into the operational framework of entire sectors, reshaping the landscape of business compliance and, arguably, economic autonomy within the country.
For businesses in South Africa, this third wave represents a critical turning point.
As Sakeliga warns, the potential for these policies to become entrenched could spell far-reaching consequences for private enterprises, consumers, and the national economy.
If BEE enforcement continues its current trajectory, businesses with no ties to government contracts may find themselves subject to increasingly stringent requirements, limiting operational freedom and, potentially, financial viability.
Sakeliga stresses the urgency of addressing this issue now, viewing the situation as an impending tipping point that could result in substantial disruptions if left unchecked.
In highlighting the PPRA’s recent actions, Sakeliga aims to raise awareness of what it sees as an orchestrated, pervasive approach that extends far beyond the mandates of individual regulatory bodies.
For businesses, the stakes are high, as the third wave of BEE could shift from an industry-specific mandate to an overarching compliance norm.
Sakeliga’s warning is both a call to action for businesses and a cautionary note about the potential impact of these policies on South Africa’s economic landscape.
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