The BBBEE Act established a legislative framework and proposed establishing an advisory council. The Act’s preamble acknowledged that apartheid excluded most South Africans from accessing skills and ownership of productive assets.
The Act would provide a framework to overcome this legacy by promoting achievement of the constitutional right to equality. Economic transformation would be achieved through various means such as changing the racial composition of enterprise ownership, management and skills acquisition.
The South African President would chair the BEE Advisory Council, which would include cabinet ministers, academics and representatives of business, trade unions and community-based organisations. The Minister of Trade and Industry was empowered to issue a BEE strategy and Codes of Good Practise and publish Transformation Charters. Codes of Good Practice would provide definitions and guidelines for implementing BEE. Sectoral Transformation Charters would be developed by major stakeholders in each sector.
The BEE Act and its associated Codes of Good Practice are legally binding on government departments, state-owned enterprises (SOEs) and other public entities. They have to apply the Act and Codes when making decisions regarding procurement, licensing and concessions, public-private partnerships and the sale of state-owned assets and businesses.
The Act and Codes are not legally binding on the private sector, but they may find their business shrinking if they do not promote BEE. For example, a 100% white-owned mining company that does not promote black staff, or make any attempt to uplift poor communities where its mines are located, could experience difficulty getting its mining licence renewed. Similarly, a large state-owned enterprise advertising a tender for supply of goods or services could award the tender to a private company that promotes BEE, even if this company’s price is higher than another company that makes no attempt to do so. State contracts can be worth millions and this provides an incentive for private companies to change. For many companies, transformation becomes an economic imperative.