It has become not uncommon for the court of law to declare a section of the legislation on B-BBEE compliance as ‘not binding or invalid’ after a certain business group or association wages a legal challenge. And it must be acknowledged that, in most cases, those who succeed would have ample facts to substantiate their grounds. They would reference grey areas or contradictions of sections in Acts which legislators may have overlooked.
Worryingly, legislative contradictions or grey areas derail focus on the ultimate goal of achieving economic transformation mainly in two areas. Firstly, weak legislation makes enforcing compliance difficult, as it gives strong grounds for organisations to elect not to comply, for which they would have potent legal ammunition to defend their ground. Secondly, weak legislation runs the risk of eroding public goodwill, especially amongst the previously disadvantaged individuals whom it is meant to help, as they cannot trust a well-meant project whose enabling law is open to different interpretations.
With respect to contradictions in sections of the enabling legislation on transformation, what comes to mind is the legal deadlock in two areas – ‘once empowered, always empowered‘ principle relating to the Mining Charter, and legislation which government uses to automatically disqualify from tendering organisations whose businesses do not meet B-BBEE requirements.
In the former, the Minerals Council of South Africa, which represents mainly blue-chip miners, is calling for the court ruling that a mining company should still retain its BEE status even though its black shareholders sold their shares to be retained. One of the conditions for the renewal of mining rights is for a respective mining company to have black ownership.
Challenging the ruling, the Department of Trade and Industry holds the position that a mining company should lose its BEE credentials once its black shareholder sells their stake, and should only regain them after a new shareholder comes on board.
In the latter, in 2020, the Supreme Court of Appeal (SCA) declared the revised Preferential Procurement Regulations and their provisions for race-based ‘pre-qualification criteria’ invalid . This was after a business organisation, Sakeliga (formerly AfriBusiness), challenged regulation based on Section 217 (1) of the Constitution, which states that: “When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost effective.”Pravin Gordan, then Minister of Finance, promulgated the regulations in 2017.
Through his attorneys, Minister of Finance, Tito Mboweni, has taken the matter to the Constitutional Court to have the ruling reversed, basing his argument on Section 217 (2) of the Constitution. Section 217 (2) stipulates: “This does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for categories of preference in the allocation of contracts; and the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination”. He argues this section is merely meant to redress past racial injustices.
Samkeliga is steadfast in its position that the legislated preference points system and that race – above and beyond gender and disability – only come into play during the preference point adjudication.
Meanwhile, businesses await the outcomes of the abovementioned court cases with vested interest. While some of the challenges have been thrown out of court, it is the successful cases that should be of great concern, as they raise questions on legitimacy of some sections of legislation governing transformation.
Indeed all told, there is no question that legal challenges against sections of BEE legislation will continue to be a costly distraction from implementation of objectives of transformation, as long as grey areas are not addressed. Of course, the constitution of South Africa grants every party an unalienable right to lodge a legal challenge on any matter they feel strongly about.
