B-BBEE – WHATS NEW?

South Africa’s Broad-Based Black Economic Empowerment framework is evolving, with proposed legislative reforms that may change how companies achieve compliance and support economic transformation.

South Africa’s Broad-Based Black Economic Empowerment (“B-BBEE”) framework is a cornerstone of the country’s post-apartheid economic reform agenda. Introduced to address entrenched racial inequality and exclusion, B-BBEE aims to promote meaningful participation of Black South Africans in the economy through ownership, management, skills development and enterprise support. In January 2026, the South African government proposed significant changes to this framework, which, if implemented, would alter how companies can achieve BBBEE compliance.

At present, B-BBEE is governed primarily by the Broad-Based Black Economic Empowerment Act 53 of 2003, together with the Codes of Good Practice issued under the Act. Compliance is measured through a scorecard system, under which companies earn points across five key elements, namely ownership, management control, skills development, enterprise and supplier development, and socio-economic
development. Higher B-BBEE scores improve a company’s competitiveness when bidding for government contracts, applying for licences and permits, and participating in procurement processes with both public and private sector entities.

While B-BBEE compliance is not strictly mandatory, it is often commercially unavoidable, particularly in regulated sectors or where government procurement is involved. Over time, the ownership and management control elements have proven to be among the most difficult for many companies to meet, especially for multinationals and capital-intensive businesses.

In late January 2026, the Minister of Trade, Industry and Competition announced proposed amendments that would introduce a new compliance pathway. Central to the proposal is the creation of a R100 billion Transformation Fund. Under the proposal, companies would be able to earn B-BBEE points by making financial contributions to this fund, rather than meeting certain ownership or management targets directly. According to government statements, the Transformation Fund would be used to support Black-owned businesses, small and medium enterprises, and transformation initiatives across the economy. The proposal is positioned as a way to preserve the objectives of B-BBEE while offering businesses greater flexibility in how they contribute to transformation.

From a legislative perspective, the proposal does not repeal existing B-BBEE requirements but seeks to supplement them. The government has indicated that the fund would be incorporated into the existing B-BBEE framework through amendments to the Act or the Codes of Good Practice, following a public consultation process. A 60-day public comment period has been announced, in line with administrative law requirements.

The government has justified the proposed changes by pointing to persistent inequalities in senior management and ownership structures, despite more than two decades of B-BBEE implementation. Employment equity data continues to show significant racial disparities at executive and board level. The government argues that the Transformation Fund could accelerate inclusive growth by channelling capital directly into Black-led enterprises and productive economic activity. However, the proposal has attracted criticism from opposition parties and some business groups. Critics argue that allowing companies to comply through financial contributions risks undermining the structural transformation objectives of B-BBEE. Concerns have also been raised that the fund could entrench a “pay-to-comply” model, reducing incentives for companies to pursue genuine ownership and management transformation.

There are also potential constitutional and regulatory considerations. While South African courts have historically upheld affirmative action and empowerment measures as constitutionally permissible, any new compliance mechanism must still satisfy principles of legality, rationality and proportionality. Questions may arise as to whether compulsory or quasi-compulsory contributions to a central fund could amount to an unlawful tax or exceed the regulatory powers conferred by the B-BBEE Act if not carefully drafted. For businesses, the proposed changes introduce both opportunity and uncertainty. If adopted, companies may need to reassess their transformation strategies, weighing traditional compliance measures against financial contributions to the Transformation Fund. Until the amendments are finalised and detailed regulations are published, existing B-BBEE requirements remain fully in force.

Legal advisors should monitor developments closely, including draft legislation, Gazette notices and guidance from the B-BBEE Commission. Companies should also consider participating in the public consultation process to ensure that practical and legal concerns are addressed before the proposals are finalised. Therefore, while the underlying purpose of B-BBEE remains unchanged, namely to advance substantive economic inclusion, the proposed Transformation Fund represents a potentially significant shift in how compliance may be achieved. Whether this reform strengthens transformation outcomes or weakens the structural goals of B-BBEE will depend on the final legislative design and its implementation.