Local Content and B-BBEE
According to Chambers Bowmans’ lawyers possess experience assisting with corporate restructuring, black economic empowerment transactions and unbundling mandates.
- Overview
- Significant Matters
The South African Government’s transformation (local content) strategy is structured around broad-based black economic empowerment (B-BBEE). B-BBEE is an important consideration for any company conducting business in South Africa, whether with Government, organs of state or private sector customers.
We have extensive experience in advising and acting for a wide range of clients across a number of sectors and have been involved in several ground-breaking B-BBEE transactions. Our specialist lawyers are up to date with the most recent developments in B-BBEE including the amendments to and interpretations and nuances arising in the context of the Codes of Good Practice and the various sector-specific codes. We regularly engage – both independently and behalf of our clients – with the B-BBEE Commission, the Department of Trade and Industry, and various B-BBEE verification agencies.
Our extensive knowledge, experience and wide range of key contacts places us in a unique and distinctive position to provide comprehensive advice and strategies for the development and implementation of lasting and sustainable transformation.
Specialist Services
- Formulating tailor-made B-BBEE strategies for businesses, with a detailed understanding of each business as well as its position in the market, applicable sector regulation, its competitors, and its current and aspirational customer base.
- Advising on and project managing all aspects of B-BBEE transactions, including providing advice on B-BBEE structuring and assisting with all M&A aspects, funding arrangements, tax arrangements, and engagements with the B-BBEE Commission and B-BBEE verification agencies (if required) in relation to the transaction.
- Advising on the viability of various B-BBEE ownership structures for a particular business, including the treatment of broad-based ownership schemes, employee share ownership plans, private equity funds, equity equivalent investment programmes and sales of assets under the general Codes and relevant sector codes, as well as applicable tax implications.
- Advising on the measurement and interpretation of the other elements contained under the Codes of Good Practice (further to the ownership element), including management control, skills development, enterprise and supplier development, socio-economic development, as well as various unique elements set out under relevant sector codes. We also advise on the implications for procurement decisions under both the B-BBEE legislation and the Preferential Procurement Policy Framework Act 5 of 2000.
- Engaging with the B-BBEE Commission on behalf of our clients (and, where required, independently) to obtain non-binding opinions on certain B-BBEE structures and/or to register major B-BBEE transactions. We also engage with the B-BBEE Commission in relation to certain findings and queries raised by the B-BBEE Commission in the context of various ownership structures and/or transaction documents, or in relation to other complaints and/or investigations conducted by the B-BBEE Commission.
- Conducting B-BBEE due diligence investigations, usually as part of a broader M&A transaction.
- Conducting B-BBEE investigations relating to fronting and other abuses of the B-BBEE regulatory framework.
Local Content Regulation
A growing trend across Africa is greater intervention by national authorities, particularly in the development and introduction of local content regulation, either holistically or in certain sectors – such as, for example, in the mining and the oil and gas sectors.
Often local content regulation focuses on ensuring local ownership and the local operation of assets in the sector, increased local employment in the sector, local transfer of skills and technology, and increased procurement of goods and services from local businesses. Minimum local ownership thresholds may be set – either as a required or an aspirational target – and foreign investments may be restricted. As a result, local content issues increasingly are a threshold issue and key consideration for African M&A transactions.
Our experienced lawyers are well-placed in key African jurisdictions to provide strategic advice to major local and international commercial and industrial corporations, mining houses, banks and private equity funds in many areas of economic activity across the African continent.
Our specialist team is up to date with the most recent developments in local content regulation, understanding both the legal framework and the political and policy contexts, and regularly engaging with key regulators on local content matters.
Our extensive knowledge, experience and wide range of key contacts places us in a unique position to provide effective and holistic advice and strategies for the development and implementation of lasting and sustainable local content compliance. We pride ourselves on giving our clients the best options to deliver on their goals and to safeguard them from possible risks.
- AB InBev and South African Breweries (SAB) in relation to the unwinding of its SAB Zenzele B-BBEE scheme (which launched in 2010 and matured in March 2020), delivering ZAR 9.7 billion to its participants (the highest B-BBEE value creation in the FMCG industry to date), and the implementation of a new B-BBEE ownership transaction through SAB Zenzele Kabili, owning ZAR 5.4 billion worth of AB InBev shares. SAB Zenzele Kabili will be listed on the B-BBEE segment of the JSE.
- AB InBev, SABSA Holdings, Kwande Capital and Isanti Glass 1 (which is 60% owned by the black-owned investment company, Kwande Capital and 40% owned by SABSA Holdings) in relation to the purchase by Isanti Glass 1 of the business (including certain property) of Nampak Glass, a division of Nampak Products, for a consideration of approximately ZAR 1.5 billion. This 2019 M&A transaction included various B-BBEE elements, such as the sale of assets principles under the Codes of Good Practice, and was named the Dealmakers BEE Deal of the Year, 2019.
- PepsiCo on the B-BBEE commitments given in the context of PepsiCo’s acquisition of Pioneer Foods Group, valued at approximately USD 1.7 billion, including on the establishment of an employee share ownership program. This was named Dealmakers Deal of the Year, 2019.
- Coca-Cola Beverages South Africa in relation to the establishment of an employee share ownership programme to hold shares in CCBSA.
- Advising South African Breweries (SAB) (now AB InBev) on B-BBEE ownership and enterprise and supplier development in the context of the establishment of Coca-Cola Beverage South Africa following the combination of the bottling operations of The Coca-Cola Company, SABMiller and Gutsche Family InvestmentsIn addition, including advising SAB on enterprise and supplier development funds.
- Old Mutual on the issues relating to the continued recognition of B-BBEE ownership following the unbundling in 2018.
- Cisco South Africa in relation to the unwinding of a previous B-BBEE ownership transaction and the implementation of a new BEE transaction involving a novel offshore structure comprising the acquisition of shares in the listed parent company, Cisco Systems, Inc. by a black women-owned vehicle
- Weir Minerals, a mineral solutions provider, on a B-BBEE ownership transaction in terms of which Medu Capital acquired 25.1% of Weir Minerals’ South African operation, Weir Minerals South Africa. The transaction required particular consideration of the application of the private equity fund principles under the Codes of Good Practice.
We also have extensive experience in the following areas:
- Advising various clients on the treatment of broad-based ownership schemes, employee share ownership plans, private equity funds, equity equivalent investment programmes and sales of assets under the general Codes and relevant sector codes.
- Advising various clients on the measurement and interpretation of the other elements contained under the Codes of Good Practice (further to the ownership element), including management control, skills development, enterprise and supplier development, socio-economic development, as well as various unique elements set out under relevant sector codes.
- Engaging with the B-BBEE Commission on numerous occasions on behalf of our clients (and, where required, independently) to obtain non-binding opinions on certain B-BBEE structures, to register major B-BBEE transactions, in relation to certain findings and queries raised by the B-BBEE Commission in the context of various ownership structures and/or transaction documents, or in relation to other complaints and/or investigations.
- Conducting multiple B-BBEE investigations relating to fronting and other abuses of the B-BBEE regulatory framework, on behalf of the B-BBEE Commission and through the Bowmans’ investigations team which has been appointed to the B-BBEE Commission’s panel.
- Advising various clients on the implications for procurement decisions, under both the B-BBEE legislation and the Preferential Procurement Policy Framework Act 5 of 2000.
Key Contacts
Wilbert Kapinga
Senior Partner, Tanzania
Paras Shah
Managing Partner, Kenya
Claire Tucker
Head of Public Law and Regulatory
Ashleigh Hale
Partner
Chambers
Bowmans’ lawyers possess experience assisting with corporate restructuring, black economic empowerment transactions and unbundling mandates.
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