ICT sector under B-BBEE spotlight as companies come up short in ownership

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Gestalt Growth Strategies’ Deon Oberholzer says new ownership requirements have caught companies off guard.

Recent changes to Icasa’s regulations, which mandate that companies requiring a licence must have a minimum B-BBEE Contributor Status Level 4 and demonstrate 30 percent B-BBEE ownership, may have caught many companies in the ICT sector off-guard, according to Deon Oberholzer, CEO of Gestalt Growth Strategies.

“Ownership is an aspect of B-BBEE that companies in the ICT sector may have neglected and many have relied on their compliance with the 30 percent HDG ownership requirement. Now, licensees must have HDG participation at 30 percent as well as 30 percent black participation in order to comply with the new regulations and qualify for a licence,” he explains.

HDG includes black people as defined in the BEE Act but the definition also includes all women, people with disabilities, and youth, irrespective of their race or date of citizenship.

However, according to the new regulations around the limitations of control and equity ownership by HDG and the application of the ICT Sector Code, a licensee must have a minimum of 30 percent of its ownership equity held by HDGs, and 30 percent of its equity held by black people, determined using the flow through principle. This means that this 30 percent ownership must be 100 percent black and may not have any white or non-qualifying black participation.

“We anticipate that Icasa will stand firm on the ownership requirement, even if it does allow progression of companies from Level 7 to Level 4 by other means. Simply having 30 percent of ownership held by HDGs is not going to suffice anymore. Licensees are going to have to urgently relook at their B-BBEE strategies and start taking steps in the right direction to comply if they want to retain their licences,” Deon reiterates.

Exempted micro enterprise (EME), being companies with an annual total revenue of R10 million or less, and qualifying small enterprises (QSE), being those with an annual total revenue of between R10 million and R50 million, also need to comply with the 30% BEE ownership and have 48 months to comply. Generic licensees have only 36 months to show compliance.

Deon warns that relying on the grace period is short-sighted and could turn out to be very risky.

“Companies that don’t currently comply will be under pressure when it comes time to submit their annual reports to Icasa, which may frustrate or delay the process if licensees are not compliant from the onset,” he says.

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