Some of the biggest companies in South Africa could fall foul of regulations and lose business after the government changed how it will evaluate their compliance with rules to award shares to black people.
Black empowerment programs benefiting community and special interest trusts and employees will carry less weight when setting a company’s compliance rating than previously, the Department of Trade and Industry said in a notice on Tuesday. The rating is needed to secure business from government and some other companies.
“It’s a really big issue,” Verushca Pillay, a director at Cliffe Dekker Hofmeyr’s corporate and commercial practice in Johannesburg, said by phone on Wednesday. The black empowerment “compliance level is relevant to them winning business from other companies and from government,” she said.
South Africa’s empowerment regulations are designed to boost participation in the economy by black citizens and other groups who were disadvantaged during apartheid, which ended with all-race elections in 1994. The rules had given companies benefit for training black managers, promoting women and helping develop communities, as well as handing over ownership.
Winning Business
Industry-specific black empowerment codes must be aligned to the Department of Trade and Industry’s scorecard, according to Tuesday’s notice. Mining companies are subject to a different set of black-empowerment regulations under the mining charter “at this stage,” Nick Holland, chief executive officer of Johannesburg-based miner Gold Fields Ltd., said by phone on Thursday.
“It’s disturbing if the goalposts keep changing,” he said. “The one thing we would prefer as a country is to have a unified set of rules that are stable and consistent because it’s much easier for anyone to make long-term business decisions.”
The FTSE/JSE Africa Index declined 1.4 percent to 53,108.85 as of 3:50 p.m. in Johannesburg, paring the year’s gain to 6.7 percent.
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