JOHANNESBURG - MTN Zakhele has become the first broad-based black economic empowerment (BEE) scheme to list on the Johannesburg Stock Exchange’s amended BEE Segment.
The entity listed its ordinary shares as BEE securities on the Johannesburg Stock Exchange (JSE) on Thursday. More than 14 million shares valued at over R1,2-billion are owned by about 102,000 black investors.

MTN Zakhele chairperson Sindi Mabaso-Koyana said the move would “provide shareholders with regulatory certainty for trading their MTN Zakhele shares”.

He noted the listing occurred after the Financial Services Board changed its policy regarding the regulation of all providers of over-the-counter share trading platforms for facilitating trading in their own shares.

The oil and gas industry is material to any economy as it has an impact on our everyday lives in various areas, including transportation, electricity, heating, lubricants and a variety of petrochemical products. The downstream sector of the oil and gas industry involves the activities of petroleum product distributors, natural gas distribution companies, petrochemical plants and oil refineries.

In this issue of Dentons South Africa Insight we address matters related to wholesale licensing in the downstream petroleum industry in South Africa and highlight certain regulatory specifics in this area in Angola, Kenya and Zimbabwe.


South Africa

In South Africa, the downstream petroleum industry is more than 100 years old. There has been a historic reliance on imported crude oil, due to the fact that South Africa has very limited known oil reserves and the majority of its crude oil requirements are met through imports from the Middle East and Africa. In addition, at the present time there are six refineries operating in South Africa, four of which are located on the coast and two are situated inland. 

In South Africa the Department of Energy has the responsibility of regulating the petroleum industry. The downstream petroleum industry is regulated in accordance with the provisions of the Petroleum Products Act, 1977 (Act No. 120 of 1977) as amended by the Petroleum Products Amendment Act of 2003 and the Petroleum Products Amendment Act of 2005 (Petroleum Products Act). The National Energy Regulator of South Africa (NERSA) is also responsible for regulating the petroleum pipelines industry.

South Africa’s first democratic government was elected in 1994, with a clear mandate to redress the political, social and economic inequalities that the majority of South Africans suffered during the apartheid era. Since then, the SA government embarked on a comprehensive programme to provide a legislative framework for the transformation of South Africa’s economy.

In the Money by Nesbert Ruwo and Jotham Makarudze

The Broad-Based Black Economic Empowerment (B-BBEE) Act is premised on the objective to advance economic transformation and enhance the economic participation of previously disadvantaged individuals (PDIs) in the South African economy.  The scope of empowerment evolved from exclusive focus on ownership empowerment in the mid-to-late 1990s, to the current more broader approach that encompasses seven pillars, namely  ownership, management control, employment equity, skills development, preferential procurement, enterprise development and corporate social investment.

The government’s focus towards the empowerment initiative has been through tools such as regulation, preferential procurement, financing, and institutional support, as well as forging a partnership with the private sector. Partnerships between the government and the private sector have been the primary vehicle for the formulation and implementation of BEE initiatives. Sector (e.g the mining charter) and enterprise-based charters have been one form of such partnerships.

Mining companies must ensure that their operations do not constitute a 'fronting practice' for the purposes of the Broad-Based Black Economic Empowerment Act 53 of 2003 (the Act).

It is not unusual for a group of companies to establish an entity (A) with a high B-BBEE rating for the purpose of procuring work which another company within the group (B), although it renders similar services, would be disqualified from obtaining. A may secure this work and then sub-contract some or all of its services to B.

It is essential that such transactions do not contravene the Act, in order to avoid strict penalties:


  1. Fronting is a criminal offence in terms of the Act.
  2. Individuals convicted of fronting are liable to a fine or imprisonment not exceeding 10 years, or both.
  3. If a company is convicted it is liable for a fine not exceeding 10% of its annual turnover.

Any person convicted of fronting may not, for 10 years from the date of conviction, contract or transact any business with an organ of State or public entity.

The Act provides for a commission to investigate fronting either on its own initiative or in response to complaints, so companies should not labour under the misapprehension that it will go unnoticed.


It is often difficult for companies to identify whether transactions such as that mentioned constitute fronting in light of the Act's wide definition thereof. In respect of arrangements between entities, the Act defines fronting as:

"a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act… including but not limited to practices in connection with a B-BBEE initiative involving the conclusion of an agreement with another enterprise in order to achieve or enhance broad-based black economic empowerment status in circumstances in which –

Professor Thomas Piketty said that a tax on SA’s wealthy would help shift inequality and poverty, writes Neeran Naidoo.

High-quality public education, a wealth tax, a national minimum wage and involving workers in the decision-making of companies will help South Africa successfully tackle inequality and poverty.

So said Professor Thomas Piketty when he delivered the 13th Nelson Mandela Annual Lecture at the University of Johannesburg’s Soweto campus on Saturday.

The French economist said available data confirmed South Africa was one of the most unequal countries in the world and that it could not only be explained by high unemployment, which stands at 25.2 percent.

He said while apartheid had played a part in entrenching inequality and poverty in South Africa, the poor quality of public education was not helping.

“It is fair to say the quality of education in this country is not satisfactory and should be a national priority, and a lot of progress needs to be made in this direction… There is no other option than to try and improve the quality of education. There is no other strategy, privatising education will not work as well in order to have sustainable and reputable growth, a well-functioning education and health system will do so,” he said.

Tuesday, 15 September 2015 11:19

Johannesburg - South Africa’s motor industry is considering establishing an automotive industry sector charter because of the difficulty multinational original equipment manufacturers (OEMs) have in complying with the ownership pillar of the new broad-based black economic empowerment (BBBEE) codes.


Nico Vermeulen, the director of the National Association of Automobile Manufacturers of South Africa (Naamsa), the representative body of new vehicle manufacturers, said the association had a major workshop last month attended by automotive companies, representatives from suppliers in the industry, as well as the Department of Trade and Industry’s (dti) motor and BEE desks.

Vermeulen said the acting head of the department’s BEE desk had put forward the case for the industry to consider an automotive industry sector charter for a number of reasons, including that a charter could be structured and tailored to the unique circumstances of the industry.


“We went back and asked him to confirm in writing what was stated at the meeting and are waiting for a response.

“We are planning a further industry meeting this month at which we will make recommendations to the chief executives. The position up to now was that it was each company to itself,” he said.

Ownership became a more important requirement in the updated BBBEE codes of good practice that came into effect from May 1, although the ownership target remained unchanged at 25 percent plus 1 share.

Saturday, 12 September 2015 09:23

Those who chose the wrong path soon find excuses to justify their mistake. South Africa’s dogmatic socialists, determined to apply economic policies which failed everywhere else, have discovered a convenient scapegoat. SA’s weak economic growth, a high level ANC discussion document claims, is primarily the fault of the shortage of electricity. This simplistic approach will scare anyone with even a little appreciation of how a modern economy works. Especially South Africa where demands of the First World bash daily against the Third World, adding layers of complexity. It’s the kind of thinking which leads to idealistic policy that delivers destructive unintended consequences. Inflexible labour legislation has killed exponentially more jobs than electricity constraints. Cadre deployment has wasted many billions more than power station cost overruns. A dumb Visa policy has chased away thousands more tourists than loadshedding. One of the obvious dangers of this new blueprint, to be presented to the ANC’s National General Council, is the way it is designed to let party loyalists draw an obvious but  very wrong conclusion – fix electricity supply and all else will fall into place. So let’s spend $100bn on a Russian-built nuclear fleet. The nation will thank us one day. Eisch. – Alec Hogg  

Electrical power pylons of high-tension electricity power lines Eskom slider
Picture taken March 8, 2015. REUTERS/Christian Hartmann
Wednesday, 19 August 2015 11:50

Focus on transparent, unencumbered, broad-based black economic empowerment that benefits recipients from day one

Bear with me; I want to have an objective discussion about an emotional topic: black economic empowerment (BEE). Given our traumatic past, it is rational that people who suffered under the oppression of apartheid have economic redress. I don’t profess to know what the right number is for SA, but let us say that a minimum of 26% BEE ownership is the right number. What I want to discuss is how we should implement this number and whether the "once empowered, always empowered" rule should apply. This issue is topical as the courts have been approached to rule on the matter.


Before that though, let me make a few observations on what is wrong with the current implementation of BEE. First, many South African companies are being disingenuous when it comes to the spirit of the 26% rule. BEE should be done in an unencumbered manner so that the recipient can start using or enjoying his or her wealth from day one. But that is not how companies are doing BEE. Rather, companies load debt onto the BEE deal such that, in most cases, after the standard 10-year lock-in period, the recipient gets an ownership level less than 26% (and in most cases, a lot less than 26%) because the debt needs to be paid. Finance can be complicated. It is easy to hide behind this complexity. Companies are structuring complicated financial deals that have the economic effect of giving less than 26% ownership — these companies are in fact breaking the spirit of the BEE rule. If you need an example, look at the Tongaat-Hulett’s BEE deal — the recipients received very little after many hard years of lock-in. Rule number one: Give 26% (or whatever is the right number) from day one. No debt.

Friday, 14 August 2015 09:15

THE controversial "trumping" provision in the Broad-Based Black Economic Empowerment Act will take effect in two months when the 12-month transitional period expires, MPs were told on Wednesday.

The provision — which was introduced through legislative amendments to the main act — states that the act will take precedence over any other law that was in force prior to the date of the commencement of the act in the event of any conflict. Specifically, this relates to all other instruments of black economic empowerment, such as codes of good practice and sectoral charters.


As from October, all sector codes will have to be aligned with the generic codes, Department of Trade and Industry acting chief director Liso Steto said in a briefing to the National Council of Provinces’ select committee on trade and international relations.

The trumping clause was introduced into the Black Economic Empowerment Amendment Bill by Parliament’s trade and industry portfolio committee after public hearings in 2013. It was strongly supported by the Black Business Council and the Black Management Forum, which argued that the sectoral codes had not achieved transformation. Others said giving precedence to the act would provide certainty to business.

Thursday, 13 August 2015 09:41

Companies and employers could face criminal prosecution for fronting as black economic empowerment entities if found guilty by a soon to be established watchdog.

BEE law expert at Norton Rose Fulbright Ismail Laher and commercial litigation expert Matthew Clark told Fin24 that amendments to the Broad Based Black Economic Empowerment Act of 2003 makes provision for a watchdog to oversee and carry out investigations into the abuse of BEE rules.

According to Laher there was no process to formally enforce accusations of BEE fronting in a consistent manner and some accusations were based on miscommunication.

The amendments came into effect in January and would see the establishment of a BEE commission to investigate contraventions of the act, Laher said.

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