While the legal landscape around B-BBEE remains uncertain, pushback and legal challenges by the private sector and civil society serve as a stress test, writes Ashleigh Hale and Claire Tucker of Bowmans.
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South Africa’s broad-based black economic empowerment (B-BBEE) framework is under scrutiny, both from those who want its scope widened and enforcement increased and those pushing back against such initiatives. Despite this friction, the government is moving forward to deepen economic inclusion and tighten enforcement.
While B-BBEE may be under the microscope, its fundamental principles are well understood and have been implemented in SA for some time. The courts have, in the past, played a constructive role in ensuring that legislation is properly implemented, and that it balances constitutional rights and upholds the rule of law. This is expected to continue.
Transformation Fund as a way to score more points
In January 2026, the draft amendments to the B-BBEE Codes of Good Practice were gazetted to introduce the Transformation Fund, which aims to provide financial and capacity-building support for black-owned and managed businesses.
No mandatory contribution requirements have been introduced for the fund. The points available for contributions to it are intended as an alternative to enterprise and supplier development (ESD) contributions established and directed by the measured company, but the proposals suggest contributions to the Transformation Fund would receive significantly more weight and recognition.
Many companies already have their own ESD initiatives, but they may elect to replace them with contributions to the fund to score additional points under the ESD element of the scorecard.
At the same time, the draft amendments to the codes propose that the points in respect of ESD are substantially redesigned to favour procurement from 100% black-owned and black-women-owned enterprises.
The proposed changes shift the weightings under the codes to devalue ownership points and increase ESD points. These changes could cause significant disruption to existing supply chain practices, which are based on and designed around the existing codes.
Public consultation on the Transformation Fund and the draft amended codes is currently underway, with some warning that the fund could enable corruption and undermine the effectiveness of existing private-sector ESD initiatives.
Sectoral targets cause controversy
When new sectoral targets introduced under the Employment Equity Amendment Act came into effect in January 2025, they attracted complaints about the way they were published and their substance. This led to legal challenges, including cases involving Business Unity South Africa, Solidarity, Sakeliga, and the DA.
The sectoral targets and the regulations remain in force until set aside by a court.
Even if these legal challenges fail, most employers should be able to implement the appropriate plans for compliance.
The regulations do not prescribe the rate at which designated employers are required to achieve the targets; rather, this is determined by employers in consultation with employees. Progress towards achieving the targets must, however, be made by 31 August 2030.
If employers are unable to reach the targets, they can still qualify for compliance certificates if there are justifiable reasons for the failure.
Further, a court is unlikely to find an employer non-compliant only because it failed to reach the sectoral targets. They would, however, have to show compliance with other requirements of the Employment Equity Act, including proof that genuine employee consultation took place, analysis was conducted, employment equity plans exist and reporting obligations were complied with.
In a worst-case scenario, sectoral targets would be applied as quotas. Non-compliance with these targets would then expose employers to fines and the non-issuance of compliance certificates. If implemented, this would likely lead to further litigation.
Government contracts under the spotlight
The Public Procurement Act should also come into force in the next year. The Act aims to create a single framework that regulates public procurement, including preferential procurement, by all organs of state. This could result in an increase in B-BBEE requirements when bidding for government contracts and concessions.
The Western Cape government and the City of Cape Town recently brought a challenge to the Constitutional Court regarding the Act, focusing on separation-of-powers issues and whether the correct public consultation process was followed. It is difficult to assess the likelihood of its success.
South Africa’s public consultation requirements are extensive, and the court carefully scrutinises all cases. In addition, there were extensive consultations on various drafts of the Public Procurement Bill before its enactment.
Further uncertainty has been created in the move away from using B-BBEE certificates in government procurement after the 2017 Preferential Procurement Regulations were set aside in a court challenge.
This has resulted in diverse approaches to B-BBEE in government procurement, with instances of much stricter requirements being imposed. Where these have been unjustifiable, the courts have set them aside.
Black ownership requirements for licences and mining rights
There are also proposals to increase black ownership requirements as a prerequisite for licensing. For example, the draft Mineral Resources Development Bill proposes stricter B-BBEE mandates and expanded regulatory powers.
Proposals for black ownership targets for licensing requirements in the financial sector and in water use and agricultural export projects were introduced in 2023. In most instances, these proposals were opened for public consultation but not ultimately implemented.
In the mining sector, the debate around B-BBEE has been ongoing for some time. Since the Mining Charter was first introduced with the new Mineral and Petroleum Resources Development Act, 2005, there have been several draft and gazetted amendments to black ownership and other aspects of the Mining Charter regime, as well as numerous court challenges.
The latest Mineral Resources Development Bill, 2025, introduces higher black ownership requirements on existing mining rights and applications for new rights. Despite the litigation since Mining Charter 3, the 30% black ownership target is generally used by the industry for new rights. Any further attempt through the 2025 Bill to change existing rights and set higher targets is likely to result in further resistance from the mining industry and the Minerals Council of SA.
In early 2026, the Department of Agriculture, Land Reform and Rural Development gazetted tightened procedures for determining export quotas for specified agricultural products destined for the European Union under the SADC-EU Economic Partnership Agreement.
B-BBEE compliance will now be measured against the AgriBEE Sector Code as a core criterion for the allocation of preferential market access. There have been calls for clarity from organisations such as Sakeliga and AgriSA.
There have also been instances of easing B-BBEE requirements, such as in the ICT sector. The Communications and Digital Technologies Ministry has proposed that licencees could make contributions via Equity Equivalent Investment Programmes (EEIPs) instead of through direct black ownership.
Like the Transformation Fund, companies would contribute to an industry-wide or government-directed fund supporting small and emerging black businesses or specific investments.
The proposal to loosen the 30% black ownership requirement to allow EEIPs is not yet legislated, but an alternative could be included in the relevant regulations.
While the legal landscape around B-BBEE remains uncertain, pushback and legal challenges by the private sector and civil society serve as a stress test, ensuring the government’s transformation priorities continue to align with economic reality and the rule of law – a clear sign of a robust democracy.
Ashleigh Hale and Claire Tucker are partners at Bowmans.
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