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Since its establishment, the BEE Commission has held strong views which often diverge from industry practice. The BEE Commission’s views have sometimes resulted in businesses abandoning BEE ownership structures, or other BEE initiatives, altogether. The guidance issued by the Department of Trade, Industry and Competition in 2021 went some way toward clarifying the contradicting views, but was limited to confirming the interpretation of various provisions of BEE legislation.
In the recent case of Sasol Oil Limited v The BEE Commission (21415/2020) [2022] ZAGPPHC 431, the BEE Commission’s views were tested by the High Court. Sasol Oil’s ownership structure included a 25% stake held by its BEE partner, Tshwarisano LFB Investment Proprietary Limited (Tshwarisano). Awevest Investments Limited (Awevest) was the sole shareholder of Golden Falls Trading 567 Proprietary Limited (Golden Falls), which in turn held a 5.67% stake in Tshwarisano. To fund its purchase of shares in Tshwarisano, Golden Falls had issued preference shares to a group of funders in 2007. Around eight years later, in 2015, an Awevest representative complained to Sasol Oil that the preference share arrangement unfairly favoured the funders. Sasol Oil brokered a settlement agreement between Tshwarisano, Golden Falls, the ordinary shareholders of Golden Falls, and the funders. Nevertheless, in 2017 the Awevest representative laid a complaint against Sasol Oil with the BEE Commission.
In October 2019 (over two years after receiving the complaint), the BEE Commission made a number of adverse findings of fronting against Sasol Oil. The crux of its findings which were set aside was that Sasol Oil had benefited through a “fictitious BEE ownership scheme that directly benefited the funders… and reduced black people to fronts”. According to the BEE Commission, Sasol Oil’s ownership structure was “not only flawed but makes a mockery of what [BEE] stands for”.
The BEE Commission’s findings were set aside by the High Court in terms of the Promotion of Administrative Justice Act, 2000, on the basis that (1) irrelevant considerations had been taken into account, (2) relevant considerations were not considered, (3) the findings were arbitrary or capricious, (4) the findings were irrational, and (5) the findings were unreasonable. The court went so far as to state that “the irrational nature of the Commission’s findings is rather astounding”. The BEE Commission also appeared to have given no consideration whatsoever to Sasol Oil’s arguments, which the High Court found to be unfair. Lastly, the BEE Commission did not adhere to the one-year time limit it had to provide its findings in terms of the regulations to the BEE Act.
The BEE Commission had recommended that Sasol Oil’s senior executives undergo BEE training, and that Sasol Oil publicly apologise for its conduct and contribute 10% of its annual turnover to a bursary fund. It appears that these recommendations were backed up by a threat of using the BEE Commission’s investigative powers if Sasol Oil did not comply. The court found the last recommendation to be “egregious” and that the BEE Commission in fact had no power to make any of its recommendations. The court interdicted the BEE Commission from making unlawful demands of Sasol Oil and threatening to use its powers in the absence of compliance. The BEE Commission was ordered to pay Sasol Oil’s costs, including the costs of three counsel.
The Sasol Oil case follows on from another High Court judgment handed down against the BEE Commission earlier this year. In Cargo Carriers Proprietary Limited v Broad Based Black Economic Empowerment Commission, the BEE Commission received a fronting complaint and delegated its investigate powers to a consulting firm. The court was severely critical of the BEE Commission’s findings, which were ultimately set aside with costs. Some of the BEE Commission’s statements were found to be “unfounded, untrue and irrational” and the court held that not a single jurisdictional fact for the criminal offence of fronting had been established.
It is encouraging that the courts are increasingly vocal in holding the BEE Commission accountable for its conduct and ensuring an appropriate application of its powers. Both cases should bring comfort to parties undertaking BEE initiatives, and especially to those engaging with the BEE Commission.
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