DealMakers - Q1 2020

BEE deals continue to drive significant M&A activity

by Allan Hannie and Verushca Pillay

Five years since the introduction of the amended Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice (Codes), BEE deals continue to stimulate M&A activity in South Africa, and the nature of the deals seems to indicate more cognisance of realising the objectives of the legislation.

While it is sometimes difficult to settle on what exactly the true vision of the legislation may be, we have noticed an increased push towards achieving the legislative purpose, particularly where the transactions will receive public scrutiny.

The BEE Commission has, through its scrutiny of transactions and investigations into complaints of fronting, helped to focus more attention on the legislative intent when deals are being done. In general, we see more scrutiny in relation to achieving not just technical compliance, but also an increased focus on achieving the intention of the legislation when BEE deals are being structured.

However, despite this, there continue to be examples of BEE transactions that do not meet the legislative objectives, especially where the entities involved are not likely to be scrutinised. More work can be done to structure transactions with a focus on achieving meaningful economic and management participation by black stakeholders.

Allan Hanning
Veruschca Pillay

Regarding further possible areas to improve, while there have been some changes to the legislative framework over the last few years, there remain some anomalies and interpretative difficulties. This opens room for differences in interpretation and application, which then creates a fertile ground for disputes to arise. So this is one area where we believe the legislature could provide more certainty, and ensure consistent application.

The most notable developments over the last few years have been in relation to enabling smaller black-owned businesses to secure better access to opportunities under the B-BBEE legislative framework.

Cliffe Dekker Hofmeyr's in-depth insights into B-BBEE legislation and the nuances within the B-BBEE landscape help provide the clarity necessary to facilitate M&A transactions which align investors’ expectations, and the desired commercial outcomes, with the objectives of transformation as contained in the B-BBEE legislation.

As testament to the firm’s transformational commitment, CDH was recently recognised as the leading M&A legal advisers on Black Economic Empowerment (BEE) deals, winning the BEE Award for Deal Flow at the 2020 Annual DealMakers Awards ceremony. The prestigious event honours advisory excellence in the M&A industry. DealMakers tracks all M&A deals and corporate finance transactions entered into by South African listed companies.  


Hannie and Pillay are Directors in the Corporate and Commercial practice at Cliffe Dekker Hofmeyr.

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