Affidavits, BBOS and the Hidden Gaps in B-BBEE Compliance

The South African B-BBEE landscape is shifting, and not just incrementally. The recent commentary by Commissioner Tshediso Matona, coupled with data presented to Parliament, reflects deep-rooted concerns about fronting, circumvention, and a troubling enforcement gap in our sector. As practitioners deeply embedded in the realities of verification and risk assessments, we believe it’s time to look beneath the surface.

The statistics presented to Parliament in recent hearings note a decline in verified black ownership (from 59% to 57%), it also brings attention to a deeper issue: although black ownership is reported at 60%, representation in actual management roles remains far lower, at just 44%. This disconnect between ownership and operational control reveals a structural flaw in how transformation is measured versus how it is experienced.

But even these numbers tell only part of the story. A silent yet substantial portion of “ownership” exists outside formal oversight, particularly through the unchecked use of B-BBEE affidavits. These mechanisms often bypass regulatory scrutiny entirely, creating a parallel compliance universe that distorts the real state of transformation.

 The BBBEE Affidavit Gap: A Loophole Hiding in Plain Sight

Affidavits, designed to simplify compliance for EMEs and QSEs, have, over time, morphed into one of the largest blind spots in the B-BBEE system. These self-declared documents don’t pass through verification agencies. As a result, no central record exists, and more critically, no scrutiny is applied.

In our own compliance and risk assessment work, particularly within the mining sector, we’ve observed a staggering trend: at least 25% of affidavits we assess should in fact be fully verified Generic certificates. Many of these entities misclassify themselves to avoid regulation, and in several cases, artificially inflate ownership credentials.

This is not a fringe issue. It is systemic.

The BBOS Illusion: Ownership Without Accountability

Compounding the problem is the growing trend, often driven by advisory firms, of structuring ownership through Non-Profits masquerading as Broad-Based Ownership Schemes (BBOS). While B-BBEE legislation allows for this structure, it comes with strict criteria: beneficiary appointment, operational governance, annual financial statements, and most importantly, proof of benefit distribution.

Yet in our experience, most of these BBOS arrangements are non-functional. They lack beneficiaries, operate without financial records, and often claim no dividends have been paid – justifying the absence of activity. The irony? No BBOS points can be claimed without operational proof. These structures are failing the very communities they’re meant to empower.

Toward a More Accountable Future

This isn’t just a matter of technical compliance. These gaps weaken the integrity of the entire B-BBEE system. If we are to take transformation seriously, our frameworks, and our enforcement mechanisms, must evolve.

Here’s what we believe needs to happen:

• Affidavit Reform: The sector must move toward digitising and tracking affidavits, or introducing third-party validation for high-risk industries.
• BBOS Audit Mandates: The DTI must implement periodic audits on BBOS entities to ensure operational credibility.
• Stricter Practitioner Standards: B-BBEE consultants and verification professionals must be held accountable for guiding clients into exploitative or non-compliant ownership models.

We commend Commissioner Matona’s move toward tighter regulation and enforcement. But the industry must also take responsibility. True transformation can’t happen in the shadows.

Need expert advice? Contact our verification specialists today to ensure your business is prepared for the next phase of BEE transformation.