The current B-BBEE associated legislation impact on the Financial Service Sector

by | Mar 29, 2023 | News, B-BBEE verifications, Documentation

B-BBEE and the Financial Services Sector plays a pivotal role in the ongoing transformation of the South African economy and in ensuring that the economy is inclusive.
The amended Financial Sector Code that came into effect on the 1st of December 2017 states the following in clause 6.10 in terms of Preferential Procurement, which is an element on the scorecard that refers to the B-BBEE compliance of a measured entity’s suppliers.

6.10 Broker and insurance intermediary commissions: this exclusion will only apply for the first three (3) years following the implementation date of the Amended FSC. This allows these entities sufficient time to implement their B-BBEE initiatives. After three years, broker commissions and commissions paid to insurance intermediaries will be an included procurement spend.

The grace period of three (3) years benefited these entities up until now as the Financial Sector Code permitted entities to exclude commissions paid to intermediaries from their Preferential Procurement calculations for the first three (3) years from the inception of the Financial Sector Code without negatively impacting their score, however, the grace period expired on the 1st of December 2020 which means that from here on out all commissions paid to intermediaries will be treated as “procurement spend” in their Preferential Procurement spend.

Due to this fact, it is expected that financial entities will start requesting B-BBEE certificates from insurance intermediaries and brokers.

We encourage financial entities to start, if you have not already, implementing a sustainable and compliant B-BBEE strategy as B-BBEE remains a key government policy.

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