What the Draft Legal Sector Code Means for BBBEE Compliance

If you’re a business owner in South Africa’s legal sector, navigating the ever-changing landscape of Broad-Based Black Economic Empowerment (BBBEE) legislation and compliance is crucial. 

The draft Legal Sector Code (LSC), which has not yet been enacted into law, introduces a framework specifically tailored for the legal profession, marking a significant potential shift in how law firms and practitioners may meet their BBBEE requirements under the Broad-Based Black Economic Empowerment Act, Act No. 53 of 2003, as amended by the BBBEE Amendment Act, No. 46 of 2013.

The journey to implementing the LSC has been marked by significant delays. Originally initiated by the Legal Practice Council (LPC) in April 2020, the draft code underwent extensive consultations before being submitted to the Minister of Trade, Industry, and Competition, Ebrahim Patel, in August 2021. Despite these efforts, the draft was only published for public comment on 22 July 2022. 

Following this, a prolonged period of inaction ensued, with the Steering Committee approving a final draft on 14 September 2023. The code was subsequently submitted to the Minister of Justice and Constitutional Development for approval, who then passed it on to the DTIC Minister on 11 October 2023.

Although the LSC has faced significant delay and has still not been officially gazetted, understanding its implications is essential for staying ahead of future compliance requirements.

Key elements of the Draft LSC and BBBEE requirements

The LSC outlines a proposed new framework for determining BBBEE compliance in the legal sector, reflecting the unique characteristics of the industry. Here are some of the critical aspects:

1. 1. 1. Ownership Targets: The LSC sets higher ownership targets for black practitioners, particularly attorneys. These targets start at 30% in the first year, rising to 35% in the second year, and 40% in the third year, compared to the 25% target in the Amended Generic Codes of Good Practice.
      2. Management Control: The LSC mandates increased participation of black women in management roles, with targets set at 35% in the first year, 40% in the second year, and 45% in the third year—exceeding general B-BBEE requirements.
      3. Skills Development: The LSC places significant emphasis on developing young black professionals in the legal sector, with a requirement for law firms to invest a higher percentage of their payroll on skills development, surpassing the requirements of the generic codes.
      4. Enterprise and Supplier Development: The LSC requires legal firms to direct a substantial portion of their procurement spend toward suppliers that are majority black-owned, with higher thresholds for black women-owned businesses.
      5. Socio-Economic Development: The LSC introduces new criteria, such as the provision of pro bono legal services, which now count as a measurable contribution under socio-economic development.

Implications for legal businesses under the BBBEE Act

The draft LSC presents both opportunities and challenges for law firms and practitioners. Complying with these proposed BBBEE requirements not only has the potential to improve your BBBEE scorecard but also contributes to the broader transformation of the legal sector. 

As the LSC remains in draft form, it’s essential for legal businesses to stay informed and start planning for its potential implementation. While delays have been frustrating, understanding the draft code’s requirements is crucial for staying ahead. In the meantime, familiarise yourself with the LSC’s provisions and consider how your business can best meet these proposed new standards.