The integrated transport sector is set to face some of the most stringent broad-based black economic empowerment (BBBEE) requirements in the country, following proposals unveiled by Integrated Transport Sector BBBEE Charter Council chairperson Kgomotso Selokane on May 16.

Speaking during an address at a transport sector engagement session on the draft Transformation Fund concept paper, in Midrand, she revealed that the council had finalised a far-reaching revision of the sector’s transformation codes, setting higher thresholds and eliminating mechanisms previously used by companies to maintain compliance.

Selokane announced that the proposed codes would raise black ownership targets from the current 26% to 30%, with an additional requirement of 20% black female ownership, up from 10%.

She added that, in management and control structures, voting rights would increase from 50% to 65%, while board voting rights would move from 25% to 40%.

These proposed changes, if gazetted, would mark a substantial escalation from the existing codes first gazetted in 2009.

“We must both strengthen the enforcement of existing codes and embed transformation more deeply into everyday practice, especially as we revise sector-specific codes, including those for the integrated transport sector,” Trade, Industry and Competition Minister Parks Tau said at the event.

Selokane said the proposals emerged from a two-year process initiated by the Minister of Transport in 2023, following failed efforts in 2014 to align the sector with the Department of Trade, Industry and Competition’s (dtic’s) Codes of Good Practice.

Among the most controversial elements of the proposed overhaul is the outright rejection of the "modified flow-through" principle and the "once empowered, always empowered" clause.

The former allows companies to recognise indirect black ownership through intermediary entities, while the latter permits continued recognition of empowerment status even after black shareholders exit.

According to Selokane, the council believes these mechanisms are not reflective of “genuine” transformation. However, their exclusion could be seen as an impractical move that is likely to create further barriers to compliance in an already challenging regulatory environment.

The revised codes would also introduce a bonus-point system linked to meeting or exceeding economically active population (EAP) targets. Selokane claimed that data from the BBBEE Commission and national statistics showed ongoing racial disparities, justifying an increase in scoring complexity.

Notably, the proposal includes the removal of junior management as a scoring category, despite acknowledging that black women remain under-represented at higher levels. Points would instead be awarded for the promotion of black individuals, particularly women, into senior positions through formal advancement programmes.

The council also proposed awarding points for training black professionals in highly technical disciplines, especially within the aviation, rail and maritime industries. These proposals focus on science, technology, engineering and mathematics-aligned skills, including the development of cadets, pilots, and technicians.

“Training pilots is an exceptionally costly endeavour and imposing these additional transformation requirements on aviation companies may place undue financial strain on the sector. This could potentially hinder sustainability and growth, particularly for operators with limited resources,” human resources consulting firm Grok director and BBBEE expert Thornton van Wyngaardt told Engineering News.

Another potentially contentious addition is the proposed recognition of mandatory training, which is normally excluded from scoring under dtic regulations.

Selokane argued that failure to recognise such training posed a safety risk, particularly in a sector where regulatory compliance was non-negotiable. The council has asked for mandatory training to be included up to a cap of 40%.

Another potentially provocative proposal is the exclusion of management control points if companies exceed the yearly threshold for employing foreign drivers in areas such as e-hailing, courier services, and road freight.

While the council cited localisation of skills as the justification, the rule could be seen as punitive, in those subsectors reliant on migrant labour. The only exemption would apply to companies involved in cross-border logistics.

The proposals also call for the creation of a dedicated Transport Sector Fund, to which 30% of the required 1% net profit after tax (NPAT) spend on enterprise and supplier development (ESD) would be directed.

This fund, Selokane said, would address persistent barriers faced by black-owned small and medium-sized enterprises, including access to finance and compliance readiness.

Further, the council proposed mandating that enterprise development initiatives be targeted specifically at rural and under-served communities, using the Rural Access Index as a planning tool.

While this objective may align with broader developmental goals, it introduces yet another layer of compliance complexity for companies in the transport sector.

The council has also proposed mandatory compliance with Section 10 of the BBBEE Act. This provision states that organs of State must apply BBBEE codes when issuing licences, concessions, or developing procurement frameworks.

The council, however, seeks to take this a step further by demanding 100% adherence and setting a minimum 51% black ownership requirement and Level 3 BBBEE status for all licences, State concessions, public-private partnerships and asset disposals.

Selokane noted that State-owned companies currently need to apply for individual deviations to bypass such rules. The council called on Tau to issue a binding directive that would eliminate the need for deviations, effectively forcing blanket enforcement of these requirements across the sector.

While the proposed codes would apply to most of the identified transport subsectors – domestic aviation, public transport, bus, road freight and courier, maritime and rail – Selokane confirmed that the taxi and foreign aviation segments would be excluded for now.

The exclusion followed objections from the taxi industry about inadequate consultation, though further engagement was planned.

“If we are serious about transformation, we must begin where the bulk of ownership and operations already are. I would suggest that we must look at how we can use [the Transformation Fund] to help us formalise the taxi industry," Transport Minister Barbara Creecy said at the event.

“A deep concern I have . . . is that individual operators are struggling to make a decent living. Much of what they earn goes toward repayments under the taxi recapitalisation process. In fact, I would go so far as to say that this process is, de facto, bankrupting the industry. The cost of repayments often exceeds the revenue they can generate in a given month.

“Therefore, the first priority, and the first call on this fund, must be to support the Department of Transport in derisking finance for taxi recapitalisation. This will enable drivers and operators to access safe and affordable vehicles and earn a sustainable livelihood.”

Despite calls for more time and a measured approach, Selokane said the council intended to proceed with gazetting the codes for the remaining subsectors without delay.

If adopted, the proposed codes would significantly increase the regulatory burden on companies operating in South Africa’s transport sector.

“A significant number of companies operating within the freight and courier sector are predominantly foreign-owned, and many have demonstrated limited enthusiasm for compliance with the existing BBBEE framework.

"The introduction of more stringent sector-specific codes is therefore likely to encounter resistance, and may, in some cases, prompt reconsideration of investment commitments or even lead to disinvestment,” Van Wyngaardt cautioned.

With substantially higher ownership thresholds, tightened scoring metrics, the rejection of widely-used exemptions, and the imposition of strict local employment conditions, the sector would face some of the toughest transformation requirements in the country.

“To unlock higher productivity, we must invest in digital platforms, green technologies, multimodal corridors, and skills development across the value chain. Equally important is aligning BBBEE and enterprise and supplier development requirements in transport and logistics by embedding clear targets.

“By setting clear targets for black ownership, management, control and supply diversity in our sector codes, we ensure that modernisation benefits all stakeholders,” Tau said.