With many economic sectors in South Africa facing increased pressure, as well as new regulations being issued in order to promote more efficient and effective compliance with Broad-Based Black Economic Empowerment (B-BBEE), we are seeing movement in regulations for the Finance, ICT and Property sectors. Added to this, the South African Health Products Regulatory Authority (SAHPRA) has announced plans to set minimum compliance levels in the industry with a direct link to the issuing of operating licenses, these regulations are referred to as the “Broad-Based Black Economic Empowerment Policy for Issuance of Licenses”.
SAHPRA is a statutory body created by government to regulate health products for both humans and animals. A key responsibility of SAHPRA, according to their website, is the “licensing of manufacturers, wholesalers, and distributors, of medicines and medical devices, radiation emitting devices and radioactive nuclides”. This is a broad and far-reaching regulatory arm that plays a key role in ensuring the health and safety of South African citizens as well as that of its wildlife.
The announcement of the progress towards the finalisation of the proposed regulations was issued in early July 2024, with SAHPRA making the submission of a B-BBEE Certificate mandatory for applicants of licenses, both new and renewals.
SAHPRA has split the implementation of the new regulations into two phases, namely:
- Phase 1, during this phase SAHPRA requires all licensees to submit their B-BBEE certificates or Affidavits when applying for a new, or renewal of, a license. Failure to submit a valid B-BBEE Certificate/Affidavit, or if the information contained in the aforementioned cannot be verified, will lead to SAHPRA not issuing the license.
- Phase 2 requires SAHPRA to utilise the information collected during Phase 1 to understand the transformation landscape of the sector before engaging with industry and other relevant stakeholders to develop and finalise the criteria that will be applied for applicants moving forward.
The announcement of these new regulations has been met with mixed opinions, with the negative opinions focusing on how B-BBEE has, inherently, no relevance to the supply of medicines and medical devices and/or products; and the positive opinions focusing on a lack of real transformation in a sector of this size (2024 conservative forecasted national revenue of $2.82billion USD or just under R52billion) with this additional reporting layer promoting inclusive and sustainable growth of the industry, jobs on a national scale, and the promotion of small business support and an increased localisation of imported medicines and medical devices.
Although SAHPRA has yet to formalise the regulations for Phase 2 and beyond, if we were to consider other industries who have implemented similar regulations, we can see that the transition periods provided for organisations to achieve the minimum requirements are usually short.
Below being some more recent examples:
- Property – announced 03 October 2019, implemented February 2022 (2yrs and 5months) with non-compliance leading to a refusal of issuing of a Fidelity Fund Certificate (FFC), without which one cannot operate within the sector. Minimum Level 8 is required.
- ICT – issued 31 March 2021, compliance requirements started 31 March 2022 (for more information, please see our detailed article on the ICT Sector requirements). Minimum Level 4 required and 30% historically disadvantaged/Black ownership.
- Finance – announced in 2021 and implemented immediately, with reporting having been done for 2021, 2022 and 2023, and the 2024 reporting request was issued in February 2024 with the deadline having been the 28th of June 2024. No minimum level at the time of publication of this article.
Despite the fact that we are still in a state of limbo around these changes, what we can be sure of is that the likelihood of these regulations passing is very real, and that the transitional period for reaching the minimum requirements may be as short as 12 months from the date of the regulations being signed.
It is highly unlikely, that even if the industry protests or tries to delay execution, that this would be considered. Importantly, the original BEE Act, 2003 and legislation required compliance for anyone who required a government license, concession or grant to have a B-BBEE certificate. So the non-adherence to this fundamental principle of B-BBEE was enshrined in the original Act. As many other countries in the world have prioritised localisation, it is sensible that there should be a focus on ensuring that companies who wish to sell in South Africa, and make income from this market, also agree to abide by local legislation with a prioritisation for local jobs and economic development.
Due to the uncertainty around the timelines for implementation, it is recommended that organisations start looking at their policies, structures and procedures now in order to allow sufficient time to identify your current position and gaps, create a strategy with the requisite buy-in, implement said strategy, and finally go through a formal B-BBEE verification with a SANAS accredited verification agency.
A key consideration here is that these regulations may also be promulgated during your financial year, with implementation being immediately required before the end of the fiscal year, which may pose real challenges for new license applications or renewals.
At Siyakha, we have a team of dedicated Transformation Specialists with many years of experience in the Health Sector, in Pharmaceutical and Medical Device industries. We are more than happy to support you in developing a strategy that adds value to ensure clear ROI, compliance with the sectoral requirements, and alignment to the organisations goals and your commercial strategy. Feel free to reach out to us for a free consultation to work through where you are now and whether your strategy is simple, aligned to world-class standards and optimally structured.
Suzaan Bezuidenhout
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