Beyond B-BBEE: What the Competition Commission Really Means by HDP Participation

“Competition Law Has Entered the Transformation Chat"

For many South African businesses, transformation discussions are often approached through the familiar lens of Broad-Based Black Economic Empowerment (“B-BBEE”). While B-BBEE compliance remains an important regulatory and commercial consideration, recent developments in competition law indicate that the Competition Commission of South Africa (“Commission”) is increasingly focused on a broader concept: meaningful participation by Historically Disadvantaged Persons (“HDPs”) in the economy. This focus extends beyond ownership percentages and scorecard compliance and is becoming a central feature of merger regulation, market inquiries and remedial action frameworks.

The shift reflects a broader transformation agenda embedded within the Competition Act 89 of 1998 (“Competition Act”), particularly following the amendments introduced by the Competition Amendment Act 18 of 2018. These amendments reinforced the principle that competition policy in South Africa is not concerned solely with market efficiency and consumer welfare, but also with addressing structural inequalities that continue to affect participation in the economy.

‍

The Legislative Foundation

Section 12A of the Competition Act requires the Commission and Competition Tribunal to consider both competition and public interest factors when assessing mergers. Importantly, the public interest assessment enjoys equal status to the competition assessment. Among the statutory public interest factors are:

• the effect on employment;
• the ability of small and medium enterprises (“SMEs”), and firms owned or controlled by HDPs, to enter, participate in or expand within a market; and
• the promotion of a greater spread of ownership, particularly ownership by HDPs and workers.

Historically, many businesses viewed these provisions primarily as ownership-focused requirements. However, the Commission's revised Public Interest Guidelines, published in March 2024, suggest a significantly broader interpretation.

‍

HDP Participation Is Not the Same as B-BBEE Ownership

One of the most important misconceptions in the market is the assumption that a satisfactory B-BBEE ownership score automatically addresses the Commission's public interest concerns. In reality, HDP participation encompasses far more than shareholding structures.

The Commission increasingly examines whether HDPs are able to participate meaningfully in economic activity, compete effectively, access markets and benefit from opportunities for growth. The inquiry is therefore not limited to who owns a business; it also considers who manages it, who supplies it, who benefits from commercial opportunities and whether barriers continue to prevent meaningful participation by historically disadvantaged individuals and enterprises.

In practical terms, a company may have compliant B-BBEE credentials while still facing scrutiny if market structures, procurement practices or business arrangements limit the ability of HDP-owned businesses to enter or expand within the market. Conversely, initiatives that actively develop HDP suppliers, expand market access and promote entrepreneurship may carry significant weight in demonstrating meaningful participation.

‍

The Commission's Expanding Approach

The revised Public Interest Guidelines demonstrate the Commission's view that transformation should be assessed substantively rather than formally. The Commission has indicated that all notifiable mergers must be evaluated for their impact on HDP ownership and participation, even where competition concerns do not arise. In certain circumstances, merging parties may be expected to demonstrate measurable improvements in HDP and worker ownership or participation as part of obtaining regulatory approval.

The growing focus on transformation is evident in several merger approvals where HDP ownership transactions, employee share ownership plans (“ESOPs”), supplier development programmes and similar initiatives have featured as public interest conditions. Such measures are increasingly viewed as mechanisms to broaden economic participation and address historical exclusion.

‍

Market Inquiries and Remedial Actions

The Commission's approach to HDP participation is not limited to merger control. Recent market inquiries have demonstrated an increasing willingness to address structural barriers preventing HDP and SME participation within particular sectors.

In the fresh produce market, for example, the Commission identified a lack of participation by SME and HDP market agents as a feature that impeded effective competition and transformation. Remedial measures included requirements for established market participants to enter into management agreements, facilitate skills transfer and provide training designed to support sustainable participation by HDP-owned businesses.

These developments illustrate an important shift in regulatory thinking. The Commission is increasingly concerned with creating pathways for participation rather than merely monitoring ownership outcomes. Skills transfer, mentorship, supplier development, access to infrastructure, financing opportunities and long-term sustainability are becoming integral aspects of transformation policy.

‍

What Does This Mean for Businesses?

Businesses should be cautious about viewing transformation exclusively through a B-BBEE compliance framework. While scorecards remain important, competition regulators are increasingly asking broader questions:

• Can HDP-owned firms effectively enter and compete in the market?
• Are procurement and commercial arrangements inclusive?
• Does the business contribute to developing emerging enterprises?
• Does ownership translate into meaningful economic participation?
• Are there unnecessary barriers preventing HDPs from accessing opportunities?

The answers to these questions may become increasingly relevant not only for merger approvals, but also for participation in regulated industries and sectors subject to market inquiries.

‍

Conclusion

The Competition Commission's transformation agenda has evolved beyond traditional concepts of ownership and B-BBEE scorecard compliance. HDP participation is increasingly understood as a broader economic objective aimed at enabling meaningful and sustainable participation in markets, industries and value chains.

For South African businesses, the message is clear: transformation is no longer measured solely by who owns the shares. The Commission is increasingly interested in who participates, who benefits, who competes and who has a genuine opportunity to grow. Businesses that proactively embrace this broader approach to economic inclusion will be better positioned to navigate an evolving competition law landscape while contributing to South Africa's long-term transformation objectives.