The recent gazetting of the Legal Sector Code by the Minister of Trade, Industry, and Competition marks a new phase in South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) framework (Department of Trade, Industry and Competition, 2024). While the Code’s stated objective is to address historical imbalances within the legal profession, its impact on specialized areas of practice—particularly patent law—has sparked concern. The technical nature of intellectual property (IP) law, combined with the economic consequences of the new requirements, suggests that the Legal Sector Code could inadvertently undermine both professional standards and the broader South African economy (Sakeliga, 2024).

History of the Legal Sector Code: 

The B-BBEE Act 53 of 2003 was introduced to promote meaningful economic participation by Black people, and section 9(1) of the B-BBEE Act empowers the Minister of Trade, Industry and Competition to issue codes of good practice. These codes include definitions of B-BBEE, qualification criteria for preferential procurement, and indicators to measure transformation (Republic of South Africa, 2013). Under the previous regime, the “Generic Codes” set out a standard five-element scorecard, comprising: 

1. Ownership; 

2. Management Control;

3. Skills Development;

4. Enterprise and Supplier Development; and 

5. Socio-Economic Development. 

Entities were assessed based on the level of compliance with each element, with thresholds for Exempted Micro Enterprises (annual revenue ≤ R10 million), Qualifying Small Enterprises (adjusted threshold up to R50 million), and so-called Large enterprises (revenue above that level). Certain elements were deemed “priority elements,” and failure to meet 40% of the relevant points for these elements meant an automatic downgrade of one’s overall B-BBEE status (Republic of South Africa, 2013).

A distinctive feature of the Generic Codes was their longstanding practical influence on both private and public procurement. In many instances, a law firm’s business clients preferred dealing with higher-level B-BBEE suppliers to maximize their own preferential procurement scores. Meanwhile, organs of state were compelled by section 10 of the B-BBEE Act to apply the relevant code when awarding public-sector work, thus further motivating law firms to maintain high B-BBEE ratings.

The logic behind a “sector-specific” code for legal services can be traced back to the government’s “Amended Guidelines for Developing and Gazetting of Sector Code,” known as Statement 003 (Department of Trade and Industry, 2015). This statement lays down principles for creating valid sector codes. A proposed sector code should address all five elements from the existing Generic Codes, adhere to the same calculation methodologies for beneficiaries, and deviate only where justifiable based on economic principles or empirical studies. 

Statement 003 also provides that there is ordinarily no separate transitional period for implementing a new sector code, although it presumes only minimal differences from the Generic Codes. The same policy guidelines allow for refusal to gazette any draft code if it substantially strays from essential definitions and targets without sound evidence (Department of Trade and Industry, 2015).

Despite these rules, the Legal Practice Council developed and refined the Legal Sector Code through multiple iterations, culminating in the final version published on 20 September 2024 (Department of Trade, Industry and Competition, 2024). 

The Legal Sector Code 2024

This Legal Sector Code departs significantly from the Generic Codes in numerous respects. It lowers the threshold for Exempted Micro Enterprises to an annual revenue below R5 million, placing many law firms that would have been considered small under the older system into the category of large legal sector measured entities (those with revenue over R25 million). The new Code reduces the usual five elements to four, comprising only:

1. Ownership; 

2. Management Control;

3. Skills Development; and 

4. A merged Preferential Procurement & Enterprise Development

Accordingly, the new Code omits Socio-Economic Development entirely, meaning law firms no longer receive recognition for contributions under that heading. Also absent is any concept of “Supplier Development” separate from general procurement.

Ownership is now a priority element worth 25 points, requiring significantly higher percentages of Black ownership than before, 30% in Year 1, 40% by Year 3, and 50% by Year 5. 

Black female ownership rises from 15% to 25% over those intervals. A new sub requirement envisages 5% ownership by Black youth and other “designated categories,” excluding women, by Year 5. 

These heightened targets appear difficult for traditional large law firms to reach in a short timeframe, especially given that promotion to equity partnership often takes at least five to 10 years. Making the matter more stringent is the elimination of “Net Value,” an aspect of the Generic Codes that rewarded full or partial unencumbered ownership by Black professionals.

Similar complexities emerge within Management Control, which now awards 24 points but focuses almost exclusively on legal practitioners. Only two points are dedicated to non lawyers such as IT, finance, or HR directors, despite their significant roles in law firm management. The Code also classifies employees according to job titles rather than the more conventional occupational categories used in Employment Equity legislation, introducing new ambiguities about what qualifies as “junior,” “middle,” or “senior” management.

Skills Development appears equally challenging. The new Code almost doubles the required expenditure percentage (from roughly 6.3% to 11.5% of payroll in certain metrics), largely for specialized legal training and post-articles retention. Under the Generic Codes, training for non-legal administrative staff in IT, finance, or HR could count toward training budgets. In the Legal Sector Code, only training for Black candidate legal practitioners or Black legal practitioners is extensively recognized, and even that is heavily segmented by designated structures such as “specialized areas of law” or “practice management training.”

Perhaps the most dramatic shift, however, is in how procurement is measured, now termed “Preferential Procurement & Enterprise Development.” The new Code requires that a vendor be at least 51% Black-owned before it can contribute to a law firm’s procurement score, whereas, under the Generic Codes, any Level 1 – 8 contributor could be valued according to its B-BBEE status. 

Law firms are also required to track “procurement” from advocates, something traditionally influenced by the field of specialisation of advocate, the client’s preference, and the advocates reputation rather than policy. Since the compiled “expenditure” now apparently includes foreign and pass through costs (with fewer permissible exclusions), a law firm’s required ratio of “qualifying spend” in the denominator may grow, making compliance even more difficult. Removing Socio-Economic Development as an element altogether means that efforts such as community-based pro bono programs or funding broader social initiatives do not contribute to the final B-BBEE score.

Impact for Patent Attorney Practices

The resulting upheaval has clear implications for patent law practices. Patent attorneys typically require specialized training, mentorship, and, in many cases, partnerships with technical experts in fields like engineering or biochemistry. The impetus under the new Legal Sector Code to elevate certain demographic targets or to count only specific categories within the measurement could inadvertently constrain how junior or prospective attorneys are developed in patent firms. 

The pressures of the Legal Sector Code extend beyond the legal profession and affect the national economy. Patent law is intimately tied to innovation and international competitiveness: multinational corporations decide where to file patents or locate research-and-development centres based in part on how smoothly IP protections can be enforced. The new Code’s selection rules, novel ownership thresholds, and constraints on large firms could lead to inefficiencies or reduced credibility in the enforcement of patents, especially if the best-suited advocate is not chosen due to complicated briefing constraints. Diminished confidence in the patent system can deter foreign investors who want predictable and top-tier legal representation for their IP portfolios.

A related concern revolves around the immediate implementation of the Legal Sector Code without transitional arrangements. Many law firms, including those specialising in IP matters, had already invested considerable resources and formed structured procurement or training programs under the older Generic Codes. Once the new Code became effective, that spending or those relationships might not count, leaving them abruptly below the required sub-minimums for certain priority elements. The absence of a grace period effectively retroactively changes the compliance rules for an ongoing measurement cycle, forcing law firms to hastily recalibrate supply chains and training initiatives in ways that may be unfeasible within a short window.

The sum of these changes can be read as part of a broader strategy aimed at accelerating transformation in the legal sector. Yet, the shift may be so severe that it undermines its own purpose. By setting unattainable ownership targets, removing standard recognized expenditures, and discarding Socio-Economic Development, the Code could diminish the number of law practices enjoying favourable B-BBEE status. This, in turn, may reduce clients’ willingness to engage with them, especially for large corporate and government instructions, and could also discourage large law firms from entering or expanding into specialized fields such as advanced patent litigation. The narrower pool of top-level B-BBEE contributors among patent specialists may encourage the withdrawal of trained patent litigators who may seek greener pastures abroad.

A balanced assessment would ideally maintain the goals of transformation while mitigating the risk of inadvertently lowering professional standards or throttling innovation in niche areas. If the patent law sector, with its unique mix of technical and legal expertise, is constrained by the Code’s new rules, then local inventors and international corporations might lose confidence in the local system, and important economic opportunities may migrate elsewhere. This would, ironically, shift South Africa from a potential hub of innovation to a marketplace of imitations, with fewer incentives for genuine research and development.

Although the Legal Sector Code was designed to address persistent historical inequities, it is uncertain whether it properly accounts for the specialized realities of fields like patent law. It also remains unclear if the Code aligns with all the criteria prescribed by the B-BBEE Act and Statement 003, given the absence of certain elements and the sweeping departures from the Generic Codes (Department of Trade, Industry and Competition, 2024; Department of Trade and Industry, 2015). Evaluating whether these changes truly advance empowerment or inadvertently undermine growth, and what modifications could blend both aims, remains a vital conversation for the South African legal profession.