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A New Era For South Africa's Legal Sector
Proactively Embracing The Legal Sector Code
By Ginen Moodley, Founder of Moodley Attorneys Inc.
While there has been a lot of debate around the amendments to the Legal Sector Codes, not enough discussion is happening about the spirit and intent behind the legislation and how organisations diversify their supplier base.
The updated Broad-Based Black Economic Empowerment (B-BBEE) Legal Sector Code, gazetted on 20 September 2024, took immediate effect, requiring law firms and legal professionals to comply without delay.
The updated B-BBEE Code for the legal sector introduces new revenue thresholds and compliance requirements aimed at accelerating transformation.
Key Changes Include
Exempt Legal Entities (ELEs): Law firms with an annual turnover below R5-million are exempt from most B-BBEE requirements
Qualifying Small Enterprises (QSEs): Black-owned law firms with a turnover between R5-million and R25-million may simply submit a sworn affidavit confirming ownership
Large Entities: Law firms with revenue above R25-million –and advocates earning over R15-million – must comply fully with the B-BBEE scorecard
To fast-track black ownership, the Code introduces a fiveyear target: 50% black ownership, with at least 25% of that belonging to black women. Law firms are also expected to reflect this ownership structure at the senior management and board levels.
In addition, firms must invest 3.5% of their annual payroll in skills development for black legal professionals. Procurement must prioritise black-owned businesses, and law firms are encouraged to contribute to the Legal Sector Transformation Fund (LSTF), which supports black practitioners – especially women and historically disadvantaged individuals.
A New Era For South Africa's Legal Sector
While these changes bring stricter compliance measures, they also create an opportunity for law firms to rethink their approach to transformation, supplier relationships and long-term industry sustainability.
For years, B-BBEE has to some degree been approached as a compliance exercise, with law firms focused on maintaining high B-BBEE scores to secure government and corporate contracts. However, the real intent of B-BBEE extends beyond compliance. It is about fostering genuine transformation ensuring that previously disadvantaged professionals are meaningfully included in ownership, management and highvalue legal work.
With the updated Legal Sector Code now in effect, law firms that previously relied on technical compliance strategies will find it significantly more difficult to maintain a Level 1 B-BBEE status, unless they commit to substantial transformation. This shift challenges the industry to move from a short-term compliance mindset to a long-term strategy that embeds transformation into firm culture and operations.
Historically, many large corporate law firms have managed to maintain high B-BBEE ratings without fundamentally restructuring ownership or leadership models. The revised Legal Sector Code disrupts this dynamic, enforcing stricter ownership and equity requirements. Law firms must now integrate black equity partners at senior levels and ensure meaningful representation in leadership and decision-making roles. While enterprise and supplier development (ESD) has been a key focus, organisations are still not doing enough to integrate new suppliers into their ecosystems.
Beyond internal restructuring, law firms must go beyond merely procuring from black-owned businesses and actively support their growth. Those that fail to adapt quickly risk losing their B-BBEE Level 1 status, which could impact their ability to secure government contracts and work with corporate clients that prioritise transformation in their procurement policies.
On the flip side, the government should adopt a similar approach by diversifying its supplier base and looking beyond established corporations to support smaller, transformative businesses. While larger law firms often prioritise maintaining a high B-BBEE rating to secure government contracts, this is where the government itself must shift its compliance mindset.
Instead of focusing solely on a supplier’s B-BBEE rating, the emphasis should be on the real transformative value a business brings – whether it actively contributes to economic inclusion, supports emerging black-owned enterprises and fosters longterm industry change. By prioritising true transformation over box-ticking, the government can empower a more sustainable transformation.
Creating a more representative legal landscape requires a proactive approach where one moves beyond compliance and regulatory pressures to drive real, sustainable change. A good starting point is to ask whether your long-standing legal relationships are truly inclusive. This can be a challenging question, given that professional service relationships often endure over time.
At a recent procurement workshop we presented, the importance of supplier diversity was highlighted. In professional services where relationships can last decades, failing to periodically review and adjust supplier choices can result in an exclusionary, outdated legal ecosystem. Businesses should assess whether they are engaging black-owned law firms for high-value legal work and consider how these changes in the legal sector align with broader industry trends, such as similar shifts in the financial services sector.
The updates to the Legal Sector Code are not occurring in isolation. They reflect broader shifts in transformation policies across multiple industries, including the property sector and likely future amendments in financial services. Law firms that wait for external pressure will always be reactive rather than proactive. The real challenge is fostering a culture that embraces transformation ahead of compliance deadlines.
Instead of viewing these changes as regulatory hurdles, law firms should consider them strategic opportunities. Exploring new ownership models, such as broad-based ownership schemes or black partner buy-ins, can accelerate meaningful transformation. Developing structured career progression pathways ensures that black professionals can move into senior leadership roles. Strengthening supplier partnerships with black-owned law firms can open doors for collaboration on high-profile cases. Embedding transformation into recruitment, promotion and procurement strategies ensures that diversity becomes a natural part of law firm culture rather than a regulatory requirement.
While the new Legal Sector Code makes it more challenging for large law firms to maintain a Level 1 B-BBEE status, it ultimately pushes the industry towards deeper, more meaningful transformation. This shift is not just about meeting compliance targets, it is about ensuring the sustainability, competitiveness, and credibility of the legal profession in South Africa.
The legal industry thrives on relationships, expertise, and long-term strategy. The firms that embrace transformation today will not only retain their B-BBEE credentials but will also position themselves as the trusted, future-ready legal partners in an evolving business landscape.
The debate around the amendments to the Legal Sector Codes is important, but it must also consider the spirit and intent behind the legislation. True transformation requires a deliberate effort to diversify supplier bases and create real opportunities for new entrants to thrive.
