Publications
Partners
Johannesburg - The department of trade and industry (DTI) may amend the process for issuing BEE self-certification for certain companies, but there seem to be no other significant verification changes on the cards in the short-term, according to Jenni Lawrence, managing director of Grant Thornton Verification Services.
The newly gazetted amended BEE codes come into effect in May 2015. One of the major concerns is the self-certification of BEE status for all EME and QSE companies with an annual turnover of under R10m or under R50m, and which are at least 51% black-owned. These companies were simply required to provide an affidavit regarding their BEE status.
“The thinking behind this was to ease the burden on black-owned companies, which is laudable,” said Lawrence. “This, however, would have had the potential for massive fraud and fronting on an even greater scale than before.”
It now appears the DTI is considering taking this process in-house, or using the Companies and Intellectual Property Commission (CIPC) - previously Cipro - for this category of certification, for example, by getting that body to confirm shareholding and turnover statements.
“If this proposal is carried out it could be in place by the end of the year,” said Lawrence.
However, Lawrence said newly incumbent Deputy Minister of Trade and Industry Mzwandile Masina caused consternation in mid-August during an address to a black industrialists’ stakeholder engagement session by implying that verification agencies would no longer exist.
Instead, BEE certification would be processed in-house by the DTI itself. With around 57 Sanas accredited agencies and a further 350 Irba registered BEE auditors, this would have impacted on upwards of 1 000 jobs.
“This is linked to the issue of fronting… [and] whether you like it or not, we’re going to take away the responsibility of these firms and close down this industry. It is us who gave them [the right] to issue BEE accreditation and now we’re taking it back,” said Masina.
He said verification agencies were “fly by night” and sought to indiscriminately issue BEE certificates to undermine transformation.
READ: Don't be short-sighted about BBEEE codes
“His words were of enormous concern to BEE verification professionals. Many businesses, black- and white-owned, already view BEE, and the verification thereof, as interference in their companies. It means additional expense and can be an administrative nightmare,” said Lawrence.
“The thought of having to deal directly with the DTI, which – unlike the SA Revenue Service – is not geared up to deal with millions of businesses and individuals, sent a collective shiver through business community. BEE certification is absolutely vital for competing in the South African business environment and this scenario was doomed to fail."
It is unfortunate, according to Lawrence, that Masina used this platform to make what she calls biased and uninformed comments at this stage in South Africa’s BEE history.
“He failed to understand the incredibly strict criteria for Sanas-accredited verification agencies and fanned the flames of the already unsettled BEE arena. And he did so shortly before even great changes are due to take place when the amended codes come into effect next year,” said Lawrence.
She explained that since then, various DTI spokespersons have distanced themselves somewhat from Masina’s comments and noted that the press statement after the event made no mention of the elimination of verification agencies.
“We were also given comfort during a recent meeting between the Association of Verification Agencies (Abva) and the DTI,” said Lawrence. “It emerged from that meeting that the DTI appears to be only considering changing the process for the self-certification of BEE status.”
Friday October 10 saw the release of the amended QSE scorecard as well as proposed amendments for equity equivalents and the gazetting of charters, with a commentary period of 35 days.
“The usual commentary period is 60 days and we are uncertain as to why this is being rushed through. We encourage mid-sized businesses to make themselves aware of the proposed changes and respond to the dti with their own concerns and proposals, as a matter of urgency,” said Lawrence.
The BEE Amendment Act should be promulgated by the end of this year. Key will be the institutionalisation of the BEE Commission and the establishment of a regulatory body for the verification industry and better representation for all stakeholders in the country.
“We look forward to BEE business as usual, but at a higher standard, better communication and with the correct infrastructure in place,” said Lawrence.
ALSO READ: Davies to unveil new BEE codes
- Fin24
