New ruling targets BEE fronting

Even those companies in the freight and trading industries that are well advanced in the self-assessment of their black economic empowerment (BEE) ratings will have to have their final documentation “rubber-stamped” by an accredited verification agency from August 1. This is a complete reversal of the previous policy, where the department of trade and industry had not made the use of a verification agency mandatory. It is the result of the April 9 Government Gazette, where minister of trade and industry, Mandisi Mpahlwa, issued a notice that said: “As from August 1, only certificates issued by accredited verification agencies – or one that has a pre-assessment letter from the SA National Accreditation System (Sanas) – will be valid.” Said Keith Levenstein, CEO of empowerment consultants EconoBEE: “What it means is that, from August 1 onwards, you may no longer accept just any BEE certificate from your suppliers. That certificate must have been produced by an agency accredited by Sanas. “You must also only supply your customers with a certificate produced by an accredited agency.” However, the ministerial notice stated that any certificate produced prior to the date of publication of the notice (April 9) would remain valid for a period of 12 months from date of issue. This means that existing certificates remain valid, as long as they’re accurate, even if produced by a ‘non-accredited’ agency, according to Levenstein. “It is as relevant now, if not more so, to calculate and improve your own scorecard before you call in a verification agency,” he said. “A verification agency’s job is to verify your data, not to just give you a scorecard or certificate on request. Successful companies should work hard at building up a scorecard, getting expert advice, gathering data, calculating their score, and then calling in a verification agency to verify the accuracy of the data.” Levenstein also felt that the minister had obviously taken this step to remove the risk of fronting, and the production of inaccurate scorecards. “Reports are that the BEE advisory council is finally going to be constituted,” he told FTW “and this is a step to assisting the council in its duties. “Unfortunately it is also a step that adds red-tape and increases operating costs of small businesses. However, with the proliferation of verification agencies, you should be able to negotiate a good price with an agency, particularly if you have prepared properly.” Dr Fred Jacobs of Safmarine, and leader of the BEE task team for the shipping industry, agreed – and suggested that the new ruling was no train smash for the maritime players. “Prior to this whole accreditation exercise,” he told FTW, “a lot of companies were doing self-assessment. “Our own practice at Safmarine has been to only look at agencies accredited by Sanas on their web-site, and to put out a tender amongst them. “And, although we are doing a self-assessment, we will still have this finally approved by our chosen accredited agency.” The cost for the larger companies, he added, should not be prohibitive, although smaller companies might find it a bit of a burden. Jacobs also noted that various auditors out there in the accountancy world were having a close look at also becoming accredited BEE verification agencies. “But,” he said, “you certainly wouldn’t be able to use your own auditors, as a serious conflict of interests might arise.”