General Commentary on BEE Status

BEE Brief February 2011
(click here to view a print friendly version)

This short newsletter is intended to keep BEE practitioners up-to-date with current developments regarding Black Economic Empowerment and to delve into various topical BEE related subjects. The plan is to publish a BEE Brief every couple of weeks or as a significant subject emerges. I would welcome feed-back and any contributions from the readers.

Currently the BEE world is going through considerable change as new legislation, recently gazetted for discussion, will enable IRBA (Independent Regulatory Board for Auditors) accredited CAs to issue BEE Certificates. Whereas this definitely will increase the national capacity to measure transformation, it has caused consternation amongst SANAS (South African National Accreditation System) accredited Verification Agencies who recognise this as a real threat to their market position. They are shocked at the likelihood of massive competition at a time when very few are truly established and they are also concerned that the Accountants will not have such a tight and regular BEE supervisory regime. If this is the case, many of their customers will defect to their auditors in the hope of an improved BEE score. This is all happening at the very time that Verification Agents are having to invest in hiring and training new analysts to address Industry BEE Charters* and to meet the rapidly growing demand for BEE Certificates. A further factor is that there is no IRBA approved BEE training course yet, so regardless of the outcome of the discussions, it is unlikely that any Accountant will be able to issue a BEE certificate for at least 12 months. Who would consider registering with SANAS to become a new accredited BEE Verification Agent under these circumstances?

What we can be sure of is that if and when Accountants commence offering BEE verification services, interpretations and practices across the BEE industry will widen even further.

On a more technical point, the Minister of the DTi has just caused quite a stir by publishing for discussion a draft amendment to the DTi’s BEE Codes of Good Practice (COGP) under which the averaging of contributions under the Enterprise and Socio-economic Development Elements would be replaced by a simple measurement of the annual contributions during the measured period. This has been a vigorously debated subject in the past and the proposed amendment was not expected; most informed practitioners felt that the Codes of Good Practice (COGP) were worded with the intent of 5 years averaged contributions and that organisations should be encouraged to engage with their community on a sustained basis on the back of development agreements etc. Practically this is a considerable simplification but it does undermine a positive influence of the COGP in encouraging long term structured corporate social investment. If enacted it would also remove a significant customer retention factor for existing Verification Agents. Its application under the Industry Charters has not been mentioned so far.

Lastly, the DTi has clarified that any organisation that derives at least 50% of its revenue from an industry segment for which there is an Industry BEE Charter has to be measured under that Charter; it cannot choose to use the DTi’s COGP for its BEE Certificate. Many of these Charters are complex and almost certainly will result in a degree of industry sector specialisation by BEE consultants and Verification Agents. More significantly, lowered BEE thresholds in some industry sectors are going to surprise a number of small businesses by sweeping them into BEE compliance and increased BEE complexity.
Alasdair Yuill