“In an environment where no verification agency has been accredited by government,
which verification agencies certificates are valid? When are self assessments applicable?
What are the risks to investing resources into an unaccredited process,
and what are the risks of doing nothing until accreditation is issued?
… “a proper understanding of these issues requires some explanation as to
the purpose of verification, the process of accreditation, and the
burdens of proof of B-BBEE compliance.”
“Without detailing the entire application of the Broad Based Black Economic Empowerment Act, it suffices to say for this purpose that only companies supplying entities measurable under the codes are required to provide verification certificates. These entities include in general terms government departments and public entities. The application challenge arises at the next level, and herewith the driver for Broad Based Empowerment – In order for these entities to recognize their own procurement levels, they must establish the procurement recognition levels of their suppliers.
The result of this practical application is an interdependent web of companies reliant on one another’s B-BBEE contribution levels, and in a closed economy where companies are reliant on each others B-BBEE contribution levels, there must be a mechanism to facilitate comparisons between the relative contribution levels of competing entities. The solution is to have independent parties (Verification Agencies) equipped with knowledge and governmental support whose purpose is to examine the structure, policies, processes, procedures and related documents and records of a measured entity which are relevant to the B-BBEE requirements and to determine that these contain sufficient evidence to support a particular B-BBEE recognition level.”
Regulating the Agency’s
“The regulating of verification agencies is no small task, and government have used the proven ISO 17011 external quality standard by which to benchmark agencies, and enlisted the South African National Accreditation System (SANAS) to police the agencies, and make recommendations to the minister of trade and industry regarding whether an agency may be accredited. A verification agency that is accredited under ISO 17011 by SANAS, and who is a member of the Association of BEE Verification Agencies (ABVA), a government approved industry body, will be accredited by the minister of trade and industry to issue verification certificates on his behalf.
An agency which has not been accredited is therefore one which has not yet received authority from the minister of trade and industry to issue verification certificates. At present there are no accredited agencies, so there can be no valid verification certificates – but that does not mean that there are no valuable verification certificates.”
“A key principle in the codes of good practices is that “any representation made by an entity about its B-BEE compliance must be supported by suitable evidence or documentation”. We’ve demonstrated that verification agencies will be required to review this evidence, and issue verification certificates confirming a companies B-BEE contribution level. Therefore in the absence of accredited verification agencies to issue certificates, companies will have to satisfy themselves that the evidence provided by their suppliers is in fact suitable, and supports a given status. The practical implications of this for companies are considerable – If reliance is given to an assertion made by a supplier of a particular status, and it later transpires that the assertion was incorrect, who bears the liability for the misrepresentation? The codes are clear in that “any misrepresentation or attempt to misrepresent … may lead to the disqualification of the entire scorecard of that enterprise.”
Role of agencies
” Appointing a verification agency in the current unaccredited environment to issue an unaccredited certificate is therefore a valuable proposition, if you wish to avoid the burden of having to self-verify all the information from all the suppliers. Verification can therefore be considered a sound outsource solution aimed at mitigating the risks and consequences of misrepresentation.
Key questions to ask the agency
The key issue for companies using verification agencies for this purpose is therefore:
• Does the company have an ISO 17011 compliant management system?
• Has it applied for accreditation?
• Is it likely to be accredited within the 1st batch?”
“The process of applying for accreditation is costly, and requires that the agency cross reference its management system to the requirements of the ISO 17011 standard, through a purpose built questionnaire. It is safe to deduce that if a company was able to meet the requirements for submission of an application in the 1st batch of applications received by SANAS (8 March 2007), then it is likely to be accredited by the minister in due course. The expected date for announcing which agencies have been accredited is Oct 2007, but this may be subject to any number of delays. In the interim, it is both safe and valuable to utilize verification agency that meets these requirements to issue verification certificates prior to being accredited, as an alternative to self investigation of each supplier assertion of compliance.”
Do not delay
“On the other hand, companies that are lulled into indifference by those who advocate the postponement of any form of action until the accreditation process is final, face far greater risks. Complacent companies will face a day of reckoning in the future, when they are required to provide evidence of compliance. Companies that have not initiated a prior process within their supply chain to establish status will at this point be unable to obtain any recognition for their procurement expenditure, because their suppliers will be in the same position as they are – reliant on someone else efforts to initiate a process to prove BEE contribution levels,”he concludes.
IQuad Verification Services (Pty)
Tel: 082 850 9311