Lack of consistency and monitoring will nullify B-BBEE

The newly gazetted Revised Codes of Good Practice need consistency more than anything else, says Keith Levenstein, CEO of B-BBEE advisory company EconoBEE.

Of concern is that there are differing interpretations of the codes, and how to earn points, says Levenstein. In some cases the codes are slightly unclear, but in others they are clear – but the agency or approved auditor simply chooses, via a procedural policy, to follow a different interpretation.

The status quo is that verification and resultant BEE certificates are inconsistent. Not by a fraction of a point, but by as much as 20 or more points.

“Shopping around for a verification agency is a current reality,” says Levenstein. While inconsistency still exists, we will still see companies change agencies to earn more points.

If agencies can issue such diverse scores, the whole purpose of verification is defeated, and since BEE certificates need to be verified, the whole B-BBEE concept will be destroyed, he says.

What has lead to differing interpretations?

When the Codes were first published in 2007, the Department of Trade and Industry (DTI) stated that verification was encouraged, but not mandatory and the concept of self-rating became popular.

“Initially, we were in favour of self-rating or unregulated assessment because it encouraged businesses to become compliant and embrace the initial stages of transformation,” says Levenstein.

However, it transpired that many businesses simply inflated their scorecards to meet a level of their choosing.

Therefore, a standard was required to ensure that a company was rated according to standard methods, procedures, interpretations and calculations. The South African National Accreditation System (SANAS) was appointed to accredit agencies and the DTI published the “Verification Manual” – a guideline of procedures for verification.

In 2010 it became mandatory to use a SANAS-accredited agency to produce a valid certificate. Subsequently IRBA has been appointed as a second regulator to approve auditors to perform B-BBEE verification.

However, each agency: SANAS, the Association of BEE Verification Agencies (ABVA – an organisation representing the interests of verification agencies), the DTI and BEE consultants, each have their own differing interpretations, says Levenstein.

“If agencies can legitimately issue such diverse scores the whole purpose of verification is defeated, and since BEE certificates need to be verified, the whole B-BBEE concept will be destroyed.”

The relevant parties (the BEE Council, DTI Minister, BEE Unit of the DTI, SANAS and IRBA) must get involved by issuing guidelines, interpretations and practice notes, implores Levenstein.

It has been suggested that a BEE Ombudsman be appointed to decide on interpretations or alternatively obtain an interpretation from the BEE Council or a court of law to ensure consistency. The DTI included the concept of a BEE Commissioner in their proposed Bill. However it has not yet been enacted.

Contact Keith Levenstein on (011) 483-1190.