A dti scandal – The beginning of the end of the sector codes and B-BBEE

Original publish date – Mon, 07 Mar 2011 06:48:48 +0000, Keith

The dti, gatekeeper of the BEE codes has wasted an enormous amount of taxpayers money in setting up the BEE codes, and the sector codes. Latest rumours are they are about to dump the sector codes.

Way back, before the B-BBEE act was gazetted, the financial sector came up with its financial sector code, and other sectors stated following suit. The B-BBEE codes specifically made allowances for sector codes. Many sectors, believing that they were being steamrolled into following a charter spent huge amounts of time and effort to try to create their charter, mostly without success. At the time we are totally anti the charters, as we said that it would cause more confusion and costs and not contribute towards transformation. At the time we were criticised by the dti.

It turns out were correct all the time: The sector codes have proven a total waste of time and money. Industry bodies, government and private enterprise have wasted our money, to create a non-functioning sector codes process.

The minister did indeed gazette four sector codes, construction, transport, tourism and forestry back in 2009. All four came into effect on the date of gazetting, and only one had a transitional period – but implying that all had to be followed from the date of gazetting. In 2009, no one bothered to follow those charters.Around about 10 other charters have been or are still in the process of gazetting including covering Financial services, ICT, property, accountants and legal.

Also in 2009, the minister stated that BEE certificates would only be valid if produced by a SANAS accredited verification agency. His initial notice gave a deadline of 31 July 2009. We pointed out to the minister that at the time SANAS did not have a methodology to accredit agencies based on the sector codes. It would imply that every company in the affected industry would be unable to produce a valid certificate. The minister then delayed the deadline to 1st February 2010. Even with this delay SANAS did not manage to accredit any agency to verify against the sector codes until March 2010. Only a small number of agencies ever managed to become accredited for the sector codes.

It did not really matter – most companies in the affected industries continued using the generic codes and passing that certificate off as a valid certificate – contrary to the regulations of SANAS and the codes. One need only look at certificates produced in 2010 for transport companies, hotels, freight and all the other affected industries to see that the sector codes and the minister’s notice was being completely ignored.

The rumours around BEE from SANAS is that “the dti may make a pronouncement as there have been complaints from the industries saying they should have a choice of utilizing the sector codes.  Apparently the DG is aware of the complaints. There was a meeting in Cape Town last week where this was discussed, and from the SANAS point of view they will not view this as a non-conformance until clarity is given by the DTI.”

So legislation is being run by the DG “being aware of problems”, and SANAS, four years after the codes were gazetted is still waiting for clarity on an issue they have been accrediting agencies to do for over a year.

Is there anyone at the dti or SANAS who has the faintest idea of what is going on?

We knew this would happen. SANAS and the dti were unable to keep up with the sector codes. Most agencies did not even know about the sector codes, and failed to check the industry of their client when the client requested verification. Each sector code requires the formation of a sector council, so for example the Tourism Sector Council was formed to manage and report back on the progress the sector has been making in accordance with the sector codes. To date, no sector council has reported back to the minister of the BEE Council as to the progress made. It would be quite easy to do so: They would say “NO PROGRESS”. Every sector council is therefore in breach of their own sector code. If the dti, SANAS and sector councils can’t manage the process, it is not surprising that most measured entities have no idea what is going on, and their level of compliance is lower as a result.What is quite ironic is that even companies that were signatories to the sector codes have not even bothered to use them. For example both York Timbers and Hans Merensky were signatories to the forestry charter. Neither even follow the forestry charter.

It is exactly as we said many years back – sector codes are a waste of time and will result in lower levels of compliance. However, once the sector codes did come out we supported them, because that is what the codes say we must do. We are the consultancy raising these issues with the dti and SANAS. We are the people identifying the errors and inconsistencies. We are the people confronting the verification agencies, measured entities, the dti and SANAS about which scorecard to use.

The problem is that until the minister issues a notice removing the sector codes, any company in an affected sector that issues a certificate that bears the SANAS logo as its official BEE status will be misrepresenting its BEE status. The codes say that deliberate misrepresentation constitutes fronting and is fraud.


This is the beginning on the end for the sector codes, and I’m not sorry about that. I have to state that the only high profile person who agreed with us about the useless sector codes was Jimmy Manyi! Even as late as the end of last year Thabo Masombuko of the dti angrily confronted anyone who said that the sector codes serve no purpose. Well, his own DG had has to be brought into the fray, and SANAS, the organisation appointed by the dti still don’t know that a certificate issued in terms of the wrong scorecard is non-conformance.

What I am genuinely sorry about is if this debacle by the dti and SANAS is anything to go by, it looks like the B-BBEE codes could die a similar death. Many people will be only too happy to see the BEE codes go the same way. To them I say “Be careful what you wish for”. (I’ll explain this last statement in a future blog.) We personally will continue to support the codes until the very end.


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