Agencies ‘wrong to deny self-rating’

Published by The Business Report
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By Stephen Timm

Cape Town – Rating agencies are still sowing confusion among business owners by insisting that those who do business with corporates will have to get a black economic empowerment (BEE) rating from a verification agency as self-assessment will no longer be permitted.

On the other hand, the department of trade and industry says business owners can still conduct their own ratings.

The first rating agencies are set to be accredited next month.

An empowerment rating can cost anything from R2 000 to R10 000 for a small company. The BEE codes apply to all enterprises with annual turnovers of R5 million or more. A recent survey by the department showed that over 30 percent of companies produced scorecards by self-assessment.

The Association of BEE Verification Agencies (Abva) and one of its members have issued e-mails saying self-ratings were not permissible, but this goes against official policy.

Abva chairman Theo Lombard had said business owners who do work for corporates would have to get a BEE rating from a verification agency as self-assessment would not be permitted. He said the industry body was following a draft document, Guide for Verification Agencies, released by the trade and industry department last October, which states that every firm with a turnover of R5 million or more will need a scorecard from a verification agency for use in its customers’ procurement calculations.

But yesterday he backtracked, saying that self-ratings would be permissible if the enterprise followed the correct methodology under the BEE codes and supplied “valid and sufficient evidence”.

But the acting chief director of BEE, Nomonde Mesatywa, said the document was never “officially” released by the department and was contrary to what was laid out in the BEE codes. She said Abva was “wrong” in insisting that business owners who supply corporates must have a verified agency rating.

Business owners could conduct a rating, Mesatywa said, as long as it was supported by suitable documents detailing how they arrived at their score.

If a corporate insisted on verified ratings, she said, it should elect to cover the cost of its suppliers’ ratings.

After Business Report told Mesatywa of Abva’s stance a few weeks ago, she seconded staff to meet with the body.

Lombard was not present at the March 6 meeting, but his deputy, Chia-Chao Wu, was.

Mesatywa said Wu had told the officials that Abva and its members were merely recommending, not demanding, that small companies get verified ratings. But rating agencies continue to issue statements against self-rating.

Keith Levenstein, a consultant at EconoBEE, this week officially complained to Abva after receiving an e-mail from one of its member stating that self-ratings were not allowed. He is considering approaching the competition commission if he does not get a satisfactory response from the association.

The e-mail from BEE Rating Solutions reads as follows: “According to a trade and industry department guideline (issued October 2007), self-assessed scorecards will not be recognised seeing that self-assessed scoring does not provide sufficient proof of a supplier’s broad-based BEE status.”

Yesterday Lombard claimed not to have seen the e-mail or complaint made by Levenstein to Abva.

Levenstein alerted the competition commission last November about similar statements from the rating agency.

Although the commission did not refer his complaint to the competition tribunal, it issued a ruling saying Abva had undertaken to alert its members not to oppose self-ratings.

The commission said the department had not made agency ratings mandatory, and the decision whether to accept self-ratings rested with a procurer.

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