Casino group under fire for ‘flouting BEE rules’

Sibonelo RadebeThe NewAge

Grand Parade Investment (GPI), a JSE listed entity with assets of about R1,9bn, has been basking in black economic empowerment (BEE) glory, under what seems to be grossly overinflated, if not misleading, credentials.

GPI presents itself as a level one BEE contributor, the highest ranking in empowerment stakes. The group earned this level by styling itself as an entity with revenue of less than R35m, when it commands comprehensive income of more than R100m (R134m in 2010 and 168.5m in 2009).

GPI CEO Adrian Funkey said there was nothing untoward with this practice as it was in line with the rules and was audited by qualified professionals. “We are comfortable with it.”

GPI used the lenient scorecard designed for qualifying small enterprises (QSE) to earn a whooping 102% total BEE score in 2010. Designed to exempt the SME sector from the main BEE scorecard, QSEs can pick and choose four of the seven elements of the broad-based scorecard to work their total scores.

BEE credentials are a critical competitive advantage within GPI’s area of focus, which is the highly regulated gambling industry. Established in 1997, GPI owns significant stakes in a number of casinos and general leisure operations with a bias towards the Western Cape.

The company is also an important partner of gambling and leisure giant, Sun International.

This partnership has been fairly successful and assisted in the building of a strong GPI asset base, which was listed in 2008.

GPI’s choice to use the QSE BEE rating takes advantage of an accounting technicality. “As an investment holding company, we were a small operation and qualified as a QSE,” Funkey said.

This refers to the small head office team which runs the investment holding company, with stakes in a number of other operations. Problem is that this may have given GPI, which has assets of about R1,9bn, an unfair advantage over truly small entities in the QSE category, defined by revenue of between R5m and R35m.

“If they did that they are being silly and must be taken to task,” said Keith Levenstein, CEO of BEE consulting firm EconoBEE. “Who knows if they have been winning licenses from the gambling authorities through this misleading exercise.

“I have seen this practice in a number of other companies and it must be condemned because it comes close to fronting.”

Ajay Lalu, executive of another BEE consulting firm, Black Lite, said attaching incomplete BEE scorecards to group activities was not correct. “Groups must rely on consolidated turnover for the BEE ratings.

“Where groups do not apply the appropriate scorecard to rate their BEE credentials, they can be considered to be engaged in a form of fronting, according to the broad based BEE code of good practice.”

.The group recently ventured into the LPM market – the gambling machines outside casinos.

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