EconoBEE Newsletter – June 2007 – BEE Scorecard Rating
Getting an “accredited” rating does nothing for your business or true empowerment!
Your companies BEE rating means absolutely nothing if you do not know why you achieved that rating. We see many companies who state they have a particular rating, but do not understand how that rating was achieved. A company will respect your rating considerably more if you also give them a commitment to BEE and detailed explanation of why your score is what it is and what you can do to improve it.
The purpose of a rating is to verify your BEE score. In order for the ratings agency to do their job, you should be able to provide them with details of your business as well as the various indicators on which you know you will earn points (much like a bookkeeper produces your accounts). The ratings agency should then confirm the accuracy of your information (much like an auditor checks accounts) and sign off your final BEE Scorecard for the year period in question.
Many companies rely on the ratings agency to produce the scorecard, verify the scorecard and to interpret the results. This causes a conflict of interest to the ratings agency, as they cannot act as both your consultant and ratings agency. The ratings agencies job is to verify that your BEE information is correct.
In many cases a company will achieve a low score (partly due to the fact that BEE has recently been introduced and you could not achieve targets that were not yet set) – the challenge is to identify strategies that will assist you in increasing that score.
The ideal situation: Get to understand the BEE codes in enough detail to understand the BEE Scorecard and to explain what you have done to you customers. Then you will need to create your own “guesstimate” of your score based on the elements of empowerment. Over a period of time you will refine that estimate until you are very sure that you have included all the elements and claimed all the points you are entitled to. This includes collecting documentation to prove that the points you are claiming are eligible.
Only then is it the right time to call in the ratings/verification agency to verify the score you are claiming.
A note about ratings agencies: Some agencies have applied to ABVA (Association of BEE Verification Agencies) and will be accredited sometime in the future by SANAS. SANAS inform us that they will accredit agencies in the very near future; however one contact at SANAS said they are still 6 months away from accrediting ratings agencies.
The ratings agency code of conduct – the ABVA constitution – is very clear about conflict of interest, and intends ratings agencies to only verify a companies BEE Compliance level.
All accredited ratings agencies must meet certain quality standards in order for them to be accredited.
At this moment no agency has been accredited and any rating would need to be redone at a later stage.
A note about self-rating: At this moment, the dti has not stated that self-rating is not acceptable, and SANAS has issued no public statements to the contrary. Some officials at dti have mentioned to the press saying that self rating will be acceptable and they were contemplating producing their own BEE self assessment tool. It is therefore wrong to state that self-rating is not acceptable. Even so, self-rating is an ideal way for companies to get knowledge of their own BEE Scorecard and prepare for an accredited rating. Many aspiring ratings agencies are stating that they will not accept a self-rating. Some go further and state that they will only accept a rating from an accredited ratings agency or only an agency that has been registered with ABVA. Some have advised their clients to only accept an accredited rating which is of course in contravention of the ABVA constitution!
On a purely practical note, and in the interests of true empowerment, the only viable option to encourage companies to become compliant is to allow self-rating.
There are over 1 million registered enterprises in South Africa. We can exclude the EMEs, but there remains a large number of enterprises that need a rating every year. It could be as much as 2000 ratings per day! There are currently 41 full members and 25 associate members of ABVA – a little impractical considering that verifications may take from one day to one month for a large corporation.
Another major issue is that some companies believe a self-rating allows anyone to cheat or commit fraud on their scorecard. Yes, self-rating does sometimes result in an invalid score, but we have seen so many “official scorecards” produced by some companies on ABVA’s list, that are also really bad and in some cases completely wrong.
We do not condone fronting under any circumstances. However, the best part of self-rating is it helps people change their thinking regarding BEE – changes hearts and minds, which is far more important than just a scorecard.
A short while ago Gauteng Business wrote an interesting article “Rate me if you can”.
A note about consultants: Companies will require the use of a consultant to help them with any number of BEE related tasks (excluding final audits). The consultants job is to prepare for a rating, advise on improvements to the BEE Scorecard and even involve themselves in the practical implementation of Black Economic Empowerment in a company.
We unfortunately find that many businesses simply refuse to even try to comply, and with some agencies deciding to make the requirements for complying even more onerous, we will have only one consequence: There will be even more resistance to implementing B-BBEE!
We need to encourage businesses to become compliant, and someone who does their own scorecard, in a relaxed atmosphere is more likely to start his empowerment journey with a positive outlook, than someone who has been instructed by his customer to get an accredited rating.
Enterprise Development is worth 15 points on the generic scorecard and 25 on the QSE scorecard.
The aim of enterprise development is to assist black owned businesses – to ensure they become economically viable – that they grow and become profitable.
In all cases, true enterprise development is sustainable enterprise development that will achieve the objective of helping the business become and remain viable.
Our aim is to ensure that your enterprise development contribution reaches the right businesses, and is put to best possible use via:
EconoBEE Workshops in Cape Town and Durban and Johannesburg
We sincerely believe the most efficient way for a company to become BEE compliant is to start getting an idea of what is required of them and then start producing a BEE Scorecard. We regularly host half day workshops in Cape Town, Durban and Johannesburg to help all companies from experts to novices understand the BEE Codes and help them become compliant.
It is important for companies to implement BEE correctly in their organisation so that they can maximise on the benefits that BEE can bring to their company.
Our workshops are held every Tuesday morning in Johannesburg, 5th July in Cape Town and Durban will be scheduled shortly.
Our popular EconoBEE Scorecard Self Assessment, BEE Scorecard Rating software is also available at each workshop.