Recommendation that an office of a BEE Ombudsman or Adjudicator be Setup

Keith Levenstein, CEO of EconoBEE has recommended that the minister of trade and industry set up an office of a BEE Ombudsman, Arbitrator or adjudicator.

He explains “I have been in the B-BBEE consulting industry since 2005. We have seen the support for B-BBEE grow, and feel proud that we have contributed to increased compliancy. However, as is common knowledge, the pace of transformation has been too slow. This is of course due to many reasons, from negative perceptions to lack of knowledge to slow response from all stakeholders.

One the biggest issues we face every day is the lack of proper interpretation of the codes and lack of standards amongst verification agencies and SANAS. This translates to hugely diverse scores achieved by companies. In some cases the differential can be as much as 20 points – 2 to 3 levels.

I recognize that the BEE codes are new, and no case law has been established, which tends to give those in charge of interpreting the codes too much leeway in their decisions. SARS has solved this problem, over many years by issuing directives.

In the case of BEE, we recommend that a competent person be appointed to head the office of the BEE Ombudsman/arbitrator or Adjudicator. This office would attend to all issues of interpretation and issue directives. It would also consider complaints against consultants, verification agencies, and companies that may be fronting.

To give a simple anecdote, the minister issued a notice recently mentioning the phrase “non-accredited verification agencies”. This is an important issue to some clients whose procurement score can be seriously affected by this definition. We asked the BEE unit for that definition. Their response was: “Although a non-accredited Verification Agency is not defined but it means precisely a Verification Agency that is not accredited.”

We asked SANAS the same question and their answer was: “Please refer to the definition as provided by the DTI.”

This is not good enough! We still do not know if the notice refers to a company that intended becoming a verification agency is included, whether a consultant that followed the codes in calculating their clients BEE score is included, or many other types of ratings. The press releases of ABVA and comments from various verification agencies give totally different definitions.

The above is one example, but there are many issues that we receive every day, and would really like to be able to get a proper and consistent answer. We have even seen the situation where the BEE unit gives different answers to the same question at different times. We have seen verification agencies ignoring a document from the BEE unit by showing a different document.

There are many areas where consultants and verification agencies have decided on an issue based on consensus. This is also not good enough. Just because we agree on an issue does not mean that this is what the minister and government had in mind when they drafted the legislation.

We could raise 50 issues immediately. Among them would be:
– Which takes precedence – codes of good practice or the verification manual?
– Date of rating vs date of verification.
– Employment equity – are the requirement that SANAS correct when they insist that the EE A2 and EE A4 returns take precedence over actual EE figures?
– Temporary vs permanent staff for employment equity and the calculation of the payroll for skills development purposes.
– Adjustment for gender: Is the algebra incorrect, or does it take precedence over the key principles?
– Does a social enterprise qualify for ED contributions?
– Enterprise development: Method of calculating cumulative spend – date of inception.
– The sector codes – how can a scorecard in that industry be verified if the verification agencies have not been accredited to perform verification for that sector codes.
– Procurement – the 3rd party payment issue.

Lack of standards is perceived as a de-motivating force to many companies. They see competitors obtaining vastly different scores – in some cases far higher scores and regard it as unfair.
I believe that establishing such an office as I suggest will sort out many issues and ensure standardization and serve to encourage more businesses to become compliant. At
SANAS will state they have standards – but these are standards of administration. They ensure that all verification agencies have the correct forms, procedures, but they do not get involved in interpretation. The verification industry is too concerned about losing their accreditation than disputing an issue with SANAS. The abovementioned issue of SANAS requiring all companies to submit their employment equity returns is a case in point. The agencies know full well that the codes do not require them to exclusively use those returns, as stated n the codes. However SANAS has decided this to be the case, and no agency is prepared to dispute the issue for fear of losing their accreditation.

From a measured entity’s viewpoint, they can appeal a decision by their verification agency. The irony is the appeal is handled for the agency itself. In our case, to give credit to the agencies we have dealt with, they have changed their decision once we presented a good argument. However, if they had disagreed with us, there is not standard method of further recourse, short of submitting a complaint to the dti and SANAS and hoping they will respond. If the dti response is “there is no definition….” And SANAS’ response is “refer to the dti definition”, then we are back to square one.

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