BEE verification industry in turmoil

Association of agencies accused of interpreting BEE codes outside government policies
March 1, 2010

By Mzwandile Jacks – Business Report

BLACK economic empowerment (BEE) verification industry leaders on Friday slammed the Association of BEE Verification Agencies (Abva), accusing it of indiscriminately setting rules and policies aimed at “protecting its own interests”.

This came after Emex Trust, a large Pretoria-based verification agency, on Friday said it would terminate its membership of Abva. Emex said Abva was manipulating the verification industry.

Insiders said the move could open the way for more membership terminations.

This shows increasing unhappiness in an industry that has been criticised for its lack of capacity. There are only 27 verification agencies in a country with about 500 000 companies.

Corrie Vermeer, a trustee at Emex, said it could not be part of an association that followed interpretations that were not gazetted by the Department of Trade and Industry (dti).

“Abva recently amended its constitution to enable the chairman to make certain policy decisions,” Vermeer said. “One of the initiatives is aimed at setting an interpretation standard for the industry’s codes of good practice.”

The BEE codes are applied in the development, evaluation and monitoring of BEE charters, initiatives, transactions and other implementation mechanisms.

The dti has issued an interpretive guide to the codes that was intended to help explain some of the terminology and issues arising from the codes.

In a document sent to the verification agencies on January 15, Abva strongly urged the dti to amend the codes. It said this would incorporate issues in the interpretive guide that were not covered by the codes, adding this would encourage transformation.

Abva stressed the fact that it was not opposed to the policies adopted in the interpretive guide. It said its only concern was that these policies were not addressed through an amendment of the codes.

Keith Levenstein, the chief executive of EconoBEE, said Abva had arbitrarily set up rules aimed at protecting its own interests for years.

“We even raised a complaint to the Competition Commission over one of the issues and the commission received an undertaking from Abva that it would not condone further actions of the sort we complained about,” Levenstein said.

He said Abva had never had the authority or power to set up rules and interpretations, yet it had continued to do so.

In 2007, Abva allegedly stated that the only verification certificate that would be acceptable was the one produced by its own members who had applied to the SA National Accreditation System and that any other certificate would be rejected.

“This constituted an unfair business practice as at the time the codes allowed for other organisations to also issue certificates,” Levenstein said.

Andile Tlhoaele, the chairman of Abva, told Business Report that amending the constitution was only aimed at broadening the membership of Abva and nothing else.

It is understood that Abva membership has been extended to companies such as tyre manufacturer Goodyear.

Last year Abva opened up various categories of membership to corporates and BEE consultants. It said this was aimed at promoting an environment where agencies, consultants and corporate clients had a forum within which to consult and discuss the intricate issues of broad-based black economic empowerment.

Tlhoaele said: “We are an industry association that has the right to set verification standards. This is in the codes.”

Nomonde Mesatywa, the chief director of BEE at the dti, said the department had engaged with Abva this year and had insisted that decisions on policy were to be taken only by the department.

“We have been engaging with them and have told them that they cannot introduce new principles and cannot pronounce on policy issues,” Mesatywa said.

Levenstein said it was becoming more urgent for the dti to address the issue of interpretations and gazette updates.

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Subsequently ABVA issued a response – please see details of the communication and our commentary.

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