Interpretations – Two sides to the same story – EconoBEE Newsletter – 19 July 2011

EconoBEE - BEE Points = Business

How much time can you save if you are well prepared for your next BEE Verification? An absolute fortune.

Last week Thursday EconoBEE presented the first round of “Prepare for BEE Verification Conference” in Durban. This Thursday is Cape Town (21st July) and the 28th of July is Johannesburg. During the conference we discussed what documents you need in order to prepare quicker for BEE Verification. How the verification agency operates and what counts and does not.

Bookings are open for Cape Town (21 July) and Johannesburg (28 July), join us for a knowledge filled Prepare for BEE Verification Conference and ensure that your BEE verification is quick and easy.

 

B-BBEE Interpretations – Two sides to the same story

In recent times B-BBEE compliance has been marred with irregularities, inconsistencies and differing interpretations. These differences have become tremendously harmful to the entire compliance process because this causes a lack of confidence in business which results in a slowdown of transformation.

In the last month alone we have come across the following differing interpretations that verification agencies have decided to use:

  1. EEA2 returns not resulting in maximum points – Do you lose all of your points if you do not submit your EEA2 returns. Some say yes, while others say no. One agency remarked to us, “no problem we do the calculation as at the date of verification”. The other simply said: “I would rather turn down the business than change my interpretation.”
  2. Enterprise Development – what happens if you spend your Enterprise Development spend outside of the rating period? Well again it depends on which agency you use. One agency will use it as at the end of your rating period. Another agency has decided that it is acceptable to do Enterprise Development anytime outside of the rating period provided it is before the actual verification.
  3. When is a BEE certificate invalid? Some agencies allow you to use a BEE certificate that falls outside of your rating period but before your verification. Others disqualify any certificate issued after your year has come to an end. Others even use a small grace period to allow your suppliers BEE Certificate to be included.

Why do we have these problems? The problem is mostly caused by the agencies themselves choosing not to take advice from other organizations (themselves included – one agency’s interpretations are not shared or implemented industry wide). The DTI not offering interpretational corrections, nor asking questions of the industry and industry in general pushing the boundary of what is acceptable and what is not.

Further, the appeal process has a fundamental flaw which prevents any company having a fair appeal. Each agency uses their own internal committee to adjudicate the appeal. The result becomes – thank you for your appeal, we have thought about it and we are right.

The fundamental principle that states “substance takes precedence over legal form” and that “any reasonable interpretation consistent with the objectives of the BBBEE Act must take precedence” has resulted in further misunderstanding and abuse with one agency stating on their BEE Certificate “ We would like to bring to your attention that certain calculations and methodologies interpreted by various agencies are in contrast to the interpretation of the Department of Trade and Industry’s Codes of Good Practice but are consistent with the BBBEE Act and the B-BBEE Strategy.”

 

 

We are beginning to use Twitter (@KeithLevenstein & @EconoBEE) more and more. One of the abbreviations used in Twitter is “SMH” – it stands for shake my head – a term used when someone makes a really nonsensical comment.

They are saying that their methodologies and interpretations are in contradiction to (“in contrast to”) the codes of good practice, and therefore the codes are being ignored in favour of their own interpretation because they find them more applicable. SMH

I’d also love to change the codes because I feel that some aspects are not perfect. I’m not referring to grey areas where the codes are not clear – I’m referring to very clear parts that could eventually be improved. This agency has taken it upon themselves to do exactly that! Even the minister has to gazette a proposed change and wait for public comment. This agency has done so without even telling anyone.

Unfortunately many inconsistencies still exist. Many will take time to solve. Many will catch unsuspecting business out, resulting in lost BEE points. Before embarking on any BEE project give us a call 011 483 1190 and we will help guide you. EconoBEE is a BEE consultancy. Through our managed service we will help streamline the process speeding up implementation and improving your overall BEE status.

 

 

Prepare for BEE Verification Conferencebook now

Cape Town (21 July) and Johannesburg (28 July), providing business managers / owners with vital information that will ensure that one is able to maximise one’s BEE points, avoid unnecessary delays during the verification process and ultimately take control of the verification process to ensure a correct result every time. Read more…

 

 

 


 

How to analyse a scorecard?

 

The procurement element is worth 20 points to generics and 25 to QSEs. Your suppliers will be supplying you with certificates from which you can earn those 20/25 points. It is your task – the measured entity – to analyse suppliers scorecards.

You can only earn points from valid scorecards, so it is very important to confirm or verify that your suppliers certificates are correct. If the wrong scorecard is used then it becomes invalid, and you will lose procurement points.

There are many scorecards that businesses use:

  • EME
  • QSE
  • Generic
  • Multi-national
  • Sector codes

All sector codes also have EMEs, QSEs and Generics, but thresholds may differ. Some sector codes have sub-sector codes, or multiple scorecards.

The Construction Sector codes defines a contractor and BEP (built environmental professional) scorecard.

The contractors scorecard is based on the same thresholds as the codes of good practice.

A BEP is an EME if its turnover is less than R1.5 million. It is a QSE if its turnover is between R1.5 million and R11.5 million. If a BEP (architect, quantity surveyor, project manager) submits a certificate, you need to confirm their turnover. Typically accountants will write a letter confirming that the entity has a turnover of less than R5 million and “is therefore compliant”. This is not necessarily the case. We have seen a construction project manager with a turnover of more than R20 million producing a QSE scorecard, which is also incorrect.

The tourism sector has a similar issue. The EME threshold is R2.5 million. Amongst others guest houses, restaurants, conference centres are included in the tourism sector. We typically see EME certificates from guest houses, again showing a turnover of less than R5 million. The letter and EME certificate should show that the guesthouse has a turnover of less than R2.5 million to be a valid EME status.

The other sector codes have their own quirks. The Transport sector codes has many sub-sector codes, each slightly different to the other – it includes, freight clearing and forwarding, road transport, rail, maritime etc. Each certificate needs to be checked for accuracy as well as to ensure that the entity falls into the relevant sub-sector code.

This was why when the sector codes initially were discussed we felt that it would place a huge burden on companies and result in less compliance. While we understand the need for various industries to undertake their own transformation initiatives, if the charters are not implemented correctly it renders them null and void.

However, while the sector codes are gazetted, it is necessary to try to ensure that your suppliers’ certificate are indeed valid. If it turns out that you accepted a certificate from, for example, the construction project manager who produced an invalid certificate, it may invalidate your own certificate. Your own competitors are going to be very upset if they see your score higher than it should be and you win the business, and vice versa.

 

 

 

BEE Managed Services Saves Time
EconoBEE can assist you with your BEE Verification – our consultants will even sit in during your BEE Verification giving you the extra time to work in your business. Learn more about our managed service, contact us on  011 483 1190 or info@econobee.co.za.


 

 

 

Expert Advice pays for itself
Save time and effort by allowing EconoBEE, Experts in BEE Compliance and scorecard optimisation handle all of your BEE requirements. Contact us on  011 483 1190 or info@econobee.co.za.

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EconoBEE Newsletter
19 July 2011

In this issue

  • B-BBEE Interpretations – Two sides to the same story
    How to analyse a scorecard?

In other news

About EconoBEE

EconoBEE is an expert BEE consultancy. EconoBEE helps businesses Become BEE Compliant, prepare for verification, earn maximum BEE Points and ensure that they achieve the BEE Level they need to get more business.

Our services include BEE Management Systems, Training, EME Pack, Complete Managed Services; consulting and advisory and Procurement Solutions.

As leaders in the industry we are driven to help maintain and develop knowledge in the BEE industry.


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Regards
Gavin and the EconoBEE Team

Executive summary of B-BBEE

Turnover below R5 million per annum – automatic BEE status

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Tip:

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