Lack of agency capacity breeds BEE verification crunch

By Mzwandile Jacks
published by Business Report

The number of black economic empowerment (BEE) verification agencies was worryingly lower than the number of companies they had to accredit, making it impossible for them to certify all local firms as required by law, consultants warned on Friday.

Keith Levenstein, the chief executive of EconoBEE Consulting, said there were 26 verification agencies that had to accredit 500 000 companies.

“The sheer volume of work that is going to come in is huge,” said Levenstein. “These agencies may not be able to accredit all these companies.

“This state of affairs is not right if we want companies to comply. Some companies may not comply, knowing that it could be impossible to verify their BEE status.”

This could undermine the state’s efforts to redress imbalances of the past. It would also open up the process to abuse by companies not interested in meeting the broad-based BEE legal requirements.

Levenstein said what made matters worse was the confusion regarding the BEE codes for the tourism, forestry, transport and construction sectors.

These had been gazetted and must be followed by companies in those industries.

“However, no verification agencies have been accredited by the SA National Accreditation System (Sanas) to perform verifications for those sector codes,” Levenstein said. “This implies that any company in those industries will not be able to have their sector scorecard verified by an accredited agency from now on.”

The codes state that companies in those sectors may not use any scorecard other than the applicable sector code.

This means many companies will be without an official verified scorecard until either Trade and Industry Minister Rob Davies extends the deadline for valid scorecards or Sanas accredits agencies to perform verifications.

On Friday the Department of Trade and Industry (dti) said unaccredited verification agencies would no longer be allowed to issue verification certificates, with effect from today.

Nomonde Mesatywa, the chief director at the dti, said only BEE verification certificates issued by accredited agencies would be valid.

And only verification agencies that were in possession of a valid pre-assessment letter from Sanas would be valid.

Ajay Lalu, a partner at Bravura Consulting, admitted that there were too few verification agencies in South Africa and they “lacked capacity”.

“There is a skills shortage in the verification industry. The industry is also not that lucrative and it is attracting fewer professionals,” Lalu said.

He said verification fees were low relative to the amount of work that needed to be done.

He agreed that there was a need to open the industry to auditing firms, provided they met accreditation standards and were sufficiently empowered.

Lalu said companies would perversely choose the cheapest rating agency as this would “result in a superficial process of verification”.

He recommended that the private sector consider an increased fee for ratings, which would improve the credibility of service providers. “The government needs to enforce the quality of the rating industry.”

Association of BEE Verification Agencies (Abva) chairman Andile Tlhoaele told Business Report that South Africa had 50 verification agencies.

“Half of them are approved, which means Abva is in the process of accrediting them, and the other half have been accredited,” Tlhoaele said.

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