Original publish date – Mon, 13 Feb 2012 10:05:31 +0000, Keith

The minister has gazetted an explanation regarding the new targets conundrum, notice 102 of 2012 issued 7th February 2012.

The key paragraph states:

“With effect from the 9 February 2012, the 0-6 year targets will come into operation. However for measured entities whose Measurement Date is prior to 9 February 2012, the 0-5 year targets will still be applicable. But for measured entities whose Measurement Date is post 9 February 2012 the new targets will be applicable.”

The notice of course should have  stated “With effect from the 9 February 2012, the 6-10 year targets will come into operation.”, instead of saying 0-6 year targets. We have notified the dti of this typo.

That notwithstanding the dti has clarified the issue to some extent, but it still is going to cause some serious problems.

The intention of this notice is that a company that is using its financial period of say 1st January 2011 to 31st December 2011 will use the “old targets”, whereas a company whose financial year ends on 29th February 2012 will use the new, higher targets for its next verification. We can therefore expect to see new targets being implemented as from about March or April of this year.

The codes, and this notice uses the term “Measurement Date”.

One of the key principles of the codes (statement 000, code 000) states:

2.3    The basis for measuring B-BBEE initiatives under the Codes is the B-BBEE compliance of the measured entities at the time of measurement.

This, presumably is what the minister had in mind when he stated “However for measured entities whose Measurement Date is prior to 9 February 2012, the 0-5 year targets will still be applicable.”

There has been some discussion about the concept of “measurement date”. We have always seen the measurement date as the end of the financial period under review. However many verification agencies do not see it that way. They correctly use the financial period for financial information like turnover, net profit after tax, skills spend, ED spend, payroll, SED spend and procurement. However those agencies tend to use ownership data and EE data as it appears on the date of the verification. We have argued that this is not a consistent approach. The purpose of verification is to verify that data as it was on the measurement date. This is consistent with for example an audit where the audit is performed many months after the year-end.

The reason that verification agencies give is that SANAS requires them to interview a selection of employees, and if an employee has left they cannot interview the employee.

In our discussions with the dti, they see measurement date in the same way as we do.

To their credit the dti has promised us that they will fix the “0-6 year” error, and give a more detailed explanation of measurement date.

It does mean that verification agencies that have incorrectly used the verification date as the measurement date will have to change their policies. They will also need to satisfy SANAS that they have sufficient information about an employee who has subsequently left the company to justify having awarded them the points.

We have one more suggestion and that is that the measurement date be included on the verification certificate, clearly showing which target is being used. This information should be included o the verification report that agencies submit to their clients, but is not included on the final B-BBEE Certificate.