JOHANNESBURG - A number of companies continue to contravene the Broad-based Black Economic Empowerment Act (B-BBEE) by misrepresenting their BEE status, according to the B-BBEE Commission.
A B-BBEE certificate enhances a company’s prospects of securing contracts with the government and large companies. Organs of state and public entities also consider compliance with the B-BBEE Act for the issuance of licences and concessions. But incidents of fraudulent and invalid certificates point to problems in B-BBEE verification.
The commission’s senior manager for compliance, Lindiwe Madonsela, said yesterday that there was a prevalence of invalid certificates.
Madonsela said that on detecting improper conduct, the commission dealt with the concerned company and the verifier.
“We can also refer the matter for investigation,” she said. A B-BBEE certificate is valid for a year and must be renewed annually.
She said the B-BBEE Act provided that any person convicted of an offence in terms of the B-BBEE Act was liable, among others, to a fine or imprisonment for a period not exceeding 10 years or both a fine and such imprisonment or, if the convicted person was not a natural person, to a fine not exceeding 10percent of the entity’s annual turnover
The commission announced last month that verification agency SAB&T BEE Services had improperly issued two B-BBEE certificates to a close corporation called Verve Marketing and Communications.
The commission said that SAB&T BEE Services had aided Verve Marketing and Communications in misrepresenting its B-BBEE status for the 2015/16 period, “undermining the need for integrity of the verification process and misleading other entities that do business or engage with Verve Marketing and Communications CC”.
According to the commission, SAB&T BEE Services issued the certificate based on old financials.
“A verification process is critical to properly reflect the extent and level of transformation of each entity, and manipulation of financial information that ought to be used to conduct this process will not be tolerated.
“Using the same financial information for two consecutive years is tantamount to misrepresentation and undermines the objectives of the B-BBEE Act. The fact that this conduct was done to avoid the coming into effect of the amended codes indicates a clear disregard of the B-BBEE Act by the verification agency and professional,” the commission said.
Chris Rayner, an associate at investment banking firm Bravura, said yesterday that there was uncertainty in understanding and managing the regulatory landscape under the B-BBEE Act.
“The second half of 2017 saw a number of material developments in South Africa’s BEE landscape, driven by an increasingly active regulator committed to investigating potential non-compliance and instances of fronting,” said Rayner in a statement.
The commission remains vigilant about the implementation of B-BBEE.
The commission has also questioned Sasol Khanyisa, Sasol’s new R21billion broad-based black economic empowerment ownership structure. Sasol Khanyisa is intended to achieve effective direct and indirect B-BBEE ownership of at least 25percent in Sasol SA, a wholly owned subsidiary of Sasol.
In a circular to shareholders, Sasol last year said the commission had raised concerns about Sasol South Africa’s entitlement to claim ownership points in respect of the proposed holding of shares by the Sasol Khanyisa Employee Share Ownership Scheme (ESOP) trustees based on its interpretation of what constitutes ownership.
“Sasol and its advisers disagree with the commission’s interpretation of what constitutes ownership. Sasol points out that the structure of the Sasol Khanyisa ESOP is no different in material aspects to those structures adopted by many South African corporates in their BEE ESOP schemes,” Sasol said in the circular.