BEE verification plan of dti ridiculed

By Wiseman Khuzwayo Time of article published Aug 20, 2014

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The Department of Trade and Industry (dti) has been heavily criticised for its plans to do away with private black economic empowerment (BEE) verification agencies as part of its radical economic transformation programme.

Addressing a black industrialists stakeholder engagement session last week, Deputy Trade and Industry Minister Mzwandile Masina said: “We will centralise BEE accreditation be- cause as things stand at the moment it is open for abuse. Therefore, we will look at ways where this function is housed in the dti. If we are to create sustainable black industrialists, we must change how we do things.”

Verification agencies are independent firms that help clients comply with the broad-based BEE scorecard.

The dti proposes doing the verification itself through the office of the BEE commissioner, which is to be established within the department by April 2015.

Agencies currently have to be accredited and regulated by the dti-appointed SA National Accreditation System (Sanas) and the Independent Regulatory Board for Auditors (Irba).

Sanas has 46 accredited verifying agencies on its website, while the number for Irba could not be established.

Duma Gqubule, a BEE analyst and founder of KIO Advisory Service, said it had to be accepted there was a problem with BEE verification certificates in the eyes of the public.

“There were loopholes in the BEE codes of good practice. You can say the exam became too easy to pass for the clients of verification agencies,” he said.

However, Gqubule called the plans by Masina pie in the sky and said the deputy minister was being irresponsible because the BEE verification sector was fraught with problems.

“Masina does not understand the issues in this sector. He is creating panic and uncertainty. He must talk to his officials; they will tell him what the problems are.”

EconoBEE, one of the biggest verification agencies, said it saw Masina’s plan as a “ridiculous attempt to solve a genuine problem”.

“At the moment, many verification certificates we see do not give us confidence that they correctly represent the entity’s BEE status. There is one reason for this and only one organisation to blame: the dti. If it, and the regulators appointed by it, did their job, the problem would cease to exist.

“The BEE codes, while having good sentiments, are badly written and riddled with errors. We have asked the dti many times to issue guidelines, and to take action against inconsistent verifications, errors, interpretations and fronting. They have not done so. Where they have issued guidelines, they invariably get it wrong. The single most important reason why BEE is failing and verification is inconsistent is the dti.”

EconoBEE said it had complained many times and written numerous articles highlighting the fact that different agencies, even different people in the same agency, would award vastly different points.

Ismail Laher, the director in corporate practice at law firm Norton Rose Fulbright, agreed that different agents had different interpretations of the codes.

He hoped the Broad-based BEE Amendment Act to come into force in April 2015 would prevent that. However, he was concerned there had been no public engagement before Masina announced the plans.

He was also concerned about what would happen to the verification agencies when the dti took over the function.

Spokesman for the department Sidwell Medupe was not available for comment.

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