WHILE business owners looking to cut down on the cost of a BEE verification – which can run to R10 000 or more – may still by law be allowed to conduct their own self-assessment when calculating their BEE score, most large companies are likely to continue insisting their suppliers obtain a verification from a BEE rating agency.
The Department of Trade and Industry’s chief director of BEE, Nomonde Mesatywa, told the Mail and Guardian this week that self-assessments are acceptable – as long as they are “supported with sound verifiable evidence”.
This followed a recent statement by the Association of BEE Verification Agencies (Abva) on its website that suppliers that submit self-assessments to a company they do work for or plan to supply, will have to get these verified by a rating agency if the buying company intends to rate the procurement element on its own BEE scorecard.
But in a conference call with Mesaytwa, Abva chairperson Andile Tlhoaéle told the Mail and Guardian that at the end of the day it will be up to the large company as to whether or not to except a self-rating from a supplier. This is in keeping with the department’s view that the decision on whether to accept self-ratings or not must be driven by the market.
The confusion over self-assessments follows a complaint 11 BEE consultants lodged earlier this month with the Competition Commission against the Department of Trade and Industry and Abva over what they believe is their stance against self-assessments.
BEE consultant Ivan van der Merwe of Matchmakers, who is co-ordinating the complaint, argues that the department and Abva are involved in a “concerted practice” to unlawfully exclude businesses that choose to compile their own BEE certificates through a self-assessment, rather than by way of a verification agency.
He points to recent statements Abva has made, as well as the gazetting of the department’s verification manual last year by the department and the gazetting of Government Notice 354 on April 9 by the former minister of trade and industry, Mandisi Mpahlwa.
The recent government notice, though not making any reference to self-assessments, stated that from the 1 August 2009 only BEE verification certificates issued by accredited verification agencies or those in possession of pre-assessment letters will be valid.
Entities with an annual turnover of less than R5 million remain exempt from having to compile a BEE scorecard.
Van der Merwe says businesses have been misled by Abva whose members stand to make tens of thousands at the expense of those small enterprises forced to get verified. BEE consultants, who are often tasked with assisting business owners with their self-assessments will also lose out.
The consultants want Abva and the department to issue press statements and inform business bodies, that self-assessments will be allowed.
Van der Merwe also questions whether the two recent government notices should take precedence over the BEE codes which say nothing about disallowing self-assessments.
Paragraph 2.6 of Code 00 simply states that: “Any representation made by an entity about its B-BBEE compliance must be supported by suitable evidence or documentation”.
But clause 5.4.8 of the verification manual dealing with procurement, states that a verification agency must ensure that a measured entity only rely on verified BEE statuses of their suppliers when determining their own preferential procurement score. This argues Van der Merwe effectively rules out self-assessments.
Abva argues that the codes do not define what “suitable evidence” is and that as such the “methodology and evidentiary requirements” of the manual are the only benchmark against which to measure the suitability of the evidence provided.
Van der Merwe also argues that companies that wish to have their suppliers verified should undertake to cover this cost themselves on behalf of the supplier.
But Tlhoaéle said buyers shouldn’t be forced to pick up the cost of their supplier’s verification as it would mean the corporate effectively owned the rating, leaving the supplier to then having to get verified again when they procured from another corporate.
He added that from a business perspective in the long run it would be more cost-effective for an enterprise to obtain a verification than to fallback on a self-assessment.
Kevin Lester, a BEE consultant and a director at Transcend Corporate Advisors, said though he was not in support of the complaint, the department had sown confusion by failing to allow for a period of public comment when releasing both the verification manual last year and its interpretive guide, in 2007.
The Promotion of Administrative Justice Act holds that where an administrative action could have an impact on the public, government must follow a consultative process.
Lester, a former lawyer who helped draft the BEE codes of good practice, said the last time the department had followed due process was in February 2007 when it gazetted the final version of the BEE codes of good practice.
“Not following due process on a matter like BEE does more damage than anything else,” he said, adding that it created suspicion by some that there was a certain “underhandedness” at play in the BEE sector.
But Mesatywa said in terms of the BEE codes it was within the minister’s executive powers to from time to time issue regulations in terms of BEE. She said the former minister had also followed due process in consulting a number of parties.
The Competition Commission’s Neo Chabane, a principle analyst in the enforcement and exemptions division said the commission was still considering whether to look into the complaint or not.
This is the second time in recent years that a complaint has been lodged against Abva at the commission. In November 2007 BEE consultant Keith Levenstein of EconoBEE took the association to the commission over its stance against self-ratings.
The Department of Trade and Industry had at the time not made the use of verification agencies mandatory.
In that complaint the commission ruled that the decision whether to accept or reject scorecards produced through a self assessment rested on the procurer of the goods or services.
This article appeared in the Mail & Guardian on 29 May 2009.
Stephen Timm is a