|Impact of BEE on your Business
B-BBEE has been pushed off the front pages of the newspapers recently due to toll roads, Mr Malema and others. However, BEE is as important as ever before. In a not unexpected turn of events, the additional demand from the new government tender regulations (PPPFA) has caused many companies who previously did not need a scorecard to require a good scorecard in a very short period of time.
The problem with getting a scorecard quickly is that there has been no preparation and almost certainly no BEE "point able" activities exist, making it an extremely expensive mistake to wait until the customer asks for a scorecard.
It has no doubt become common knowledge that a BEE scorecard is required when doing business in South Africa. This cascading effect is a smart mechanism used to encourage businesses to become compliant. In so doing every business who gets a scorecard needs another scorecard from their supplier. As a result depending on the nature of your business and the customers you have you might find yourself losing big contracts overnight because of non-compliance. On the other side a good level will not only please your customers but help keep your competition away from your hard earned success.
So ultimately is your business prepared for a good BEE status?
With the right tools, knowledge and approach becoming BEE compliant and doing well is not difficult. The first step is to do some research. Once you have a good idea of what to do, strategise on ways of implementing it properly while giving yourself enough time to have all transactions complete before your year end.
Remember, having a BEE scorecard and having a BEE scorecard that is satisfactory to customers are two completely different issues. On the one side you have a scorecard, issued by an accredited agency (SANAS or IRBA) but it invariably doesn't have enough points to satisfy your customers.
Points are earned on seven elements.
Smaller businesses(below R35 million) can select any four while larger businesses(above R35 million) have a harder scorecard.
Manage your BEE process better EconoBEE's complete managed service is designed to help you earn more BEE points, be less admin intensive and ultimately less costly. Contact 011 483 1190 or visit www.econobee.co.za for more info
When is too late, too late!
The scorecard will be verified on past data, so if you need a good scorecard and your financial year has just come to an end, then during your rating very few elements will earn you points. The implication for many businesses is that their last year's period (Feb 2012) is already closed which makes it impossible to earn more points in that period. The sooner they start preparing the better their overall score. BEE is a long term process that takes time to implement, time to manage and time to plan.
The Procurement element on the scorecard is one of the easier elements. It simply requires you to phone/email/fax each supplier and get a BEE scorecard from them. With that scorecard you can then earn more or less points based on the level achieved. The procurement recognition table is available here. Now, if we reverse the process, your business will be on the receiving end of one of the telephone calls that asks you for a scorecard because your customers require it. Once your customer asks for a scorecard you generally need one within days which is simply not possible.
Contacting all of your suppliers - Using our BEEProcured Database. We already have over 25 000 BEE certificates which speeds up the data gathering process tremendously.
EconoBEE is a BEE consultancy who specialises in helping companies become BEE compliant. We will assist you by compiling the administrative work for you which will include;
Strategies to earn more points in-line with best practice and business sense.
Templates, contracts, registers and other forms of proof documents.
Verification assistance by working with you when you go through verification to get the best possible score.
Internal scorecard calculation before your year end.
Contact us on 011 483 1190, email
or visit our website on www.econobee.co.za.
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|What is an Acceptable EME Document?
An Exempt Micro Enterprise (EME) is one that has a turnover of less than the threshold. An EME is exempt from all forms of B-BBEE and is automatically assigned a level 4 status.
If the EME is more than 50% black owned then it is level 3.
The threshold differs by sector, and is generally R5 million. If the enterprise falls into the tourism industry, then the threshold is R2.5 million or is a built environment professional the threshold is R1.5 million.
In order to qualify as an EME, the enterprise must supply acceptable proof or evidence of their turnover. Simply stating that they have a turnover of R5 million is not acceptable proof. Generally evidence must be audited financial statements, or signed off financial statements.
The B-BBEE Codes, codes 000, paragraph 4.5 states:
"4.5 Sufficient evidence of qualification as an Exempted Micro-Enterprise is an auditor's certificate or similar certificate issued by an accounting officer or verification agency"
The above states that you can ask your auditor, or accounting officer to issue you with the required letter. Alternatively you can use an accredited verification agency or approved auditor.
There has lately been some confusion over this, and some verification agencies are choosing to reject certificates that were not produced by accredited agencies or approved auditors.
In September 2011, the minister issued a gazette appointing IRBA as a regulator to approve auditors to perform BEE verifications. In the same gazette he stated:
“Statement 000, section 4 of the Codes of Good Practice still applies for determining eligibility of a Exempted Micro Enterprise”.
In June 2011, the dept of treasury issued new regulations for the PPPFA, in which they finally reconciled the PPPFA with B-BBEE. Effectively they stated that you will need to supply a valid B-BBEE certificate in order for your tender to be favourably adjudicated. It also spoke of EMEs and followed the exact rules of 4.5 above, but in connection with verification agencies specifically used the words "accredited verification agency".
Now it gets a bit more interesting:
Until now verification agencies did not have SANAS accreditation to issue EME certificates. I know this sounds stupid or wrong, but they were never accredited for code 000, which we pointed out a long time ago.
If you look at the accreditation certificates issued by SANAS it always excluded code 000 (of which paragraph 4.5 forms part). Strangely it could imply that any EME certificate issued by a verification agency was invalid because no agencies had been accredited, and technically there were no EME verification agencies.
There were some good reasons for this. If they were accredited they would have to follow the verification manual, which would require an on-site audit and more diligent work, at far greater cost. As mentioned above, the new PPPFA regulations have now stated that EMEs would need an auditor's or accounting officer's certificate or a certificate issued by an accredited verification agency (one with a SANAS logo on it). We pointed it out to the dept of treasury, SANAS and dti that no agency was allowed to put the SANAS logo on the EME certificate. (I have tens of emails from us explaining the legal issues to these departments). I was concerned that civil servants in evaluating EME certificates would automatically throw out EME certificates from accredited agencies simply because the certificate did not display a SANAS logo. I was dong this for the benefit of all EMEs, but in a way I was assisting the verification industry who were about to lose their right to issue EME certificates. I know the above is true because I trained hundreds of government officials about the new PPPFA regulations, and all they were interested in was seeing the SANAS logo.
This is when dti, treasury and SANAS finally realised that they would have to allow agencies to use the SANAS logo on EMEs. They then issued a joint statement in February 2012. The statement’s intention was to award all verification agencies accreditation for code 000, thereby allowing them to issue certificates that would satisfy PPPFA regulations.
The joint statement states:
"Sufficient evidence of qualification as an Exempted Micro-Enterprise is an auditor’s certificate or similar certificate issued by an accounting officer or an Accredited Verification Agency. In accordance with gazette notice 34612, the Minister of Trade and Industry announced that as of 1 October 2011, only B-BBEE status level certificates issued by SANAS accredited verification agencies and Registered Auditors approved by IRBA are valid. However in the case of EME certification Statement 000, Section 4 of the B-BBEE Codes of Good Practice still applies, but only accredited verification agencies may issue verification certificates including the Exempted Micro Enterprise certificates.
In the past, the issuing of EME certificates did not form part of the SANAS accreditation scope, as these entities are exempt from the requirement of the B-BBEE Codes of Good Practice which are the founding document for the role of SANAS. SANAS Accredited Verification Agencies were therefore not permitted to use the SANAS symbol on EME Certificates."
After issuing the statement, some verification agencies began thinking that it implied that they, and only they could issue EME certificates. Some companies have also started insisting on verified certificates. This is completely wrong.
There is no problem with the wording or intention of the statement, and there is no conflict with statement 000, section 4. The statement is absolutely clear that this applies to how SANAS accredited agencies must verify EMEs. All other methods of handling EMEs still apply. I think the dti would be horrified to learn that some agencies are rejecting those other methods.
- The B-BBEE Codes of good practice and approved sector codes are still the only measure of your B-BBEE compliance.
- The dti has given some guidelines of how the new targets, in the Codes of Good Practice are to be applied. These are not new codes. The existing Codes always spoke of targets for years 0-5 and targets for years 6-10. We now know that the targets for years 6 to 10 will apply to any company whose financial measurement period is after 9th February 2012.
- The B-BBEE Amendment bill, gazetted for public comment in December 2011, has not yet been passed by parliament. It needs to go through many processes in parliament before it can be signed into law. Parliament has not put it onto their record of business yet, so the chances are that it will be a couple more months, if not longer before it becomes law. The existing B-BBEE Act of 2003 is still the only act to follow.
- The dti has appointed IRBA as a regulator of approved auditors for B-BBEE verification. Verification agencies and approved auditors are still the only organizations that can perform a B-BBEE verification of your business. The only exception is an auditor or accounting officer can still sign certificates for EMEs.
No time to manage your BEE scorecard. Our consultants can phone your suppliers for a BEE certificate - Managed Service.
While there is demand for a B-BBEE Scorecard someone will be taking advantage, shouldn’t that someone be you...