Government’s BEE strategy is giving rise to a whole new industry of paperwork, as thousands of companies need to have their empowerment credentials checked. But the verification agencies themselves are still waiting for accreditation.
Empowerdex executive director Chia Chao Wu said the BEE verification industry was about R400-million a year, although this could be lower as the government is considering exempting more businesses from BEE requirements. Micro and very small businesses are already exempt.
“Using the StatSA Integrated Business Register, there are 428 540 active companies in South Africa [out of roughly 1,2-million registered] … Only 11% of the active companies in the country actually need to consider BEE,” Wu said.
He calculated that 49 281 companies need to have empowerment ratings. So far about 3 000 have been rated. Government has urged companies not to wait until agencies are accredited.
Wu said the cost of a rating for a listed entity would be “anything between R60 000 and R300 000, depending on size, employees and complexity”. Empowerment ratings start at R5 000 for a company, but depend on complexity.
Verification agencies need to be vetted by the South African National Accreditation System (Sanas). This cannot be done until the BEE Codes of Good Practice are gazetted, and as yet there is no indication as to when this might be.
“That’s the million-dollar question. We’re hoping soon,” said Theo Lombard of Empowerlogic, the interim president of industry body Abva, the Association of BEE Verification Agencies, when asked when he thought the codes would be ready. “But we’ve been hoping that for a year already,” he added.
In the meantime, Sanas and the department of trade and industry are running workshops to explain the process to the verification agencies. The accreditation criteria verification agencies will need to comply with are in the final stages of being drawn up, said Sean MacCurtain of Sanas.
Agencies will be able to apply for accreditation from October 1, until one month after the Codes of Good Practice are gazetted. These applications will be considered at the same time, and temporary licences granted for six months. No one is sure how many agencies will apply for accreditation, or when. Abva has just more than 100 members, but only about 40 of these are apparently ready to apply. Not all members are operational, and in order to be accredited they must be already working in the field.
There’s also the question of accuracy. If an incorrect rating is given, the company concerned can appeal to Sanas, which has the power to revoke the agency’s licence where necessary. Assessors are trained to pick up indicators of BEE fronting, and can ask for evidence of a company’s shareholding.
“It’s a growth industry, but it’s still in its infancy,” Lombard said. He could not give an indication of the number of jobs already created by verification agencies, but said many other companies were expected to enter the field.
The verification process
The Sanas website says it will assess whether verification agencies are themselves competent, have implemented the accreditation criteria and have qualified assessors who can conduct verifications at a variety of organisations.
“The qualifications and composition of a team that would rate a South African multinational entity would, of necessity, be higher and more comprehensive than for a team rating a small- to medium-sized entity with a simple share and management structure,” the website says.
It would also be important to ensure that agencies were consistent in their ratings. Sanas says on its website that it will do an on-site assessment of the verification agency and that it would witness the agency doing ratings, to assess competency. Agencies also need to comply with seven indicators of the broad-based BEE scorecard, and be independent and impartial. The indicators concern equity ownership, management and control, employment equity, skills development, preferential procurement, enterprise development and residual factors. A Sanas document says that agencies will be re-assessed after 42 months.
Once Sanas has accredited a particular agency, the minister of trade and industry will need to approve the accreditation. Approval will depend on whether the agency is itself a superior contributor to BEE and whether it is a members of Abva, the industry body.