/ 7 February 2014

Long-awaited BEE ombud still a work in progress

One thousand cops have been arrested for crime since 2010.
One thousand cops have been arrested for crime since 2010.

After spending more than 18 months going through approval processes, the now-entrenched Broad-Based Black Empowerment Amendment Act calls for the establishment of a Broad-Based Black Economic Empowerment (broad-based BEE) Commission, something industry practitioners believe is long overdue.

But although the Act has been legislated, South Africans can expect to wait for at least a year for the ­formation of the commission, let alone its functioning.

The much-anticipated commission will perform an ombudlike role. It has the power to investigate organisations where foul play such as fronting is suspected, either by reacting to a complaint or of its own volition.

It can report its findings publicly and institute legal proceedings against offenders, getting the National Prosecuting Authority and the police involved, where necessary.

The group will be headed by a commissioner, the "chief ­executive" of the commission, who will be appointed by the minister of trade and industry and serve for five years.

Most practitioners welcome the idea of a central authority in an area that has become infamous for inconsistencies, fronting and the exploitation of legal loopholes.

Seven years overdue
"Everyone would welcome a ­commissioner. It’s about seven years overdue, to be honest," said Alasdair Yuill, the managing director of BEE software company Mantis Networks.

But according to Nomonde Mesatywa, the chief director for BEE at the trade and industry department, this reality is still a distant one.

"As the DTI, we are still in the process of setting up the BEE commission itself," she said. "No appointment has been made as yet. We are hopeful this will be done before the end of the 2014/15 financial year."

That means companies and BEE practitioners eager for a central source of clarity for the many grey areas of interpretation around broad-based BEE, will, optimistically, need to wait until March next year before the commission kicks in. When it does come into play, the regulatory body will be expected to shoulder a number of responsibilities.

In addition to investigating fronting practices, the commission will be required to review broad-based BEE reports submitted by all public companies listed on the JSE, another new requirement that is outlined in the Act.

In addition, public entities, spheres of government and organs of state — entities that previously escaped broad-based BEE reporting altogether — are now required to report to the ­commission on their compliance.

Call for increased monitoring
According to Duma Gqubule, the founder of broad-based BEE consulting firm Kio Advisory Services, the call for increased monitoring of government practices is a welcome one.

"When you talk about state procurement, nobody has a clue as to how much procurement actually goes to black-owned companies. We need to know exactly how much is being spent on what. We need more transparency and reporting," he said.

But whether this actually means that every municipality and state-owned entity in the country will now be required to produce its own broad-based BEE certificate (at the taxpayer’s expense) is unclear.

According to Andile Tlhoaele, the founder of BEEandYourBusiness.com, that is what the Act requires.

"A BEE certificate is basically a report on BEE compliance," he said. "So they will have to get their own BEE certificate according to the specialised requirements for state-owned entities."

Others believe this is unlikely and unnecessary, as long as departments report on procurement and other BEE-related aspects relevant to their functions.

Mixed feelings
"I don’t think they need a BEE ­certificate," said Gqubule. "But they can report on employment equity, skills development and procurement."

The department did not respond to a request for clarity at the time of going to print.

Some practitioners feel that the confusion over the requirements for state-owned entities introduced by the Act only serves to underscore the general disorder and lack of decisive leadership in the industry.

Although some hope that the commission will be a salve to some of these woes, others are sceptical that the body will solve deep-seated industry-wide perplexities.

"To have some centre of reference would be appreciated," said Paul Janisch, the managing director of broad-based BEE consulting firm Caird.

"But I just don’t see it happening. The commissioner will be ­completely stretched. If you overregulate, you have to police, and if you don’t police, you make a fool of yourself."