Continuing our comment on the BEE Amendment Act, see our next article below highlighting some of the most important changes in the Act. To read the previous 2 articles, click here for Reporting Requirements and click here for Punitive Measures

This week’s comment: Trumping Provision

Section 10(3) of the Act now determines that an enterprise that falls within a sector in respect of which the inister has issued a Sector Code of Good Practice in terms of section 9, may only be measured for compliance in terms of that sector code.  This provision was inserted due to some confusion that existed with respect to the status of the sector codes vis a vis the general codes.  Although the amendment serves to clarify some of the confusions we cannot but wonder whether this amendment represents a missed opportunity to totally clarify the issues surrounding sector codes.  To explain -  in spite of the amendment two areas of uncertainty remain:

i)  The scope of application of the majority of thesector codesare not defined narrowly enough and in most cases attempts to cast the net wider rather than narrower, or in other cases are unclear as to its application. This often leads to the unintended consequence that businesses that do not naturally fall within the ambit of the particular sector find themselves measurable under a particular sector code.   This uncertainty on its own should have disbarred most of these sector codes from receiving final approval – but unfortunately did not.  In order to resolve some of these issues the Dti has attempted to introduce a rule of thumb which requires agencies to use the turnover of a business to determine whether the 'majority' of its business falls within a particular sector.  This 'rule of thumb' is however not gazetted and one would have hoped that the Dti would have made use of the process of amending the Act and in particular section 10 to deal with this.

ii) Section 10(3) also fails to address more complex group structures where a group of companies whose subsidiaries operates in diversified sectors, wishes to obtain a consolidated B-BBEE certificate for the group.  The question begs whether or not such a group is barred from including those subsidiaries that are governed by separate sectoral codes, into the consolidation and if not whether those subsidiaries are forced to then also have their own individualB-BBEE certificatesin terms of the particular sector code it falls under.  A pragmatic approach to this problem might be to allow consolidation of all subsidiaries in terms of the consolidation and to conduct the consolidation at the hand of the general or sectoral codes, whichever the case may be, that appears to be applicable after having applied the Dti's rules of thumb to the group as a whole.  We believe that even if consolidation is allowed in such cases that it would only be the holding company of the group and those subsidiaries that fall outside the scope of any particular sector code that would be allowed to furnish the consolidated verification certificate as proof of itsB-BBEE status(this of course assumes that the consolidation is done in terms of the general codes).  All subsidiaries that fall within the scope of a particular sector code would be in transgression of section 10(3) if it then furnishes the consolidated group certificate as apposed to its sector specific B-BBEE certificate.

In our view the Amendment Act could have done more to clarify the above matters, specifically as it was highlighted to the parliamentary portfolio committee during the commentary process.

Impact of Revised BEE Codes? Click Here for more info regarding our workshops

Last week we started our comment on the BEE Amendment Act with the 1st of 3 newsletters to highlight some of the most important changes - read previous article  here.

This week we look at:

Punitive Measures

Act 53 contained no express punitive measures for transgression of any of its provisions. The Amended Act expressly criminalises several offences and provides for harsh penalties of up to 10 years imprisonment and up to 10% of the annual revenue of the business involved or both. In addition to the above any person convicted of an offence in terms of the Amended Act may not for a period of 10 years from the date of conviction, contract or transact any business with any organ of state or public entity and must for that purpose be entered into a register of tender defaulters which the National Treasury may maintain for that purpose. 

Other than for the reporting obligations discussed above the Amended Act expressly provides that it is an offence to knowingly:

  1. Misrepresent or attempt to misrepresent the B-BBEE status of an enterprise;
  2. Provide false information to or misrepresent information to a B-BBEE verification professional;
  3. Provide false information to or misrepresent information to a public entity or organ of state;
  4. Engage in fronting practice.

The term 'knowingly' as defined in terms of the Amended Act does not mean that the individual involved had intent to defraud or misrepresent. If the misrepresentation happened negligently it would be sufficient to trigger the criminal offence that attracts the penalties referred to above. This places a significant onus on measured entities and verification professionals alike to ensure that the risk of misrepresentation is appropriately mitigated.

Look out for next week’s commentary: Trumping Provision

The Broad-Based Black Economic Empowerment Amendment Act, 2013 (the 'Amendment Act') was gazetted earlier this year on 27 January 2014 (Gazette 37271). This followed a year long public commentary process where interested parties were also encouraged to make submissions to the parliamentary portfolio committee on transformation.

The Amendment Act is an amendment to the Broad-Based Black Economic Empowerment Act 53 of 2003, which came into existence on 1 January 2004. Act 53 of 2007 was an enabling framework which gave wide powers and authority to the Minister of Trade and Industry to issue Codes of Good Practice, which currently contain the scorecards and calculation methodology companies use in order to measure their B-BBEE status. The Amendment Act must therefore not be confused with Revised Codes of Good Practice that were also gazetted recently on 11 October 2013.

Over the next 3 weeks we will highlight some of the most important amendments contained in the Amendment Act.

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The Revised Codes were launched on Friday.  The most important facts to be aware of for the moment are the following:

BEE Amendment Act signed into power by the President and gazetted on 27 January 2014


AQRate Revised BEE Forestry Codes

We are proud to announce that AQRate has in Joint Venture with Foresight Strategies been awarded the tender for the management of the alignment process of the Forestry Sector Code with the Revised Codes of Good 

Practice.  As part of the tender AQRate is tasked with drafting the final revised Forestry Sector Code.  This further entrenches AQRate's role as a thought and academic leader within the Broad-Based BEE industry.

hrsmartIn our continued pursuit of excellence and quest to remain the market leader in terms of service, quality and innovation, AQrate is proud to announce our latest offering.

In conjunction with an international leader of talent management solutions, AQrate can now introduce an online applicant system which will allow jobseekers interested in joining the AQRate team to view vacancies and upload their resumes electronically. The application process has been tailor-made to allow jobseekers to effortlessly search for vacancies/jobs or even just to load their CV on the database for potential future applications. The entire recruitment process is automated from start to finish. This in turn allows for rapid feedback and real time updates on whether an applicant has been successful or if the vacancy has already been filled.

Our philosophy of acknowledging the importance of high level skills to a credible verification audit; coupled with this new recruitment drive for talent will ensure we provide you with top a level of service delivered by quality and professional staff.

Click Here to go to the system.

We are proud to announce that AQrate KZN has been awarded the Alec Rogoff BEE Qualifying Small Enterprise award for 2014 by the Chamber of Commerce & Industries at the annual Chamber Awards Ceremony – proving that we not only have the “know-how” of Broad-Based Black Economic Empowerment, but also the “show-how”!

AQRate KZN is proud to have been awarded the Alec Rogoff BEE Qualifying Small Enterprise Award by the Durban Chamber of Commerce and Industries

2014 is our 10th Anniversary in the Verification Industry. Thank you to you our valued clients and important stakeholders and peers in the industry – without you it would not be possible to have achieved the reputation of one of South Africa’s leading Verification Agencies.

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