Archive for August, 2009
The reason why any company should produce a BEE scorecard is not to please their Verification Agency. In reality, the Verification Agency should not be in the position of dictating the whole process of BEE compliance. The company has all the responsibility to make sure that the process towards getting BEE compliant is effective and produces the desired result. The scorecard is essentially produced for the customer so that the company does not run the risk of losing business because of failure to produce a good scorecard. This means a company is actually supposed to work on the scorecard because they fear losing business from their customers. In most instances, the customer wants a scorecard with good points. The urgency to work on the scorecard should not be initiated by the Verification Agency. Verification Agencies are in no position to punish a company for failing to produce a scorecard. Therefore, companies should make decisions that ensure they have the best BEE scorecard points. Some companies have even gone as far as skipping important stages in the BEE compliance journey like getting a consultant’s help because they have been given undue pressure by Verification Agencies..
BBBEE, is a brilliant act. It consolidates, objectively the performance of various elements to determine how compliant a business is. With such a fantastic system many businesses still use the BEE charters as an excuse.
This is an extract from the SA CORPORATE REAL ESTATE FUND Unaudited Interim Results And Distribution Declaration
EMPOWERMENT AND TRANSFORMATION
There are certain elements of the DTI codes that the Fund is unable to comply
with due to legislative restrictions that are placed on the Fund via the
Collective Investments Schemes Control Act. The Fund will obtain an official
BBBEE rating once the Property Sector Charter has been gazetted under Section
9(1) of the BEE Act.
In terms of its internal review and rating process that has taken place, the
Fund has made positive progress, particularly in the category of preferential
The BEE scorecard never intended a company to earn all their BEE points (at least at this point in the process), it intendeds them to earn as many as they can and then over the years improve that score. Preferential Procurement governs this in that a supplier is likely to get business if they have the highest score which in some industries is lower than others.
It is a terrible excuse to wait for a Property Charter and not get a scorecard. Why choose not to produce a scorecard. The only practical sollution is, earn as many points as they can and then if the property charter is gazetted show a significant improvement in their score. In any event the BEE Codes of Good Practice are clear, they must use the Code of Good Practice until their property charter is gazetted.
I see this ultimately as an excuse, not to transform, rather than a genuine attempt at true transformation.
The National Treasury has issued a draft notice reconciling the PPPFA with the B-BBEE codes. The PPPFA dictates how government should issue, adjudicate and award tenders. It was based on the 80/20 for tenders below R500 000 or 90/10 principle for above that limit. Using this principle a tender would be evaluated by allocating 80 points to the tender itself – price, product, service, guarantees etc. 20 points would be allocated by using “HDI status and the achievement of the RDP goals”. Effectively it meant that tenders were awarded using the old narrow based method. A company’s BEE status meant nothing – only ownership and management were taken into account.
The draft regulations now state that those 10 points or 20 points are based only on your BEE level. They have also increased the 80/20 threshold to R1million. So, if a company tenders for government business and it has achieved level 4, then it is automatically allocated 12 points out of the 20. If it is non-compliant then it earns zero points on the tender adjudication. On the other hand if it is level 1 then it earns 20 points on that tender. For tenders above R1million the 90/10 principle applies. The 10 points are allocated based on BEE level. A level 1 company earns 10 points, a level 4 gets 5 points and a non-compliant gets zero points.
With minor exceptions, this is exactly what we have been asking for over the past 4 years. The main difference is that a company’s BEE score is now used in evaluating their tenders, rather than the unscientific and arbitrary manner,usually based on the now discredited narrow based format.
A good scorecard will now become more important, and more useful to businesses, many of which had to try to comply with contradictory requirements.
When you spend money on an enterprise development project you would like to know that the business you are assisting is will be viable and sustainable. We know that most new businesses fail within 5 years – 98% of them. What a difference it will make to us, an the world if we can improve the success rate of businesses we help: Less unemployment, more production, more growth, more GDP, more wealth – a better economy!
While procurement is worth 20 points on the B-BBEE scorecard, many people perceive it as being very admin intensive and generally a difficult tasks. You have to identify all your procurement by supplier and type of expense, then go through the big effort of asking each supplier for a BEE scorecard. Then you need to know what to do about the certificate you get from the supplier. Each certificate must be examined for accuracy, expiry date etc. You need to capture the data by supplier, by his type of enterprise, his value adding status, his ownership etc etc. Then there are the calculations itself. you need to remember to take into account and calculate the score for each indicator etc etc etc.
The etc,etc,etc etc sometimes become just too much for many businesses and they just give up, or simply lack the time and skills to do the job properly. After all you job is to make a profit, not get tied down in admin. There is a solution: We are working on our BEE Procured system, which takes the admin and pain out of procurement and maximises your points.
Imagine making a list of suppliers and spend, uploading it to our BEE Procured system, spending a couple of minutes working on the system and already earning the points. Imagine not have to call every single supplier – we already have many scorecards, so why duplicate the effort by phoning the supplier again. Imagine the system automatically looking up in our system for scorecards, and once you have confirmed the right scorecard it takes into account all the right details, and calculates the score you have earned. It identifies the suppliers without scores to be followed up, optionally by ourselves and instantly produces a report, that is perfect for your verification agency ensuring you earn all the procurement points you deserve.
The above is no longer a dream. We have been working on this system for the past 6 months to make it so easy to use that it will, GUARANTEED (*), cut your time and effort of doing procurement by 80% or increase your scorecard points by 30%. Procurement is going to become the easiest element on which to earn points, and your cost per point will be the lowest of any element of the element on the scorecard.
(*) Your money back, no questions asked!
This amazing system is nearing completion and will be available in time for our forthcoming Procurement and ED Conference. Delegates who book and pay for the event get a free one year license. Everyone else will have the opportunity of purchasing an annual license at a very reasonable rate shortly.
In my many years of developing cost effective solutions this is the one that has excited me the most because it has the potential to save our clients more time and money than anything prior and ensure they earn the points. 8 years ago I developed EconoSMS, an SMSing system, that is still in use at many clients. Their computer gave in before the system did! I am very proud of EconoAccounting, also an 8 year old product that does your accounts in a way that others have never done before (we call it the 5 minute per day accounting system). Our popular EconoBEE V3 is an easy to use system that helps you calculates your own BEE score and understand how BEE works.However BEE Procured is going to save more time and remove more aggravation than all our other systems put together.
I’m really excited, you should be too!
Some verification agencies believe that one interpretation applies, others that a different one applies. One agency flatly refuses to accept a particular calculation, while the other fully accepts that calculation.
One example is the calculation around early repayment of invoices. One agency believes that a company can claim a maximum of 15% of invoice value for paying COD while the other believes that 100% of the invoice value is claimable. Each produce a letter or email from someone justifying their position. Let’s say Agency A believes that 100% is claimable and Agency B follows the 15% rule while Agency A follows the 100% rule. We of course know that the 100% rule is the right one and have a letter from the chief director of the dti’s BEE unit to prove it.
Now Agency A produces a certificate for “Company X” using their interpretation giving “Company X” 14 points more than Agency B would have. Now “Company X” is a supplier to “Company Z” and gives them a scorecard showing them to have a score from Agency B’s viewpoint that is 14 points too high.
What should Agency B do? When they do the procurement calculation for their client “Company Z”, do they reject the scorecard supplied to them by “Company X”? If they had principles they should reject that scorecard on the basis that the company is misrepresenting their score, ie fronting. If the boot was on the other foot, then Agency A acting for “Company X” should reject the scorecard produced by Agency B for “Company Z”, in this case on the strange basis that the scorecard is 14 points too low – misrepresentation nevertheless!
What happens in practice? Neither agency rejects the other’s scorecard, as long as they are fellow SANAS accredited agencies (even though the minister has extended the period for “non-accredited verification agencies” to continue issuing scorecards.
If an agency accepts a scorecard produced by an alternate calculation, does this mean that the agency accepts both calculations as being valid? If so, why would one agency chose to use a calculation that decreases its client’s score while accepting that calculation for one of its client’s suppliers.
A conundrum indeed!
See below for the dti’s comments on this issue:
No, nothing from them either!
There are no more verification agencies! They do not do verification, notwithstanding their accreditation with SANAS. All they do is come up with some opinion that suits them at the time. Based on an opinion, with no legal backing they award or remove points from their clients. They knowingly ignore the codes, directives and notices and use whatever little knowledge they have to guess a score. Recently we complained that agencies were differing on up to two levels. This is not an isolated instance. It is happening all the time.
One agency consulted to their client last year, and made certain suggestions. This year, against all dti and SANAS policies they did the verification for the same client, disregarded their own advice and rejected the points. A sure case of conflict of interest. This is why an agency cannot consult and verify at the same time.
When we ask why they do something they cannot give an answer, other than “my boss told me”. And companies are paying thousands for this lack of competence and service! Moreover a good scorecard is desperately needed by companies in order to retain or get new business, so the verification, sorry opinion agencies, have huge power over their far larger clients. Those clients are too scared to complain in case their scorecard is removed entirely at the oipinion agency’s (in)discretion.
The problem, other than the BEE unit of the dti and SANAS have no clue has is happening, is there is no competition – only 22 agencies have been accredited.
The minister has extended the date for issuing a valid certificate to 1st February, but many companies will not accept your scorecard unless it has been produced by one of the group of 22. This is contrary to the dti minister’s policy, and we believe amounts to an unfair business practice by the company.
If you know of any companies that are refusing to accept your scorecard, and have written proof of their policy, please forward it tous, so we may take further action.
Msizi of Mabuya Glass Merchants has now made a few sales after our newsletter talked about his business and the glass white boards.
It is really a great feeling to walk into the office and look over at the fax machine and see orders.
In addition to helping Msizi our business will earn points. A real win win.
Mabuya Glass Merchants is one of the businesses we help – not because we have to but because we want to. Msizi Ngwenwa is a running mate of mine – (Comrades silver medalist). He is a glazier, and knows all about glass. He tried very hard to get into the building trade, but due to the competition, and lack of cash flow and expertise he never really succeeded, but he has still not given up.
Some time back we needed a whiteboard for our training room, but do not like the standard boards as they tend to stain, and the ink never really rubs out. Instead we asked Msizi to install a glass white board on our wall, and it works perfectly and looks really good. We can write on it with any marker pen, and a bit of windowlene is all that is needed to clean it. We started discussing ideas for Msizi around producing glass whiteboards. We have assisted him with equipment and he has now started production of glass boards: They are beautifully framed in aluminum and can easily be mounted by a DIYer on your wall. It is the most useful piece of office equipment we have.
Msizi is working very hard on the quality of his framed white board – and quality is still a problem, but Msizi wil not rest until he has produced “the Rolls Royce” of glass white boards.
We purchased his first board and our staff love it.
Our role has been a bit of finance for equipment and we have purchased all his “mistakes” which is good enough to us to use perfectly well. We also help him with his accounts, marketing and most of all we are a shoulder to lean on and able to help him with brain-storming. In a few years his product could well become a well-known brand.
Mabuya Glass Merchants is currently producing trial aluminum framed glass boards 80 cm by 60 cm at a price of R299 (excluding packing and shipping and installation which any DIYer can easily do). The size is perfect for every office. I’d love to take orders for him while he perfects his quality. Take this opportunity to support his enterprise, earn BEE points but more importantly help his business thrive.
We have obviously earned both enterprise development points and procurement points from our positive relationship with Msizi (he is level 3 and is a category A enterprise development beneficiary) so there is enhanced recognition on both our ED scorecard and procurement scorecard so we have great BEE benefits.
Moreover Msizi, is about to finally and able to reach his dream of running a sustainable business. He is not a “bigwig”, not being enriched, just a South African who cares and is beginning to feel good about himself. So do we! This is what true B-BBEE is all about!
The link between Enterprise Development (Mabuya Glass Merchants) and procurement (buying glass white boards) works very well, to find out more attend our Procurement and Enterprise Development conference.
Contact EconoBEE on 0861 11 3094 or email@example.com or Msizi Ngwenwa on 072 263 0130 for more info.
The minister has listened to us! The dti minister has issued a notice that extends the period for obtaining a valid verified certificate to 1st February 2010. He states: “All verification certificates issued by non-accredited verification agencies before 1st February 2010, will remain valid for 12 months from date of issue.
This effectively solves the sector code problem that we highlighted a month ago. It also means that an entity is entitled to use a non-accredited verification agency until 1st February.
This is also quite disturbing – the original notice was dated April 2009 and gave a four month period before which accredited verification was required. The extension is for a further 6 months – longer than the original period.
The minister does not define a “non-accredited verification agency”. Is it one that tries to follow the guidelines for verification, and if so how do we confirm that? Especially since the agency has not yet been accredited?
Is it an agency that has applied to SANAS for accreditation, or one that intends applying for accreditation? Is it simply a BEE consultancy that consults and verifies at the same time?
Is it an competent independent assessment agency, like an accountant that has verified a company’s scorecard?
Our position remains that we are consultants helping our clients with B-BBEE, but we do not produce scorecards.
I do see lots of arguments over this – between accredited or non-accredited, in possession of a pre-assessment letter or only applied, a member of ABVA or only a consultant!