Archive for category Interpretations
Valid certificates – 2
Posted by Keith in Accreditation, Interpretations, Verification on August 13th, 2010
The scenario: An agency has applied to SANAS but not yet received it pre-assessment letter. The agency produced a certificate for their client on 1st June 2010.
Is it valid?
Points to consider:
1) The minister’s notices states that a valid certificate is one that is produced by an accredited agency or one that has a valid pre-assessment letter. The term “valid pre-assessment letter” is crucial. SANAS performs a pre-assessment visit to the agency and if it achieves minimum standards with its management system, SANAS will issue a pre-assessment letter. A pre-assessment letter is not the same letter that SANAS may send as an acknowledgment or acceptance that the agency has applied to be a verification agency.
2) The agency began its work with its client before its pre-asessment letter was issued, and to date, August has still not received its pre-assessment letter. It may have had reason to believe that it would receive its pre-assessment letter during the verification process.
Is the certificate they issued valid? Following the strict guidelines of the minister’s notice the answer is NO. At the exact date if issue of the certificate, it had no valid pre-assessment letter.
If the agency obtains its pre-assessment letter later this year, the inclination is to accept the certificate because the agency has subsequently received its pre-assessment letter. However all pre-assessment letters carry an inception or start date as well as an expiry date. Had there been a gap of a couple of days before receiving its pre-assessment letter, we could have believed in the interests of substance of form that the certificate is valid.
Conclusion: In our opinion the certificate is not valid.
Valid certificates – 1
Posted by Keith in Accreditation, Interpretations, Verification on August 13th, 2010
The scenario: An agency has applied to SANAS and received its pre-assessment letter. The letter expired in June 2010. The agency produced a certificate for their client in July 2010, after the certificate has expired.
Is it valid?
Points to consider:
1) The minister’s notices states that a valid certificate is one that is produced by an accredited agency or one that has a valid pre-assessment letter. The term “valid pre-assessment letter” is crucial. SANAS issues pre-assessment letters that all carry an expiry date. In the case of the above scenario the agency’s pre-assessment letter had expired.
2) The agency began its work with its client while its pre-assessment letter was valid. The work took longer than expected and they could only sign the certificate after their letter expired.
3) The agency had good reason to believe that it would receive full accreditation around about the same time that its pre-assessment letter expired.
Is the certificate they issued valid? Following the strict guidelines of the minister’s notice the answer is NO. At the exact date if issue of the certificate, it was not accredited and had no valid pre-assessment letter. If the agency obtains its accredited later this year, the inclination is to accept the certificate because the agency has subsequently become accredited. This would be similar to a person who decides to operate on a patient, and later on become a surgeon. It did not give him the right to operate at the time. Similarly driving a vehicle without a license because in the future you will get the license will still earn a fine.
Even if the final accreditation is a formality, as the agency believes, that fact is as at today the agency has not been accredited – 3 months after signing the certificate.
SANAS has a rule that they do not reissue pre-assessment certificates, unlike licensing authorities that allow one to take a learners license multiple times. If this is blatantly unfair, then it is a matter for the agency and SANAS, and still does not give anyone the right to issue valid certificates.
Conclusion: In our opinion the certificate is not valid.
Why use EconoBEE for your EME requirements?
Posted by Keith in BBBEE Knowledge, General, Interpretations, Marketing on April 29th, 2010
Most people know that if their annual turnover is less than R5million then they are classed as an EME – exempt micro enterprise. They believe that they are exempt from BEE and do not need to take any action. They hope that their customer will recognize them as being exempt and that they will win the business they want.
This is unfortunately not true. An EME is generally, but not always a business with a turnover of less than R5million. Some industries, e.g construction have changed those thresholds.
More importantly it is not sufficient to tell your customer that you are exempt or expect them to guess!
You need to tell your customer why you are an EME, and you need to prove this, usually by means of an auditors letter/certificate.
Why use EconoBEE? We will help phrase the document/letter you need to send your customer. We help explain to your customer why you are exempt and how it will assist your customer in continuing to do business with you.
Most importantly, we will talk to your customer if he is not satisfied and give him all the documentation he needs to convince him that you have given him the right information. There has been the odd occasion that a company has rejected our EME pack. In all cases, we work on the side of our client to convince the customer to change his mind. In every single case we have won the legal issue, and satisfied the customer.
We know of businesses that have tried to explain their EME status to their customer, failed to convince them and lost the business. It won’t happen with us. We will satisfy and convince your customer!
ABVA in Disarray
Posted by Keith in Accreditation, BBBEE Knowledge, Interpretations, Verification on March 2nd, 2010
The split we expected in ABVA is beginning to show. EMEX has resigned from ABVA because they say they “cannot be part of a voluntary association that follows interpretations which were not gazetted by the DTI.”
We know of other agencies that are as concerned about ABVA acting as judge and jury.
Even the dti is annoyed with ABVA. Nomonde Mesatywa, chief director of BEE says “We have been engaging with them and have told them that they cannot introduce new principles and cannot pronounce on policy issues,”.
I too was interviewed for the press article and also criticized ABVA for making rules. In my interview I brought up the successful challenge that we instituted against ABVA at the Competition Commission in 2007.
Subsequently ABVA has issued a press release once again denying the turmoil in its organization. They make the following point:
On the issue of acceptance of member’s certificates, ABVA never recommended that only its member’s certificates should be accepted in the market place, but has always referred to the legal interpretation of all the legislation which governs BEE implementation, the Codes of Good Practice, the SANAS R47 and the Verification Methodology. The legal position embodied in these documents show that only agencies that have made application to SANAS before the 1st February 2010 could be regarded as a “verification agency” for purposes of the minister’s notices issued during the course of 2009. This was ABVA’s position whether or not a particular verification agency was a member of it or not.
Before my complaint to the Competition Commission in 2007 I obtained a letter from ABVA which stated:
“ABVA requires that when their members are considering certificates for calculation of procurement points in a verification only certificates from Verification Agencies that have submitted to SANAS for accreditation will be considered valid. In order to validate if a Verification Agency has submitted to SANAS one would need to consult with the Full Member listing on the ABVA website or request from the Verification Agency directly their proof of submission letter from SANAS.”
They also state: “The article also makes mention of a complaint against ABVA to the Competition Commission yet fails to mention that this complaint was dismissed.” This is untrue. The complaint was not dismissed. It was not referred to the tribunal due to a commitment made by ABVA not to condone actions by its members that are contrary to the codes. ABVA are now not only ignoring their commitment, but denying that they ever gave that commitment to the Competition Commission.
EMEX Leaves ABVA
Posted by Keith in Accreditation, Interpretations on February 25th, 2010
EMEX Trust has announced that they have terminated their membership of ABVA. In their announcement, they stated that “ABVA recently amended its constitution to enable the chairman to make certain policy decisions. One of the initiatives is aimed at setting an interpretation standard for the industry. The DTI is the only entity that can prescribe rules on how to interpret the Codes of Good Practice and Emex Trust cannot be part of a voluntary association that follows interpretations which were not gazetted by the DTI.”
Keith Levenstein, CEO of BEE consultants, EconoBEE said: “For years we been complaining that ABVA has arbitrarily setting up rules and policies aimed at protecting its own interests. We even raised a complaint to the Competition Commission over one of the issues, and the Competition Commission received an undertaking from ABVA that they would not condone further actions of the sort we complained about. However ABVA have continued to set rules at the expense of transformation. Ironically their current chairman Andile Tlhoaele’s own company has not yet received accreditation as a verification agency.
ABVA has never had the authority or power to set up rules and interpretations, yet have continued to do so.
This move by EMEX reinforces our call last month for the minister to set up an ombudsman/arbitrator/adjudicator to help with interpretations on the BEE codes. It is becoming more urgent that the dti address the issue of interpretations and issue updated gazettes or directives, just like the dept of Treasury does for tax issues. It is not feasible, or in the interests of transformation for a anyone to ask the high court to rule on every outstanding issue. The dti si simply not doing their job, and effectively sabotaging B-BBEE as a result.
Codes of good practice Interpretations
Posted by Keith in BBBEE Knowledge, Interpretations, Scorecard points, Verification on February 17th, 2010
To earn points on enterprise development (and socio economic development) you would need to spend a percentage of your net profit after tax on those activities. The codes describe it as follows:
“Average annual value of all enterprise development contributions and sector specific programmes made by the measured entity as a percentage of the target”
Average implies averaging the annual spend. so if you spent R300 in 2007, R500 in 2008 and R250 this year, your total spend is R1050, and average annual spend is R350.
A key principle (para 3.1.2) is that “qualifying enterprise development contributions of any measured entity are recognisable cumulatively:
- from the commencement date of this statement, or an earlier date chosen by the measured entity (the inception date), until the date of measurement.
Our interpretation is that the “commencement date of this statement” is 9th February 2007 – i.e. the date that the codes were released.
We also see the generic target of 3% of net profit after tax as being the average net profit after tax from that date.
So if your net profit after tax from
9th Feb 2007 to 8th Feb 2008 was R10000
and from
9th Feb 2008 to 8th Feb 2009 was R12000
and from
9th Feb 2009 to 8th Feb 2010 was R15000
then your total or cumulative NPAT over the three years is R37000, and the average NPAT is R12333.33
Note: The codes do discuss issues where you do not make a profit (indicative profit), but this is not discussed here as it is not relevant to the specific point being made in this article.
What does seem clear is that your spend needs to be looked at from 2007 (9th February) onwards.
There are issues around this:
What is a company did not start its ED activities in 2007, or did not even get a scorecard for 2007?
What about a QSE that did not choose ED as an element in 2007 or 2008 or 2009. Must it go back 4 years to start earning points?
However, the dti, and some verification agencies do not look at it this way. The dti, according to some verification agencies has told them that a measured entity can choose the starting date for ED contributions, even if they are after the inception date of the codes, e.g 2009. This is a huge benefit to an company just starting our on their BEE journey. They do not need to “make up” the shortfall of having to spend money in 2007,2008,2009. At the same time it sounds quite unfair to companies that did spend the money in the earlier years, in that with hindsight it was not necessary to have spent that money (unless of course they did get a valid scorecard during those years).
Is this right?
No, not according to the codes! The codes are clear that the inception date is the commencement date of the statement or before, but not after, ie. 9th February 2007, and the dti does not have the discretion to arbitrarily change the codes. The minister certainly does have the right to make decisions, by gazetting changes to the codes, which has has not done in this instance. Reports are that the dti will be issuing yet another interpretative guide in January 2010. (This article is written on 17th February) and nothing has been issued so far.
Commentary
What we find very disturbing is that the dti makes decisions, and in some cases clarifications, but does not publicize them or issue them as an official statement. We have noticed for a while now that some verification agencies were using the current year for calculating ED points. Yet, nowhere does the dti document their decision, neither does SANAS issue any updates as to how to do the calculations. We also find it very disturbing that the dti seems to be circumventing the codes in this instance.
Strategy
If a company that did not ED until now is lucky enough to choose a verification agency that “knows” the dti’s new ruling, then they will benefit, otherwise they may lose up to a 75% of their ED points – 11.25 points! This is two levels.
Recent Comments