The new codes of good practice for the measurement of broad-based black economic empowerment (BEE) were published on Friday October 11 2013 paving the way for the start of the new phase of BEE.Companies have been given one year to adjust before the new codes and scorecard are applied.

For many firms it will become more difficult as ownership will be measured more strictly. They can also be discounted by a level if they fail to achieve the minimum requirements in three areas – ownership, skills training, and enterprise develop-ment and procurement.

Companies that are 100% black-owned will qualify as level on BEE contributors, and those that are majority black-owned as level two. Those classified as exempted microenterprises – with a turnover of less than R10m – will qualify for a level four contributors. Qualifying small enterprises – with a turnover of R10m – R50mil – will have to be measured on all elements of the scorecard. Exempted microenterprises or small enterprises will not need verification certificates from ratings agencies but will require a sworn affidavit on an annual basis, attesting to their ownership credentials and turnover.For companies that are not exempt from the scorecard, BEE compliance gets tougher.

The seven areas of the card have been reduced to five: enterprise and supplier development, ownership, skills development, employment equity, and corporate social investments. Achieving a minimum threshold in the first three areas will be essential to avoid being penalized.

Firms that fail to achieve in these areas will be discounted by one rating level. The ownership element of the card has increased in weight, from 20 to 25 points out of 105, and has been significantly tweaked. A new requirement is that black shareholding must result in a 40% holding of net value by black shareholders if a deal is to qualify for the ownership points. To avoid being penalized for skills development, companies must score eight out of 20 points on the scorecard.The extent to which in-house training can be counted towards the scorecard has been capped, what a minimum re-quirement of 16 out of 40 points for enterprise development and procurement.

The definitions within this category have also been changed to ensure that a proportion of production takes place locally. The “value-adding supplier” concept in the previous codes has been replaced with the “empowering supplier” defined as “a broad-based BEE-compliant entity which can demonstrate that its production or value adding activities take place in the country”.

Large enterprises will have to comply with three out of four criteria and small enterprises with one. The criteria in-clude:

* At least 25% of cost of sales excluding labor cost depreciation (unless in the service sector) must be spent in SA.

* At least 50% of jobs created are for blacks, provided the number of black staff in the year of measurement is maintained,

* Transformation of raw material of at least 25% includes local manufacturing, and

* At least 12 days per annum is spent in assisting beneficiaries to increase their operational, technical or financial

Impartiality lies at the heart of Landel Services CC’s commitment to Broad Based Black Economic Empowerment and concomitant verifications. Landel Services CC base its impartiality policy on the underlying values of: objectivity, independence, freedom from conflict of interest, freedom from bias, lack of prejudice, neutrality, fairness, open mindedness, even handedness detachment and balance. To ensure that impartiality is both maintained and can be demonstrated the following principles have been established:

1. Landel Services CC Certificates are only issued after review by an independent authorized and competent verification manager to ensure that no interest predominate

2. Landel Services CC does not have any relationships with companies who offer consultancy related to BEE or other services that can be construed as having an impact on the BEE verification provided by Landel Services CC. Any proposed relationship between Landel Services CC and any other company will undergo a risk assessment by an independent risk assessor prior to the formalization of the relationship

3. Individuals employed by Landel Services CC are required to document their current relationship and past relationships with all companies specifically if they have provided consultancy in the past four years. Any situation past or present which may present a potential conflict of interest is required to be declared by employees on the declaration form to be completed. Should there be a conflict of interest and it can be resolved without compromising objectivity Landel Services CC shall not provide the verification.

4. All employees will be monitored annually to ensure, amongst other criteria that they remain impartial.

5. Landel Services CC shall in no way provide a verification that is simpler, faster or less expensive to the entity as a result of the entity making use of a specific consultancy agency

6. Landel Services CC shall provide accurate and not misleading information to the public

7. Activities of a related body shall never be marketed and nothing shall be stated anywhere that gives the impression that the two activities are linked in anyway.

8. Landel Services CC shall not provide any other service, which could compromise confidentiality, objectivity or impartiality.

9. The overall aim of verifying is to give confidence to all parties that rely upon the verification. The value of verifying is public trust achieved by gaining the confidence of all these parties, which include but are not limited to:

(a) The Measured Entities that are the clients of the B-BBEE Rating Agencies

(b) The customers of the B-BBEE Verified measured Entities

(c) Government authorities

(d) Non-government authorities

(e) Consumers and members of the public; and

(f) Public entities

10. Principles for inspiring confidence include:

(a) Impartiality

Impartiality is the actual and perceived presence of objectivity. Objectivity means that conflicts of interest do not exist or are resolved so as not to influence the subsequent activities of the B-BBEE Rating Agency. Synonyms that are useful in conveying the element of impartiality are: objectivity, independence, and freedom from conflicts of interest, freedom from bias, lack of prejudice, neutrality, fairness, open-mindedness, evenhandedness, detachment, and balance. Being impartial, and being perceived to be impartial, is necessary for a B-BBEE Rating Agency to be able to deliver a verification that provides confidence. It is recognized that the source of revenue for a B-BBEE Rating Agency is the client paying for its service and that this is a potential threat to impartiality. In order to obtain and maintain confidence, a BBBEE Rating Agency has to be able to demonstrate that its decisions are based on objective evidence and that its decisions have not been improperly influenced by other interests or by other parties.

Threats to impartiality include:

• Self-interest threats – threats that arise from a person or enterprise acting in their own interest, for example financial self-interest
• Self-review threats – threats that arise from a person or enterprise reviewing the work done by themselves, for example evaluating the B-BBEE compliance of a measured entity to whom the B-BBEE Rating Agency provided consultancy
• Familiarity (or trust) threats – threats that arise from a person or body being too familiar with or trusting towards another person instead of seeking evaluation evidence on which to base the verification conclusion
• Intimidation threats – threats that arise from a person or enterprise having a perception of being coerced openly or secretively, such as a threat to be replaced or reported to a supervisor.

(b) Competence

Competence is the demonstrated ability to apply knowledge and skills effectively. The competence of the personnel supported by the infrastructure of the Agency is necessary for the B-BBEE Rating Agency to deliver a verification that provides confidence.

(c) Responsibility

The measured entity, not the B-BBEE Rating Agency, is responsible for conforming to the requirements for B-BBEE Verification. The B-BBEE Rating Agency is responsible for carrying out a factual, thorough evaluation of a measured entity’s B-BBEE status and, based on the result, for granting a B-BBEE score.

(d) Openness

Openness is access to or disclosure of information. A B-BBEE Rating Agency needs to provide public access to, or disclosure of, appropriate and timely information about the evaluation and verification process and about the verification status of any measured entity in order to gain confidence in the integrity and credibility of the B-BBEE verification process. A B-BBEE Rating Agency needs to provide appropriate access to or disclosure of specific interested parties’ non-confidential and non-proprietary information about the results of specific evaluations (e.g. evaluations in response to complaints) in order to gain and maintain confidence.

(e) Confidentiality

In order to gain access to the privileged information that is needed for the B-BBEE Rating Agency to assess adequately the requirements for B-BBEE Verification, a B-BBEE Rating Agency needs to keep any proprietary information about a measured entity confidential. However, a B-BBEE Rating Agency may disclose a measured entity’s actual verification result, without compromising the confidentiality of the information supporting the verification outcome.

(f) Resolution of complaints and appeals

Parties that rely on the outcome of their verification status as assessed by accredited BBBEE Rating Agencies expect to have their complaints / appeals investigated. If these complaints / appeals are found to be valid, they need to have confidence that the complaints/ appeals shall be appropriately addressed and that a reasonable effort shall be made to resolve them.

(g) Ethical and Professional Behavior

To comply with relevant laws and regulations and avoid any conduct that the B-BBEE verification professional knows or should know that might discredit the profession. This would include the following but not limited to:

• Acting in good faith and with due care and diligence to B-BBEE Verifications.
• Avoiding collusive or anticompetitive behavior.
• Promote a culture of fair and ethical behavior, without prejudice against any party.
• Refrain from debate and discussion that is disrespectful, threatening (mental or physical), or otherwise unprofessional in tone or which is offensive to other participants and damaging to SANAS and the overall process of achieving consensus
• Treat all persons with respect and fairness and not offer or appear to offer preferential treatment to any person or group
• Refrain from disseminating false or misleading information or from withholding information necessary to a full, fair, and complete consideration of the issues
• Not harass, threaten, or coerce any participant in an effort to persuade or sway votes. This does not preclude professional, respectful debate and exchange of views that contain information and/or present perspectives intended to persuade other participants to lend their support or opposition to issues, proposals, etc. in order to ultimately achieve consensus (PUB100397) An appropriate balance between the principles of openness and confidentiality, including resolution of complaints, is necessary in order to demonstrate integrity and credibility.

1. Should the Measured Entity dispute the results on the Verification Report and Certificate, the Measured Entity will have 7 working days to appeal to the results.

2. The appeal has to be addressed to the Verification Manager of Landel Services CC in writing.

3. The Verification Manager will forward the appeal to the Financial Member who will either handle the appeal himself or mandate an external expert to handle the appeal.

4. The Verification Manager shall complete the appeals and complaints register and assign an independent analyst to handle the appeal. The person assigned to handle the appeal shall send an acknowledgement of receipt to the Measured Entity.

5. The Assigned person shall proceed to investigate the appeal.

6. If the appeal was not lodged within the prescribed 7 working days of receiving the Report, Scorecard and certificate the Assigned person shall send a findings report to the Measured Entity indicating that the appeal was not successful because the timeframes were not met.

7. The Assigned Person then has to investigate the merits and background of the appeal. Should the appeal be based on the grounds of new information submitted by the Measured Entity, the Assigned person will indicate in the findings report which is sent to the Measure Entity that there are no grounds for appeal as this was new information.

8. The Assigned person has to resolve the appeal within 10 days of it being assigned to that person.

9. Should the Assigned person, after investigating the appeal find that there were calculation errors or that the incorrect score was given, the Assigned person will send a corrected verification Report, scorecard and certificate to the Measured Entity. The Assigned person shall note actions taken in the diary of the file and the person who assigned them to the appeal shall sign off on the effectiveness of the actions and make notes.

10. The Process for appeals shall be stipulated in the Service Level Agreement which will be signed by the Measured Entity before the BEE process commences.

11. Any information sent to or received from the Measured Entity related to the appeal shall be filed in the Measured Entity file and any communication or decisions taken with regards to the appeal shall be noted in the diary section of the Measured Entity file.

1. Should the Measured Entity not be satisfied with the behavior/conduct of any personnel involved in the verification process, they have the right to lodge a complaint or should a 3rd party not be satisfied with any aspect of the verification agencies process and methodology.

2. The complaint must be lodged within 10 days of the incident which was the result of the complaint.

3. The Verification manager shall assign an independent person who was not involved in the incident from which the complaint originated.

4. The person assigned to the complaint shall send the Measured Entity an acknowledgement of the complaint

5. The Assigned person has to resolve the complaint within 10 days of it being assigned to that person by means of a findings report.

6. The complaint has to be investigated and the seriousness of the behavior/conduct which was the result of the complaint or the substance of the 3rd party complaint has to be considered. Should it be found by the investigator that there was negligence involved or there was substance to the complaint, disciplinary action or corrective action has to be considered.

SANAS is the South African National Accreditation System. SANAS was appointed by the Department of Trade and Industry as one of the accreditation bodies of the B-BBEE Industry.

Our SANAS Facility Accreditation Number: BVA196