Be Mindful of the B-BBEE Verification Measurement Minefield
South African Broad-Based Black Economic Empowerment (B-BBEE, often shortened to BEE) uses two terms for measurement of the individual elements of the scorecard, namely “measurement date” and “measurement period”.
The measurement date is the date when the on-site verification is performed.
The measurement period refers to the financial year on which your verification will be based (the year under review). This is the most recent 12-month* period as registered with CIPC.
These terms may sound straightforward enough, but the measurement date must be as close as possible to the on-site date. If not, you could expend more resources to achieve compliance and experience delayed B-BBEE certification.
Here is why.
Breaking down the B-BBEE Verification Measurement Date
The “ownership” and “management control” elements are only verified during the on-site verification visit, called the measurement date.
For this reason, the two dates must be as close together as possible. If the on-site date is too far from the measurement date, the information may be too old for verification. This will result in re-performance of the verification and delay the certification.
B-BBEE claims schedules are based on the latest completed payroll information and entity structures, namely equity ownership, management control and employment equity. You also need to submit evidence to support your B-BBEE claims, such as employment contracts, payslips, IDs, organogram, payroll, secretarial evidence, and CIPC documentation.
Communicate subsequent promotions or terminations to your verification agency so that they may apply the appropriate headcount targets to B-BBEE verification scoring.
It is important to be forthright regarding any substantial changes to the ownership structure or top management.
The Measurement Period for B-BBEE Measured Entities
As stated, the measurement period is the most recent, registered financial period of the measured entity.
Only in exceptional circumstances may a period of less or more than 12 months be verified where amendments to the financial year-end are made and approved. Such revisions may also be subject to additional or alternative verification procedures.
The following elements are measured based on the figures within the associated financial period:
- Skills development
- Preferential procurement
- Enterprise development
- Supplier development
- Socio-economic development.
While these are all based on the accrual method, enterprise, supplier, and socio-economic development claims must be paid to and received by the beneficiaries within the financial period.
Remember that measured entities cannot use a different measurement period from their financial period. As the most recent 12-month period must be used, a financial year-end older than 12 months will not be assessed.
No certificate may be dated and issued after 12 months have elapsed from the financial period. This means that for any certificate issued up to and including 28 February 2022, the latest financial period that may be measured is 28 February 2021.
As of 1 March 2022, the 28 February 2021 financial period is deemed too old and may no longer be measured. If, however, the certificate was issued before the 1 March deadline, you may request to be rescored on that financial period. It is essential to note that a rescore is treated as a separate engagement, so the original certificate issue date and expiry will not be amended. Instead, a re-issue date and number will reflect on the certificate.
The above requirements also apply to entities that are only required to submit the BEE affidavit. If you fall within this category, please ensure that you use the most recent 12-month period and the most recently approved DTIC affidavit template. The templates are available on the DTIC website or the relevant sector code council website.
While signed and audited financial statements are required for the B-BBEE verification, it is noted that these are not always available within the 12-month time period. Ideally, they should be available within three to six months following the financial year-end.
Where the audited financial statements are not available, draft financial statements or signed management accounts may be used for the B-BBEE verification. A letter of representation for the financial director, entities auditors or accountants confirming the accuracy of the documents provided must be supplied, and additional validation procedures will apply. Such includes but not limited to an analytical review of:
- the prior year management accounts to the prior year signed financial statements
- the current year management accounts to the prior year signed financial statements
- the current year trial balance to the current year management accounts
- the current year VAT201s to the current year management accounts
- the current year TMPS to the prior year TMPS.
Where we identify significant variances, we will request a representation letter from the financial director detailing the reason(s) for these variances. Once we have assessed and deemed the draft financial statements or signed management accounts reasonable and fair, they will be accepted for verification purposes.
B-BBEE Verification Measurement Made Easy
We at Moore believe in efficiency and delivering the best service possible. So, we typically schedule the [remote or physical] on-site verification within one month of submitting the claims schedules. We implore our clients to submit all necessary information before the on-site visit, enabling us to raise any findings timeously. We can, in turn, address and resolve potential errors efficiently with little-to-no delay to the overall B-BBEE verification timelines.
No matter the scenario, our competent team are fully prepared to assist you in the verification process.
Please do not hesitate to contact our Moore offices for further guidance on the above or to initiate your B-BBEE verification process.
*12-month period follows most recent SANAS Clarification by Mr Yuneal Padayachy on 14 August 2020 and reiterated by Mr Thabo Chesalokile on 06 April 2021 notwithstanding the judgement in the matter Serr Synergy (Pty) Ltd v South African National Accreditation System and Another (48866/2021) [2022] ZAGPPHC (22 March 2022) which declares the prescribed period in the clarification unlawful. Upon receipt of a new clarification by SANAS reflecting this decision, Moore South Africa will update the measurement period in this and any subsequent articles accordingly.
While every effort is made to ensure that information is correct at the time of publishing, Moore is not responsible for any errors or omissions or for the results obtained from using this information. The information and material published in this article are provided for general purposes only and does not constitute legal advice.
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