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Can you still use management statements for your BEE verification?
12 October 2020
 
“My business has automatic Level 4 BEE recognition because our annual turnover is below R10 million. However, a key client is requiring that we have to have at least a Level 3 BEE certificate meaning I will now have to verify. However, I had no planning in place to be able to do so in my previous financial year and I cannot wait until the current financial year is over. I was wondering whether I could use management statements for my verification if I can get the necessary planning measures in place?”

The South African National Accreditation System (“SANAS”) is the body responsible for the accreditation of BEE verification agencies. SANAS recently specifically addressed your question by providing clarification on the measurement period that entities can use for their BEE verification. In the past some verification agencies were willing to accept management statements for any 12-month period but SANAS have now stated clearly that the measurement period can only ever be the financial year end for the business as registered with the CIPC. 

This clarification from SANAS raises some potential issues, the first of which is for EMEs and QSEs who wish to tender for contracts worth more than R10 million or R50 million respectively. The BEE Codes state that an EME who wishes to tender for a contract worth more than R10 million must submit a QSE certificate and a QSE that wishes to tender for a contract worth more than R50 million must submit a Generic BEE certificate. If a tender for a contract worth more than R10 million comes up and an EME wishes to tender for the job they will, in most cases, have no planning in place to comply with the more onerous QSE requirements. They will now also not have an opportunity to get that planning in place and use management statements to get the necessary QSE certificate in order to tender and will lose out on the tender.

Also, companies who have never been compliant or been through a formal verification process may be discouraged from becoming compliant or undergoing verification if they cannot do so immediately when it becomes necessary and may try to find ways of continuing to operate without a BEE certificate.

An additional area of concern is the fact that there are still a number of grey areas when it comes to verifications. Programmes that are recognised in one year may no longer be recognised the following year due to changes in interpretation or clarification of certain provisions. This could lead to companies who have all their planning in place to obtain a certain level but, due to a change in interpretation, could lose points which could potentially mean a loss of a level or two. These companies then do not have the option to rectify that situation immediately as they would need to wait until the end of their current financial year before they can verify on new information.

Although there are legitimate reasons for not allowing management statements for any 12-month period, this approach can have unintended consequences. Management statements for the 12 months of your financial period is allowed, and can maybe help speed up the process by not having to wait for the annual financial statements. However, it still remains limited to the official financial period, which will require companies like yourself to plan carefully to ensure that they have the necessary in place in the 12-month period which will be used for their verification.  
 
 
 
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