The Broad-Based Black Economic Empowerment (BBBEE) Act has made it compulsory for all listed companies and public entities to formally report on their empowerment status to a newly created BEE commission.
This reporting requirement came into effect from 6 June 2016 and requires all listed entities and public companies to comply from that date. Jenni Lawrence, Managing Director, Grant Thornton Verification Services believes this should go some way towards ensuring more active monitoring of progress against BEE targets within each sector.
“The BEE Commissioner, Zodwa Ntuli, was appointed to monitor and deal with complaints and issues related to fronting; keep a registry of major empowerment transactions; and monitor compliance to the Act from organs of state, public entities and companies listed on the JSE,” says Lawrence. “By complying with the Act and reporting on their efforts in this regard, entities will ensure that we maintain an accurate record of the status of empowerment in the country, and remove the negative practices that has come to be associated with the Act.”
The regulations have made it a legal requirement for public entities and listed companies to provide an annual verified BEE certificate. This certificate has to be issued by an organisation accredited by the South African National Accreditation System (SANAS). “Many listed companies already undergo this audit, but previously it was seen as a business requirement, whereas it is now mandated by law,” explains Lawrence.
“Government entities and organs of state can submit their reports to the BEE Commissioner within 30 days after the approval of their financial statements and annual report. JSE listed entities are required to submit their report within 90 days of the end of their financial year. However, those companies that include the specified report within their annual report may file this with the Commissioner within 30 days of the approval of the AFS and annual report,” says Lawrence. She also warns that entities should take heed of the timeframe of the required reporting.
“The report should reflect an organisation’s expenditure over the preceding 12 months and should correspond with the most recent annual financial statements. Previously, some organisations have been running a year behind in conducting their BEE verification” says Lawrence.
Plan verification processes
Lawrence believes the biggest impact on companies relates to the timeframe within which submissions must be done. “This means companies have to plan their verification processes well in advance. It is crucial that entities work closely with verification agencies to ensure verification occurs in the stated timeframe.”
The BEE Commissioner will respond to entities within 90 days of their submissions, highlighting problems and areas for improvement. If an entity does not comply with the reporting requirements, the commissioner can give it 30 days to submit a correct report.
Lawrence concludes, “Although some may anticipate that this creates an additional burden on companies, it is in reality a two- page summary of a BEE scorecard which is submitted annually. The Commissioner has provided a simple template and submission process and this should go some way in assisting us to monitor the effect of this important legislation in South Africa.”