B-BBEE

BEE in the Know – Edition 2 2015

Conversations with…Tanya Dippenaar

Tanya Dippenaar is the recently appointed regional manager of our Western Cape divsion. Tanya is a stalwart of our relatively young organisation, having been with us since 2010. She has risen quickly up the ranks starting at junior analyst level and progressing to senior analyst, technical signatory and regional manager. She is considered one of the top technical minds in our division.

Hello Tanya. You’ve been with us for a number of years now and through many changes. How do you foresee the amended codes, which come into effect on 1 May changing the landscape of BEE verification and consulting?

Although verification agencies are not allowed to provide consulting services to existing verification clients, they are still allowed to provide training and scenario planning, and can offer such services to companies if they are not their verification agency.

It is essential for businesses to make strategic changes and restructure their supplier base to ensure compliance with the amended codes. This is the time where companies need to make use of consultant expertise that will help to prepare, understand and navigate them through this initial phase of compliancy on the new rules and regulations.

Compliance will be beneficial and thought it may seem difficult at present, once companies understand their own scorecard, they will realise that it is possible to be BEE compliant, especially if they focus on the priority areas.

What has been the biggest challenge for you in your new role as regional manager?

Being an effective leader is a challenge – most people in leadership positions will agree – One of the biggest areas of adjustment has been dealing with criticism, which has only strengthened my abilities. Keep a team motivated is tough, however I try to take this in my stride and maintain a positive outlook.

Most people don’t realise how multi-faceted a managerial role is, and how many different elements one has to juggle – from data and information to paperwork to people issues. It surprised me at first; however this just makes my job more interesting.

I’m also striving to continue to improve on the high standards and quality of our service levels laid by previous management and this is a daily area of focus for me and my team.

Dealing with the loss of a colleague last year was particularly hard and really tested us as a team. But we stood together and supported each other well in a time of need. The partners at Grant Thornton were also very supportive which was a great comfort.

Please explain to our readers the undertaking to become a SANAS approved technical signatory – what is involved?

A technical signatory (TS) is a person deemed as competent by SANAS, whose signature confers validity on the B-BBEE certificates, report and/or results issued under its SANAS accreditation. Before signing off on certificates and reports, a technical signatory must also be deemed as competent by SANAS to sign results issued under SANAS accreditation. By signing off on the certificates, such a person accepts responsibility for the content and final score.

All technical signatories must be evaluated by SANAS and witnessed onsite before being declared competent to issue certificates.

Your division did exceptionally well in its last SANAS audit, do you think there is any one particular reason which stands out for the excellent achievement?

Most certainly the team’s consistency and maintaining high standards throughout each and every audit – Also, the dedication and team work/unique team dynamics contributed a great deal to our success.

The extra evaluation as an empowering supplier is a new concept for businesses to grasp from 1 May. What words of wisdom can you offer to our readers that will help them to put into place the requirements for this status?

The empowering supplier concept focuses on four mechanisms: the development of local production, job creation, localisation of business activities, and skills transfer to small black businesses whose annual turnover is less than R50m. Large businesses should aim to comply with three out of the four mechanisms, while QSEs need only comply with one.

The amendments to the codes assume that “empowering suppliers” are generally available in every sector of the economy but in practice this may not be the case – So earning procurement points may become more difficult under the new codes.

It is critical that entities know the importance of gaining this status of an empowering supplier and how to go about it.

It is also dangerous to assume that “value-added supplier” will automatically be recognised “empowering supplier” – The best entities can do is to seek the best advice from the experts.

What would your best advice be to clients when they are planning their BEE contributions and then preparing for verification?

Ensure that all levels of management have a clear understanding of the dynamics of B-BBEE:-

Develop a BEE strategy:- know what the organisation’s current BEE score is. This must become the basis from which a BEE strategy can be developed

Evaluate the progress, if any, that the company has made towards trying to obtain a better rating when the present certificate expires.

Do scenario planning: evaluate which strategies will be suit the company e.g. monetary or non-monetary contribution.

In your years of experience with clients, have you noticed any trends that stand out in terms of preparation for verification e.g. dilemmas clients have faced, dilemmas we have faced, industry trends in general?

Clients often have no or little supporting documents and don’t always understand why they should be compliant, how they will benefit and contribute to the economy of the country and often hinder the progress of verification because they don’t follow the expected timeframe. Verification agencies can provide valuable information and guidance to ensure that clients and businesses understand why and how compliance is gained and how to avoid unethical practices.

One of my former colleagues once said: ‘…your BEE score will not manage itself and it is very dangerous to simply call a verification agency in to find out what score you achieved without managing it and being sure you have achieved your desired score before getting verified!…’ This couldn’t be a truer statement.

Women in business have been a big focus for Grant Thornton over the last few years. Have you any words of inspiration for other women out there climbing the corporate ladder?

There is no easy way to success – WORK DAMN HARD! There is no substitute for effort. It will take some personal sacrifice – come in early, work overtime, take on extra responsibilities an be accountable for difficult tasks.

Finally Tanya, when you’re not running the very busy operation that is our Western Cape division, what do you like to do to unwind?

Take a break from everything! Breakaways from work on Fridays – booking into resorts, guest houses or even camping with my husband and doggie ‘children’ – That is the only way for me to unwind.

Contact Tanya Dippenaar, regional manager of Grant Thornton Verification Services, Western Cape, for assistance.

Fronting is fraud – are you guilty?

“Fronting” is a term used in BEE, to mean a “deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes” – This definition is an extract from the DTI guidelines on B-BBEE

The BEE Act was amended in January 2014 to give this term more clarity and to introduce specific penalties for those found guilty of fronting, which is another word for fraud.

In addition, it has widened the pool of people who can be found guilty of fronting, to include a BEE verification professional, a procurement officer, or any other official or public entity.

If one of these persons knowingly, or ought to have known that an offence or even an attempt to commit fronting has taken place and does not report it to an appropriate law enforcement agency, they can be found guilty. In this case, the guilty person will be fined or imprisoned for a period not exceeding 12 months or both.

In addition, where a person is found guilty of:

  • misrepresenting the B-BBEE status of a measured entity
  • providing false information or misrepresents B-BBEE information to a verification professional; or
  • providing false information or misreprents B-BBEE information to an organ of state or public entity

they will be fined or imprisoned for a period not exceeding 10 years or both. If it is not a natural person, then a fine of not more than 10% of the annual turnover will be payable.

Expect verification and procurement officers to start demanding danger pay!

So what exactly is fronting in practical terms?

In effect, fronting happens when a company misrepresents its level of black ownership or its contributions to the BEE targets set by the DTI.

‘Fronting practice’ means a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act or the implementation of any of the provisions of this Act, including, but not limited to, practices in connection with a B-BBEE intiative.

Fronting practices often appear as window dressing, where a black person may, for example, have a share certificate with their name on it, but be discouraged or inhibited from meaningful participationin the entity, in terms of representation and/or economic interest.

The DTI guidelines offer a list of indicators for fronting as follows:

  1. The black people identified by an enterprise as its shareholders, executives or management are unaware or certain of their role within an enterprise
  2. The black people identified by enterprise as its shareholders, executives or management have roles or responsibility that differ significantly from those of their non-black peers
  3. The black people who serve in executive or management positions in an enterprise are paid significantly lower than the market norm, unless all executives or management of an enterprise are paid at a similar level
  4. there is no significant indication of active participation by black people identified as top management at strategic decision making level
  5. An enterprise only conducts peripheral functions and does not perform the core functions reasonably expected of other, similar, enterprises
  6. An enterprise relies on a third-party to conduct most core functions normally conducted by enterprises similar to it
  7. An enterprise cannot operate independently without a third-party, because of contractual obligations or the lack of technical or operational competence
  8. The enterprise displays evidence of circumvention or attempted circumvention
  9. An enterprise buys goods or services at a significantly different rate than the market from a related person or shareholder
  10. An enterprise obtains loans, not linked to the good faith share purchases or enterprise development initiatives, from a related person at an excessive rate and
  11. An enterprise shares all premises and infrastructure with a related person, or with a shareholder with no B-BBEE status or a third-party operating in the same industry where the cost of such premises and infrastructure is disproportionate to market-related costs

If a verification agency detects a deliberate act of fronting, they are required to report this to the fraud hotline at the DTI for further investigation. If the entity is discovered to be engaged in fraud, the DTI for further investigation. If the entity is discovered to be engaged in fraud, the DTI may disqualify their scorecard until corrective action is taken.

If an end user of a BEE certificate discovers that it is fraudulent, they may take legal steps against the measured entity which could result in massive penalties.

To avoid these penalties, we strongly suggest that you seek the right advice, either from a BEE consultant or verification agency, together with your legal team, before setting up any new structures or undertaking any new initiatives relating to the points raised.

MEDO – the next generation of BEE consulting

Beverley Venter, national marketing co-ordinator, Grant Thornton Verification Services, Port Elizabeth

We recently had the pleasure and privilege of meeting the joint chief executive of MEDO Holdings, Judi Sandrock, when she came to Port Elizabeth for the Isuzu Trucks Empowerment conference. Not only were we inspired to our jobs better and just to be better, but the way Judi has chosen to operate MEDO should be an inspiration to corporate, BEE consulting firms and emerging entrepreneurs alike. MEDO are leading the new wave of consulting firms in their approach to B-BBEE and empowerment.

MEDO Holdings was formed in 2011 after Judi had been appointed to head up the small community fund by her then employer, Anglo Zimele. She opened the first 14 Hubs located around its various operations. She also went on to start the Branson Centre of Entrepreneurship, spearheaded by none other than Sir Richard Branson himself. Judi realised quite quickly that for true empowerment to occur for the business owners supported by the incubator, it needed to be run independently of a big corporate.

With this experience and more than 20 years in corporate and with a chemical engineering background and MBA to her name, Judi was well placed to deal with the problems faced by both corporates and small businesses in a developmental environment.

And so, MEDO was born.

MEDO, now in its fourth year of operation, has grown exponentially and is the foremost of its kind of consultancy in South Africa. It compromises three pillars, each with a specific role, however, inextricably intertwined with the other.

SEDO is the socio-economic development division of the company and specialises in mobile entrepreneurial activities, using their innovative Treppies – trucks which travel around the country all year long, giving advice and help to grassroots start-ups – whether it be legal advice, help with paperwork, tax registration, training or mentoring, the Treppie team are there to help those who are unemployed make their skills work for them. Judi holds the Treppie team in very high regard, describing them as incredibly hard-working, enthusiastic and passionate group of young people, dedicated to helping others.

MEDO, the original core of the business, focuses on incubator-type activities and putting these companies in touch with larger corporates in terms of supply-chain and also assistance through funding, mentoring and training. As part of this programme, MEDO also runs national trade and international trade programmes to assist entrepreneurs. Unlike most other ED and Supplier development initiatives, where corporates sign on the dotted line and make a payment, MEDO encourages them to be more actively involved with the development of entrepreneurs at this level and to utilise their own resources smartly when conducting development of this nature. When it comes to benefactors, MEDO prides itself on its quality of interaction and immersion with the benefactor, and so, as a principle will not take on a competitor ot an existing client, and chooses quality and depth of relationships over quantity of clients on the books.

MEDO Red is the public-sector-serving arm of this business, and this is where relationships are built with government or state-owned entities in support of the activities undertaken by both SEDO and MEDO. Judi and her team have also made it their mission to build an excellent relationship with the BEE division at the DTI, which gives them valuable insights into government expectations and standards.

n addition to all of these services, MEDO publishes a quarterly magazine which deals with cutting edge and topical issues pertaining to small businesses, social issues, B-BBEE at large, and issues which corporate benefactors find challenging and also where they can showcase their achievements using MEDO as an intermediary.

The work that the company is undertaking is very exciting for us to witness in the industry and MEDO is fast emerging as a leader in terms B-BBEE knowledge and practical application in South Africa.

Our meeting with Judi left us feeling very positive about the industry, so we can only imagine what positivity generated when working with them will do for your business.

We are very excited to be working with MEDO as one of our partners in B-BBEE consulting arena.

Please visit the MEDO website for more information.