Any intentional misrepresentation of a BEE score through the use of an incorrect calculating tool, for example using the scorecard for the generic code instead of the tourism sector codes scorecard, is constituted as fronting, according to the BEE codes and its custodians.
The Department of Trade and Industry (DTI), SANAS and the Sector Councils have taken a stand against sector code fronting, alongside self-appointed fronting watchdogs, EconoBEE.
They are now insisting that companies operating within a specific sector follow the applicable scorecard. All verification agencies must produce certificates using the correct scorecard, and if they do not the application will be rejected. This is applicable in each of the four currently gazetted sectors: construction, forestry, tourism and transport.
EconoBEE, expert BBBEE consultancy, has been instrumental in creating a precedent for future sector code transgressors whereby any certificate issued on the incorrect scorecard will be invalidated.
“Sadly, sector code fronting occurs too often and is generally caused by verification agencies that have not yet received their extension of scope to verify sector codes. On the positive side, many organisations are only too happy to take corrective action upon realising that a mistake has been made,” states Keith Levenstein, CEO of EconoBEE.
Recent cases uncovered by EconoBEE involve well-known South African tourism companies, Tempest Car Hire and City Lodge, both verified by NERA, who erroneously used the generic codes and not their industry sector code scorecard.
Tempest voluntarily withdrew their certificate after being informed of the error. City Lodge also reluctantly conceded to the invalidity of their certificate, motivated strongly by EconoBEE’s unwavering insistence that the codes be adhered to.
Another battle against Stuttafords Van Lines, operating within the transport sector, has ended in a concession from Stuttafords Van Lines and their verification agency, BBBEE Rating Agency. After a considerable battle, the certificate was withdrawn by BBBEE Rating Agency on 28 March 2011.
“We feel totally vindicated at having spent months of hard work fighting the battle against sector code fronting,” says Levenstein. “Regretfully, NERA and BEE Rating Solutions are not the only verification agency participating in questionable verification activities.”
In a recent media statement, the DTI has committed to conducting training on using the correct scorecards for verification agencies and again confirmed the invalidity of any certificate based on the incorrect codes.
“This can be labelled a victory for BEE and EconoBEE, as it will encourage more sector specific transformation and consistency,” concludes Levenstein.