BEE FAKE IT UNTIL YOU MAKE IT

No Fear No Favour No Constitution Amendments needed............

BEE Certificates: Fake it till you make it

 rebecca davies  south africa 28 january 2014  00:34                                                                                                                                         

On Monday the latest report emerged of a South African company having faked its empowerment credentials. In this case the story was stranger than normal: the business in question is owned by the wife of a serving member of the Presidential Advisory Committee on BEE. It also happens to be 100% black female-owned, meaning it would have soared through authentic BEE compliance. Experts say up to 5% of all BEE certificates are invalid. By REBECCA DAVIS.

It was the French philosopher Baudrillard who argued that modern human experience is merely a simulation of reality. In South Africa we may be getting a pretty good grasp of that concept. Consider, if you will, the litany of fraudulence and fakery to which we’ve been exposed over little more than a month.

We’ve seen a fake sign language interpreter shame us in front of the world. We’ve seen a fake destitute person accept a free house from the EFF. We’ve had a North West Premier with a fake CV. We’ve seen Johannesburg motorists buy fake number plates to avoid paying e-tolls.

Life in South Africa, or a reasonable facsimile thereof. But you can’t always have your fake and eat it. Ikhono Communications has become the latest company exposed, in this case by Business Day, for having faked its BEE certificate. The matter likely wouldn’t have made headlines if it hadn’t been for the awkward fact of its association – via marriage of its owner – with Don Mkhwanazi, who sits on the presidentially-appointed Broad-Based Economic Empowerment Advisory Council. (According to the Department of Trade and Industrywebsite, another council member is former National Youth Development Agency chair Andile Lungisa, who faces charges of fraud and money laundering.)

South African companies, depending on their annual turnover, require either a BEE exemption certificate or a BEE compliance certificate from an accredited BEE verification agency. Businesses with a turnover of R5 million and below are classed as Exempt Micro Enterprises (EMEs). Those with a turnover of between R5 million and R35 million need to meet 4 out of 7 BEE elements – which take into account the racial composition of ownership and management; employment equity; and aspects like CSI and procurement – and need a BEE plan and a compliance certificate. Companies with a turnover exceeding R35 million need to comply with all seven elements and need a BEE plan and a compliance certificate.

Because Ikhono Communications had impeccable BEE credentials, Business Day notes that the business’ only possible motivation for faking its BEE verification certificate would have been a desire to avoid the cost of having the company re-validated every year, as is required by the BEE codes. Other high-profile incidents of BEE fraud over the last few years have seen companies fake certificates in order to avoid having to comply with the BEE codes themselves.

In August last year, for instance, the Mail & Guardian exposed a company called First Strut for faking its empowerment credentials. First Strut had held major contracts with Sasol, and boasted a forged verification certificate from legitimate verification firm Veri-Com. The details of the firm’s ownership were brazenly incorrect: it claimed, for instance, to have 50% black owners, when in fact it had 0% black owners.

Keith Levenstein, CEO of EconoBEE, says he has seen some pretty audacious attempts at BEE certificate fraud. “We have seen a certificate that awarded eight points for socio-economic development – when there are only five available. It’s like forging a $12 bill,” Levenstein told the Daily Maverick. “On confronting the company they expressed ignorance and admitted that they were approached by someone at the DTI’s offices and paid R2000 for the certificate at the local Wimpy.”

Another company, Levenstein says, pretended that their turnover was less than R5 million, rendering them exempt from BEE compliance. “It was not difficult to discover from their website that the company employs 4,500 people, has eight branches and does R1 billion turnover.”

Levenstein says that probably 2 to 5 BEE certificates out of 100 are flawed or invalid, but many slip through the cracks. “During verification, an agency will check a small sample, and even then, if they don’t have more history regarding previous certificates, the analyst will miss an invalid certificate.” When companies do get caught, they can be charged with fraud. The B-BBEE Amendment Bill makes allowances for penalties of up to 10 years in jail and 10% of a company’s annual turnover.

Why risk it? “Mostly laziness, or a lack of knowledge of the codes,” surmises Levenstein. “Companies need a certificate and can’t be bothered to go through the process, so they take a shortcut. The most common excuses we hear when we catch the company are ‘I didn’t know’, or ‘My consultant did it’, or ‘My operations manager did it’. It’s difficult to prove that the owner knew that it was wrong.” In addition, of course, there are those companies which would rather cheat than become genuinely BEE compliant. Levenstein says that there aren’t particular industries which are worse offenders than others.

When the new BEE codes come into effect, likely next year, we may see an upturn in BEE certificate fraud because the conditions for compliance are more onerous. “Companies will take shortcuts,” predicts Levenstein. “We expect to see many companies pretending their turnover is less than R50 million and [that they are] 51% black-owned. Also, because the new codes are unclear, companies will ask for more lenient interpretations from agencies.”

Of course, BEE certificate fraud is far from a victim-less crime. “A good certificate results in more business,” Levenstein says. “In government tenders there is a direct link between BEE levels and the awarding of tenders. Quite simply, someone cheating may take business away from someone else.” Black Economic Empowerment, or an unreasonable facsimile thereof. DM

Read more:

• Presidential BEE adviser link to fake certificate, in Business Day

Photo: A few out of hundreds of BEE certificates available in South Africa today.

DAILY MAVERICK

COMMENTS BY SONNY

IN SOUTH AFRICA EVERYTHING SEEMS TO BE FAKE!

INCLUDING OUR DEMOCRACY!!

THE ONLY THING THAT IS REAL IS THE PROSPECTS OF A DICTATORSHIP!