Dear Valued Clients

It is always a good time to start planning for your next verification, even if your next verification is meant to be a few months from now. Likewise, it is always useful to fully understand what could have changed from your last engagement, whether with Empowerdex or elsewhere.  We have made a few changes in our process that may affect you, and this section will highlight some of the changes. It will also re-iterate some of the current processes that may not have been clear or well-articulated in the past. The aim is to provide you with as much helpful information as possible, which you can refer to at any point, to better prepare you so that the process can be shorter and easier for you to complete.

We trust that going through this section would provide some insights, however the managers are available to meet with you to go into details especially on issues that may affect you directly. Most of the information in this section will be discussed at the planning stage of your verification, however, we do recognise that it may be too late at that stage to make any amendments or attain additional proof that we require. Therefore, we hope that this section will be a useful first step in the process.

This section also highlights general areas that need clarification. This is not a methodology document nor a definitive document. It is just an explanation on some of the requirements and why we need them. Some areas may apply to your organisation, while others may not. There may be areas, especially rising from the most recent updates to the Codes of Good Practice that are still unclear in terms of interpretations.  We’ve highlighted those and will provide further feedback as we get clarity from the DTIC. We aim to continue amending this document as and when things change, as we believe it will assist in planning and lead to a smoother verification process.

The Empowerdex Team

1. The Basic Process

1. The Basic Process

*Please note that at the time of preparing this guide virtual site visits and meeting where being allowed by SANAS due to the current Covid 19 situation in the country. Conducting interviews site visits or planning meetings virtually will be done in the same manner as actual on-site visits with the difference as suggested by the name being that the meeting will be over a preferred virtual platform such as MS Teams or similar. The meeting or interview will be recorded for record keeping purposes and will still include the discussion of information as well as scores etc. as per usual. SANAS has been granting extension on the use of virtual site visits and we expect that the situation may change depending on the Covid Lockdown levels in the country, however we will communicate such changes as and when communicated by SANAS.

1.1. Planning Meeting*
1.2. Verification (1st Site Visit Verification)*
1.3. Closing Site Visit:*
1.4. Post Verification
1.5. Consolidated Scorecard
1.6. Management Accounts

2. Elements of the scorecard

2.1. Ownership

Under ownership, it is important to have sufficient evidence to demonstrate black economic interest, black voting rights, as well as assess the level of net value the black participants can claim.  Because most companies have unique ownership structures, the analyst is able to identify, the exact information we would need based on your structure.  As an indication, the typical information requested would include: Share registers / share certificates / shareholders agreement/ Sale of share agreements / Preference share agreements / Memorandum of Incorporation and all other related agreements that affect ownership. These agreements will indicate if there are any restrictions placed on the black participants in terms of their ability to vote or receive economic benefit according to their percentage shareholding. 

  • Black new entrants would require an affidavit, signed by the fiduciaries of the entity in question, confirming the status of the participants of that entity.
  • Outstanding Debt Confirmation needs to be independent, except where there is vendor financing, in which case the confirmation must be signed by both parties, annually. An independent company valuation will also be required in order to calculate Net Value.
  • If the black participants are black owned EMEs or QSE’s, the affidavit will not be sufficient evidence for black ownership purposes. They would need to provide their proof of black ownership, including being available for interviews.
  • If the black participants hold shares through a Trust, whether it be an ESOP, BBOS or an ordinary trust, not only must they demonstrate compliance with Annexure 100(B, C & D) of Statement 100, but we would require interviews with sampled Trustees as well as Beneficiaries. Copies of AGM’s and financial statements must be available for verification to avoid limiting participation to 40% of the scorecard. We have developed a sampling methodology for selection of beneficiaries, depending on how many beneficiaries there are.  Please note that if the beneficiaries are not aware of their benefits, we will be unable to recognise the Trust, amongst other reasons.  Please also note that the independence of the Trustees is also as important, and in this case, the King Codes on Corporate Governance would be a good place to start to ensure that your trust is compliant when it comes to the independence of Trustees. The main point under trusts is that the Trust should be able to demonstrate that it is an independent shareholder in the Measured Entity and operating on the mandate of the stated beneficiaries or beneficiary groups.
  • In the case of family trusts where the beneficiaries are minors the voting rights will be recognised based on the trustees of the trust as the minors do not actively exercise voting rights
  • Private Equity firms holding equity in the Measured Entity will need to be verified separately if they are claiming to qualify as Black Owned Private Equity Firms as per Statement 100. We will also require a certificate from the DTI should the Measured Entity have an approved EEIP programme they wish to recognise for ownership purposes.
  • In the case of listed entities, the normal verification process will apply, based on the share register as of verification date, or financial year end. On average, most listed entities would supply information as of the financial year end, as this can be compared easily with the audited financials of the same period.  
  • Where there is black participation based on identified entities in the share register, but there is no specific BEE Transaction concluded, instead the shares are bought on the open market, we will request these entities’ BEE certificates. Where there is a BEE Transaction announced, it will be assessed as per the normal process. 
  • Listed entities have an option to either include or exclude South African Mandated Investments. If they opt for the exclusion, we would request the identified Mandated Investments and these will be verified as qualifying, and the percentage limit assessed.  If they opt to include Mandated Investments, a Competent Person’s report will be requested stating the methodology used and percentages assessed, and whether the report percentages have been adjusted for foreign operation. Please be reminded the Standard Valuation method for foreign operations needs to be consistent over the years to avoid inconsistent results.
  • If the Measured Entity is seeking recognition based on a Sale of Assets, please note that we will request an independent valuation of the original transactions value with the expert opining on the fairness of those values. This is a requirement of the amended codes.  The codes do not specify the frequency of this opining, and we are comfortable to request this every third year, unless there is further direction from the DTIC regarding the frequency. 
  • Continuing Recognition will continue to be assessed on the same basis as before, no new processes have been introduced. The only issue would be on recognition in the final year of the validity of the recognition.  Our approach is that if we do a verification in June, and the recognition expired in May of the same year, we cannot recognise it.  If it expires in August, we can recognise it for the next two months, and we would need to update the certificate in August to reflect that it has expired. 

There are many more intricacies regarding ownership verifications, and your particular structure and the particular requirements will be discussed in detail at the preliminary site visit.

2.2. Management and Control
2.3. Skills Development
2.4. Enterprise and Supplier Development: Procurement

Total Measured Procurement Spend (TMPS)

When determining TMPS, the audited financials of the measured entity (ME) would be utilised, using the inclusions and exclusions as per the relevant code.  Where the ME is being measured on a consolidated basis, we would need confirmation of the entities included in the financials presented – which is normally stated in the pack.  If not stated, we would need confirmation from the auditors / reviewers of the pack.  If the consolidation includes other subsidiaries audited separately, their combined financial information will be assessed, minus inter-company spending. 

TMPS is aimed at calculating procurement incurred within the financial period under review. In the calculation of the Cost of Sales figures, the amount for stock or inventory that has been used in the financial period is reflected and not the amount for stock that was purchased in the financial period. Therefore, the opening and closing stock adjustment is now included in the calculation of TMPS to better reflect the purchases for that period. The sampled suppliers will continue as per usual. 


Please also note the sampling of the ledgers to determine proof of purchased amounts for the sampled suppliers for the period under review.  Where the ledgers have cut-off dates indicated, then a random selection of any three invoices will be done, including the first invoice, the last invoice and the largest invoices as per the GL accounts. Before submitting your procurement list, please ensure that the claimed amounts are consistent with your ledger dates.  That is, payment-based vs the accrual basis – the difference in the two can result in samples failing as they are outside the period of assessment. 

Import exclusions

Where the Measured Entity is claiming exclusion of imports, we would require an Import Substitution Plan as per the codes – if it is claimed under 6.5.2- including clear objectives of the plan, priority interventions, key performance indicators, and implementation plan.  In subsequent years, we would require progress on implementation, showing active implementation.  We would require proof of importing including the relevant customs documents to tie up with the claimed amounts.  If the reason for importing is as per 6.1 – i.e., capital goods for value added production, or not available in SA, justification on why they qualify would be required, including proof of value adding, and proof of no local production. 

B-BBEE Affidavits

Regarding affidavits as proof of BEE Status, please ensure that the deponent indicates their designation, that the registration number and VAT number is indicated on the affidavit, and that the rest of the affidavit is filled in correctly.  Please ensure that the affidavit is signed by the Commissioner of Oaths and the deponent, and that it is dated correctly (i.e., must be commissioned on the same date as signed by the deponent).  Regarding the VAT number, the DTIC has released an updated Affidavit that now requires the VAT number to be filled in.  In most cases, the VAT numbers instead of the registration number are printed on the invoice from the supplier, and it becomes difficult to prove that the invoicing entity is the same as the entity who signed the affidavit – with only a name to work with, hence the amendment. 

Transport sector suppliers

When dealing with EME’s and QSE, please check which services are being offered to your entity and ensure that you have the right proof of BEE status.  For companies that operate in the transport sector, such as courier companies, freight (although they are not likely to be small), or offer any transportation services (including providing transport for staff), the EME/QSE needs to provide a BEE Certificate, and not an EME/QSE affidavit.  This is necessary since the Transport Sector Code has not been aligned with the Amended Codes, and the BEE Commissioner has released a Note to the effect that these EMEs/QSE would need to approach their nearest rating agency and get an EME Certificate; or obtain an Accounting Officer’s confirmation letter; or undertake a QSE rating based on the Transport Sector Code.  Please remember that under the transport sector code, EME’s have a turnover of less than R5mil, and QSE’s are between R5 mil and R35mil.  Anything above the aforementioned revenue thresholds, would mean that the generic Transport Codes apply. 

Construction Sector Code EMEs

Please note that only the following EME’s can supply a B-BBEE affidavit – using the correct template:

  • BEPs with a turnover below R1.8m, and
  • Contractors with a turnover, below R3million.

All other EME’s and QSE’s will require a verification certificate.

2.4.1. Supplier Development (SD)
2.4.2. Enterprise Development (ED)
2.5. Socio Economic Development (SED)

The important point to note when it comes to SED is that the initiatives need to contribute towards sustainable access to the economy for the black beneficiaries.  The Codes have indicated some initiatives that do qualify, however if not on the list, the Measured Entity would need to show how the intervention improves sustainable access to the economy.  This then implies that employees’ benefits do not apply as they already are in the mainstream of the economy.  It has also been confirmed with the DTIC and the BEE Commissioner’s office that contributions to the Solidarity are not claimable for B-BBEE purposes as the fund was established to respond to the Covid 19 pandemic and not for B-BBEE purposes.

The verification manual requires that if contributions are made to an organisation that qualifies, the Head of the organisation can attest what percentage of the beneficiary base is black as defined.  Alternatively, a third party can also attest to the percentage of black beneficiaries. A beneficiary affidavit can be requested, if the beneficiary does not have an independent third-party report or beneficiary certificate on its beneficiary base.