The costly, tedious and exhausting verification process to obtain a BEE Certificate with a decent level sometimes leads to companies opting for the faster, easier and cheaper method of simply obtaining a BEE Affidavit.
If done correctly, a BEE Affidavit may be more cost-effective and time-efficient than obtaining and submitting all relevant documents for verification. It can even lead to a higher or better BEE Level for your company.
Unfortunately, some companies use this method as a “shortcut” and present illegitimate BEE Affidavits to clients or other parties. This might be because of the companies’ turnover requiring them to be scored according to a BEE scorecard or their BEE Affidavit being issued based on the Code of Good Practise whilst the company should be rated on another Sector Code such as the Construction Sector Code.
This article will first look at the consequences of submitting an illegitimate BEE Affidavit. Secondly, the criteria your company needs to comply with to be eligible to obtain a legitimate BEE Affidavit in some sectors.
Consequences of having an Illegitimate BEE Affidavit:
Because of the BEE Affidavit being a misrepresentation of a company’s actual BEE Level, and undermines or frustrates the achievement of the objectives of the BEE Act or the implementation of any provisions of the BEE Act. The presentation of an illegitimate BEE affidavit constitutes fronting.
The dire consequences of fronting are as follows:
- Individuals involved in fronting may be fined or imprisoned for up to ten years. There is no limit to the fine imposed.
- Entities involved in fronting can be fined up to 10% of their annual turnover;
- Verification agents, procurement officers, and public servants who are aware of any fronting or attempted fronting but fail to report the fronting can be fined and/or imprisoned for up to ten years. There is no limit to the fine.
- The BEE Act also provides that once convicted in terms of the act, the guilty party may not deal with the government or organs of state for the next ten years.
What are the criteria for a company to be eligible to obtain a valid BEE Affidavit?
The criteria to be eligible to obtain a valid BEE affidavit differ from sector to sector.
- The Code of Good Practice states that companies which fall
in the following categories are eligible to obtain a BEE Affidavit:
- Companies with an annual turnover of less than R10 Million.
- Companies with 51% Black Ownership or more, with an annual turnover between R10 million and R50 million.
- The Construction Sector Code differentiates between
Contractors and BEPs and sets out the following criteria for companies eligible
to obtain a BEE Affidavit:
- Contractors with an annual turnover of less than R3 million.
- BEP with a turnover of less than R1,8 million.
- The Tourism Sector Code sets out the following criteria
for companies eligible to obtain a BEE affidavit:
- Companies with an annual turnover of less than R5 million.
- Companies with 51% Black Ownership or more, with an annual turnover between R5 million and R45 million.
- The Transport Sector Code does not allow any BEE Affidavits to be issued.
Take note that various other sector codes could apply to your company.
Conclusion
The importance of ensuring that your company has a valid and legal BEE Affidavit cannot be over emphasised.
You are expected to ensure that your BEE Affidavit is based on the correct Sector Code and that your company meets the necessary criteria to qualify for a BEE Affidavit.
Opting to have a BEE Affidavit rather than going through the verification process might seem like the cheaper, easier and shorter route, but if done incorrectly, it could have devastating consequences for you or your business.
If you are unsure whether you have a valid BEE affidavit, please do not hesitate to contact your nearest SEESA office. Alternatively, leave your name on our website, and we will contact you.
About the Author:
Corne Zandberg started his career at SEESA in 2020 and is currently a Labour & BEE Legal Advisor at SEESA’s George branch. He obtained his B.Com LLB degree from the NWU in 2014 and was admitted as an Attorney of the High Court in 2017.
Resources
- BROAD-BASED BLACK ECONOMIC EMPOWERMENT ACT 53 OF 2003 AS AMENDED BY ACT 46 OF 2013