How does the R47-03 affect the Measured Entity?

The SANAS R47-03 came into effect on the 7th of October 2020 and will have an undoubtedly impact on the Measured Entities-B-BBEE verification process. The R47-03 is a SANAS reference document, which clarifies the role of B-BBEE Rating Agencies.

It further lists the SANAS accreditation criteria, as required by the Department of Trade, Industry and Competition (the dtic).

The related SANAS amendments share the ethical and professional conduct standards for B-BBEE Rating Agencies and their employees. It forms a basic guideline to manage the likelihood and prevention of risks such as conflict of interest from materialising. As such the impartiality of the verification agency is assured during the verification process.

SANAS is the accreditation body of B-BBEE Rating Agencies as part of its oversight role. The body must ensure that Rating Agencies assess, verify, and validate disclosed and undisclosed B-BBEE related information, on measured entities. The regulations imposed by SANAS, are detailed on R47-03 and must be referenced in the verification process to ensure that the B-BBEE certification process meets the required validity and accuracy standards.

As a rule, B-BBEE Rating Agencies must be able to demonstrate objectivity and impartiality in their decision making. The South African community at large demands that these values be adhered to.

The new R47-03 contains an amended definition of “Consulting Services”, which, includes Scenario Planning and Gap Analysis. B-BBEE Rating Agencies are not allowed to provide any consulting services to a Measured Entity for which they provide B-BBEE Verification Services. This ruling is in place to ensure that the risk of conflict of interest is totally eradicated and further guarantees impartiality. As a further deterrent for the risk of conflict of interest to occur, members of these agencies, may not be related to parties or any entities that are subjected to the verification process or any other related party, which may have a vested interest in the outcome of the B-BBEE verification.

Historically B-BBEE Consultants have worked closely with B-BBEE Rating Agencies. They primarily acted as a representative for the client during the B-BBEE Verification Process. However, since B-BBEE Consultants do not have the same regulatory requirements as a B-BBEE Rating Agency, this has been identified by SANAS as a risk of conflict of interest. SANAS constantly monitors B-BBEE Rating Agencies with consequences in place for non-conformance, which does not apply to a B-BBEE Consultant.

The B-BBEE Codes of Good Practice specifies the following in relation to the responsibilities of the Measured Entity: “it is the Measured Entity’s responsibility to understand their requirements for B-BBEE compliance and to ensure that their B-BBEE strategy is in line with the intention of the codes.”

Many Measured Entities have come accustomed to entrusting their B-BBEE Consultant to take the lead in their B-BBEE Verification process. The consultants by default assume the responsibility to address issues arising from the implementation of B-BBEE strategies. The amendments address and compel the Measured Entity to accept their innate responsibilities and take the lead during a B-BBEE Verification process. These organizations therefore must be direct and own communication with the B-BBEE Rating Agency as it is related to their business and the dynamics of the process. This does not prohibit the B-BBEE Consultant to receive copies or to be included in the verification process, but the core of the communications in terms of requests and deliverables must be between the B-BBEE Rating Agency and their client.