Ashley Vandiar, SAICA’s project director for Assurance confirms that this is directly in line with the objective of the new Companies Act and will go a long way in promoting entrepreneurship and economic growth. “We fully support the initiative to scrap verification fees for small businesses as this will promote a spirit of compliance with Black Economic Empowerment (BEE) without companies having to incur costs while doing so. Going forward, only an affidavit confirming the BEE status will be required for a company to be recognised.”
However, Vandiar notes that merely obtaining an affidavit to gain recognition for BEE purposes is likely to increase fronting, while he warns that fronting is a serious common law offense. “The new legislative changes are going to make it a criminal offense with serious consequences such as being sentenced up to 10 years in jail and paying a fine of 10% of the company’s annual turnover” Vandiar says, still expressing concern regarding the ethical reliance that can be placed on affidavits alone and those entrusted to issue them.
Vandiar also encourages Government to consider the use of South African Chartered Accountants [CAs(SA)] in the verification of small businesses saying that “chartered accountants are well versed with current and future legislative issues surrounding BEE and they currently provide small exempted micro enterprises with level 4 and level 3 contributor status certificates.
He asserts that CAs(SA) are bound by the SAICA Code of Professional Conduct which is aligned with the International Federation of Accountants Code. As such, CAs(SA) who engage in unethical practices will be liable to disciplinary action by the Institute. Vandiar affirms that CAs(SA) are also bona fide Commissioner of Oaths and are thus entrusted by law to certify documents. “CAs(SA) are best suited both ethically and technically to provide small businesses with the certification that they need for BEE purposes. Due to the nature of their profession, CAs(SA) are also well positioned to assist Government with the eradication of the fronting which Minister Rob Davies confirmed has become very sophisticated,” Vandiar concludes.
