B-BBEE COMMISSION // BEE MATRIX SA (PTY) LTD AND OTHERS
|B-BBEE Commission||BEE Matrix SA Pty Ltd|
|Summary / nature of the complain|
|B-BBEE Commission initiated the investigation against BEE Matrix SA (Pty) Ltd based on allegations of issuing B-BBEE certificates that appeared invalid to Zuri Quantity Surveyors Incorporated and Ilifa Africa Engineers (Pty) Ltd – Findings – B-BBEE certificates issued contrary to SASAE 3502, verification manual, Codes of Good Practice and the B-BBEE Act.|
|Findings against BEE Matrix SA|
| BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy and Ms. Mitchell issued a B-BBEE certificate on the 07th of June 2016 to an Exempted Micro Enterprise named Zuri Quantity Surveyors Incorporated contrary to paragraph 4 of Statement 000 of the Generic Codes of Good Practice 2013, which states that Exempted Micro Enterprises are only required to obtain a sworn affidavit on an annual basis confirming the entity’s revenue and level of black ownership.|
BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy and Ms. Mitchell further issued a B-BBEE certificate to a Generic Enterprise named Ilifa Africa Engineers (Pty) Ltd on the 04th of August 2016, with no indication that the initial B-BBEE certificate was withdrawn and the re-issued B-BBEE certificate further failed to indicate the date of issue, re-issue and expiry, in a manner that is contrary to the objectives of the B-BBEE Act, and the verification procedures guiding the verification and issuing of B-BBEE certificates under the dti’s Framework for Accreditation and Verification by all Verification Agencies, Government Gazette No. 31255 of 18 July 2008 (“verification manual”).
BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy and Ms. Mitchell verified Ilifa Africa Engineers (Pty) Ltd using the Construction Sector Code despite the fact that the said code was repealed on the 17th of February 2016 and with entities that fell under the construction sector required to be verified under the Generic Codes of Good Practice 2013, a fact known to BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy, and Ms Mitchell, demonstrating clear negligence of their duties and obligations as verification professionals or agency.
BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy failed and neglected to have quality control measures for verification, as stated in the verification manual that a verification professional shall establish policies and procedures designed to provide it with reasonable assurance that its personnel comply with relevant ethical and legal requirement, establish and implement appropriate quality control procedures for the verification engagements undertaken and ensure that the quality control procedures are documented and communicated, also evidenced by the failure to put in place such measures even after being advised by the Compliance Division of the B-BBEE Commission of the clear breach in their verification processes and issuing of B-BBEE certificates.
BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy have financially benefited from issuing B-BBEE certificates, without legal authority, to Exempted Micro Enterprises that should not have been subjected to such unnecessary costs and an invalid B-BBEE certificate to Zuri Quantity Surveyors Incorporated, and further have failed to withdraw such B-BBEE certificates even after being advised of the apparent breach through the Compliance Division of the B-BBEE Commission as would be expected of an ethical and honest verification professional or agency;
Whereas they cooperated with the investigation and apologised for the conduct, Messrs. de Swardt and Munusamy provided some responses that were not true, not honest and contradictory in a manner that is unethical, improper and indicates a total disregard of their fiduciary duties as shareholders and directors of BEE Matrix SA (Pty) Ltd in a manner that may also amount to a contravention of the Companies Act, as amended, casting doubt on their fitness to hold such positions in entities, and a total disregard of the required standards for verification professionals or agency in a manner that undermines the objectives of the B-BBEE Act;
BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy and Ms. Mitchell provided false and misleading information to the B-BBEE Commission in their averment that the Exempted Micro Enterprise certificate issued to Zuri Quantity Surveyors Incorporated was issued at no cost and that they have control measures in place to address any possible circumvention of the B-BBEE Act, when such was clearly not the case, which conduct may also amount to an offence in terms of section 13N (3) (c) of the B-BBEE Act in addition to it being dishonest, unethical and devoid of the professionalism expected of verification professionals or agencies;
The conduct of issuing a B-BBEE certificate to Ilifa Africa Engineers (Pty) Ltd without proper verification procedures being followed is contrary to South African Standard on Assurance Engagements 3502, Assurance Engagements on Broad- Based Black Economic Empowerment Verification Certificates (“SASAE 3502”) which bestows a duty upon auditors to fully conform to ethical requirements and to plan and perform their engagements in a manner that would ensure that they obtain limited assurance about whether the issued B-BBEE certificate is free from material misstatement, an obligation that Ms. Mitchell, as an auditor affiliated to Independent Regulatory Board for Auditors (IRBA), and BEE Matrix SA (Pty) Ltd ought to have known;
BEE Matrix SA (Pty) Ltd and Ms. Mitchell, failed to use and apply professional scepticism and due diligence in performing verification function, assessing the information and issuing the apparent invalid B-BBEE certificates to Zuri Quantity Surveyors Incorporated and Ilifa Africa Engineers (Pty) Ltd, in a manner that displays a total disregard of the transformation ideals and objectives of the B-BBEE Act as well as the verification methodology prescribed by the verification manual, and the dismissive and dishonest approach with which they dealt with the apparent breach on being informed of it is indicative of lack of such professional scepticism and due diligence required;
BEE Matrix SA (Pty) Ltd and Ms. Mitchell failed to consider the guidance as well as the methodologies for verification of B-BBEE Codes of Good Practice which would have ensured that they perform their verification in accordance with the applicable criteria and minimised any information that would lead to the issuance of an invalid B-BBEE certificates to Zuri Quantity Surveyors Incorporated and Ilifa Africa Engineers (Pty) Ltd, or any other entity, which is unacceptable unprofessional conduct from a verification professional or agency;
The conduct of BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy and Ms. Mitchell may further amount to an offence in terms of section 13O 1 (a) of the B-BBEE Act, in that they may have misrepresented the broad based economic empowerment status of Zuri Quantity Surveyors Incorporated and Ilifa Africa Engineers (Pty) Ltd given that proper verification procedures were not followed in the issuance of the B-BBEE certificates in question; and
The B-BBEE ownership structure of BEE Matrix SA (Pty) Ltd has 45% black shareholding is as reflected on its sworn affidavit supported by the shareholders’ agreement, as amended from time to time, however provisions relating to board representation and voting rights must be made clearer and proof of participation be kept to demonstrated both de facto and de jure control over BEE Matrix SA (Pty) Ltd commensurate with the 45% shareholding by Mr Munusamy.
|Recommendations: Effective 06 July 2018||Effective Date||6 July 2018|
| BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy must within ten (10) days of the findings issue a written public apology and written individual apologies to the measured entities in question for this conduct, the contents of which must be approved by the B-BBEE Commission, and must circulate the public apology to all clients in their verification part of the business, and further place the public apology on the website of BEE Matrix SA (Pty) Ltd for a period of thirty (30) days;|
BEE Matrix SA (Pty) Ltd must make a written undertaking under oath that BEE Matrix SA (Pty) Ltd will fully abide by the B-BBEE Act and seek advice from the B-BBEE Commission when in doubt on any matter relating to B-BBEE, and such undertaking must be submitted to the B-BBEE Commission within ten (10) days of the findings;
BEE Matrix SA (Pty) Ltd must commission an independent audit of all B-BBEE certificates issued in 2015/2016 and 2016/2017 to identify any other B-BBEE certificates that were issued by Ms. Mitchell and BEE Matrix SA (Pty) Ltd using the approach they adopted in the verification of Ilifa Africa Engineers (Pty) Ltd and the issuance of B-BBEE certificates to Exempted Micro-Enterprises, and submit a report of such independent audit to the B-BBEE Commission within sixty (60) days of the findings;
BEE Matrix SA (Pty) Ltd, Messrs. de Swardt and Munusamy must thereafter refund all measured entities that the independent audit will identify to have been improperly verified and issued with B-BBEE Certificates in the approach used in verifying Ilifa Africa Engineers (Pty) Ltd and the issuance of B-BBEE certificates to Exempted Micro-Enterprises, and send proof of refund to the B-BBEE Commission within thirty (30) days of the independent audit report being submitted to and accepted by the B-BBEE Commission;
The shareholders’ agreement of BEE Matrix SA (Pty) Ltd be amended within thirty
(30) days of these findings to reflect clearly the board constitution, the voting rights and participation of the black shareholder, and that proper records be kept for any resolution relating to the shareholding, economic interest and net value, including any change in directorship and reason thereof;
BEE Matrix SA (Pty) Ltd must ensure that Messrs. de Swardt and Munusamy attend training on corporate governance and the B-BBEE Act within sixty (60) days of these findings with any institution accredited to offer such training in terms of the laws of South Africa in order to prevent the conduct from occurring in the future, and proof thereof be submitted to the B-BBEE Commission;
In light of the submission in response to the B-BBEE Commission’s recommendation for a site visit and audit by the South African National Accreditation System (SANAS) that BEE Matrix SA (Pty) Ltd will voluntarily withdraw its B-BBEE verification with SANAS, BEE Matrix SA (Pty) Ltd and any of its current shareholders, directly or indirectly, shall not engage in the B-BBEE verification business and shall not revive or register for B-BBEE verification accreditation with SANAS for a period of five (5) years from the date on which the current accreditation is withdrawn by SANAS, except for Mr Nathan Cyril Naidoo who joined and became a director in the entity after the conduct that is subject of these findings; and
In view of her role as a technical signatory, Ms Mitchell must implement recommendations 4.1.1, 4.1.2, 4.1.6 and 4.1.7, with the text adjusted to apply to her, and same timelines applicable in respect of each recommendation, failing which a separate investigation is to be pursued against her and also that her conduct be referred to the regulatory body for auditors for further investigation and appropriate remedy.
|Click here to download the full Publications of Findings and Recommendations|