In the past my company was able to undergo a BEE verification based on financials for a year that ended 14 months prior. I have heard that this is no longer possible. What is the current situation regarding the measurement period that we can use for a BEE verification?
BEE verification agencies used to rely on a so-called “18 month” rule when determining what financials could be used for a verification. This meant you could use financial statements for a verification as long as they were the latest available and not more than 18 months old. The practical effect was that you had 6 months after your financial year ended in order to use the financials from the previous year provided that your financials from the latest year where not finalised and available yet.
On 16 April 2021 the South African National Accreditation System (“SANAS”) published a directive that changed this and stated that only statements from your latest financial year may be used for a verification. This was challenged in court and on 22 March 2022 the Gauteng High Court ruled that SANAS did not have the power to prescribe the measurement period, only the DTI could do so. The directive issued by SANAS was found to be unlawful and was set aside.
This should mean that we revert back to the position prior to the directive being published and that the “18 month” rule applies. Practically, however, it is our experience that verification agencies are hesitant to go back to the “18 month” rule and view this as a risk. They have indicated that they are awaiting further communication from the DTI on the matter.
Consequently, while the directive from SANAS which instructed that only the latest financial year should be used for a verification has been set aside most verification agencies have chosen to continue to enforce this rule and we now await communication from the DTI to clarify this matter.