IFRS - there's nowhere to hide - Grant Thornton

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8 Volume 2. November 2005 3 2© It is possible to attain sufficient B E status without losing control over your business. The scorecard has been divided into three core components namely, direct empowerment human resources development indirect empowerment These are further divided into BEE elements, each of which is weighted as detailed alongside. Core Component BEE Element Weighting Direct empowerment Human resource development • Ownership • Management • Employment equity • Skills development 30% 30% Guidelines DTI currently setting out measurement criteria Not yet been issued by DTI (anticipated November 2005) Indirect development • Preferential procurement • Enterprise development • Residual element 40% Not yet been issued by DTI (anticipated November 2005) BEE ratings Currently there are guidelines setting out measurement criteria for only the direct empowerment portion of the scorecard. These guidelines were also recently revised. At the time of writing this article, the guidelines dealing with the other two areas had not yet been issued by the DTI. It was anticipated that these guidelines would be released during November 2005 but thus far, we have not seen anything. The draft Codes have generated significant debate and comment from the interested and affected stakeholders. In general, the Codes provide significant variation from the targets, terms and definitions of the various Charters in existence. Must all businesses comply with BEE No business is required by law to be BEE compliant. However, if you are currently doing business, or planning to do business with a government department, local authority or municipality, non-compliance could affect your business especially in relation to preferential procurement. These bodies will ask about your transformation or BEE status and if it is not rated highly enough, they are required to find an alternate supplier. Ratings provide an independent assessment of a company's empowerment status, risks and opportunities but when it comes to obtaining a rating, caution needs to be exercised. Rating agencies are currently providing ratings based on their own interpretation of the generic scorecard. This is resulting in a variance on scores for companies with very similar statuses which, in turn, is causing confusion in the market. 3 2© When the DTI release the official guidelines for B E , all businesses who already have a rating will have to be re-rated as the criteria initially employed by the rating agency will more than likely be out of line with the final DTI requirements. It is important to note that acquiring a rating is not a once off initiative and needs to be conducted annually. Because a business is dynamic, with a range of internal factors regularly changing, a rating certificate is only valid for a period of twelve months. 3 2© B E - the right thing to do Until all of the elements within the Codes of Good 3 2© Practice have been finalised, B E remains a moving 3 2© target for business owners. True B E is not something that is going to be achieved over night. The 3 2© important thing to remember, however, is that B E is the right thing to do, regardless of whether you are looking for economic or ethical benefits. Lee-Anne Bac Grant Thornton consultants have a keen understanding of the Sector Codes and Charters. Through comprehensive analysis, 3 2© we can provide you with strategic B E solutions that work for your company. For further information, please contact us.
Volume 2. November 2005 9 Occupational health & safety is a risk factor Non-compliance will result in severe penalties By Anton Barnard, Director, Business Risk Service, Johannesburg With good corporate governance requiring enhanced accountability and transparency from directors, occupational health and safety has come to the fore as a key factor of triple bottom line reporting. In South Africa, occupational health and safety is also receiving a lot of attention from the Department of Labour and failure to adhere to the Act could result in severe penalties, including hefty fines and jail sentences for business owners. Occupational health and safety is fast becoming one of the greatest risks for business, not only from a financial point of view but also in terms of good governance and organisational reputation. The Occupational Health and Safety Act (1993) states that an actual person, as opposed to the organisation, will be responsible for the implementation of the Act as well as taking accountability for any legal activity relating to the Act. This responsibility falls on the owner of the business and in the case of listed entities, the CEO. If any business is found to be in contravention of the Act, that person will face criminal prosecution and could be fined up to R50 000 or 12 months in prison. In terms of King II, no person with a criminal record can be a director of a business. In addition, non-compliance could result in the business having to close until it is deemed to be compliant and the business will have to foot the bill for any resulting health and safety investigations. Non-compliance could be incredibly costly for any business and the state will no longer accept ignorance of the Act as an excuse for non-conformity. Easy implementation Misinterpretation of the Act is one of the biggest hurdles faced by businesses but by following these steps for implementing a formal health and safety strategy, you can rest assured that if investigated by the state, you will meet their occupational health and safety requirements. Step 1: Structures of defined roles and accountability Although the executive has to accept accountability for his responsibilities towards health and safety, it is understood that he is a busy individual and may delegate the implementation and management to other members of the organisation. That being said, the buck still stops at the top and the executive needs to ensure that his business's health and safety strategy is clearly defined with a clear reporting framework and, on a regular basis, assess the status of compliance to the Occupational Health And Safety Act requirements Part of the reporting framework must include a safety manager whose responsibility would include: developing, implementing and maintaining the safety, health environment and risk program for the whole organisation ensuring that the organisation complies with all relevant legislation making recommendations to management to eliminate, reduce, transfer and/or accept the identified risks performing risk assessments to determine the level of exposure to the whole organisation liaising with the relevant outside organisations with regards to safety, health, environment and risk related matters ensuring that all employees are aware of the rules regarding safety, health, environment and risk related matters ensuring that all incidents/accidents are reported to and investigated by the relevant authorities In addition, a safety committee is often recommended for larger organisations. This committee would: make recommendations to management concerning safety, health, environment and risk related matters discuss all incidents and/or accidents and make recommendations to management to prevent future such occurrences give management feedback on the safety, health, environment and risk progress of the organisation ensure that all safety, health, environment and risk related matters concerning the risk program are attended to on a regular basis Triple bottom line reporting has gained favour since the introduction of the King II Report (2002) on corporate governance. Triple bottom line reporting requires that businesses report to all their stakeholders (i.e. more than just their shareholders) on more than just their financial results. There is now a need to report on their ongoing sustainability as an organisation in terms of environmental responsibilities as well as their interpretation of and response to social responsibility.
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