Third-part procurement still a gray area

TRAVEL agents remain
unclear on third-party
procurement, despite
the Department of Trade
and Industry relaxing
requirements for B-BBEE
suppliers. Recently, the
dti temporarily scrapped
the B-BBEE condition that
required suppliers to be
classified as an ‘Empowering
Supplier’.
Under the new ruling,
travel agents will, for the
time being, automatically be
classified as Empowering
Suppliers, whereas
previously they had to
comply with one or more
criteria, such as 25% local
procurement, job creation
for black employees and
skills transfer, to obtain this
classification.
An Empowering Supplier
replaced the ‘Value Adding
Supplier’ in the amended
B-BBEE codes in June
2015 and is defined as
a compliant entity that
can demonstrate that its
production and/or valueadding
activities take place
in the country.
But travel agents still
lack clarity on whether they
should in fact be considered
suppliers. “This is a
conundrum in the travel and
tourism industry,” says Jenni
Lawrence, md verification
services at Grant Thornton.
She says there is still a lot
of conflicting information
surrounding third-party
procurement, despite the
publication of a recent
practice guide on the issue
by the Broad Based Black
Economic Empowerment
Commission.
Lianne Levenstein, ceo
of EconoBEE, says travel
agents are sometimes seen
as suppliers and, in other
instances, as intermediaries.
When seen as a supplier,
the client will claim that
his entire travel spend lies
with the travel agent. As
an intermediary, only the
commission fee is seen as
spend with a travel agent.
Says Lianne: “The
customer will say they spent
R10 000 with the travel
agent. However, the travel
agent will say the client only
spent R1 000 with him,
and actually spent R5 000
with SAA and R2 000 with
Southern Sun and R2 000
with Bidvest car hire.”
Lianne explains that the
corporate client should have
B-BBEE certificates for all
the different suppliers and
a clear breakdown of how
much was spent with each
supplier as well as with the
travel agent.
Alternatively, the client can
claim the full amount with
the travel agent but only if
the travel agent records the
full amount as income in its
financial statements. That,
in turn, will affect the agent’s
classification as an EME
(Exempt Micro Enterprise)
or a QSE (Qualifying Small
Enterprise).
According to the recently
released practice guide,
if the travel agent records
the full amount as spend,
he or she could suddenly
become a Large Entity
requiring a generic certificate
instead of an EME or QSE
certificate. If this is not
clearly recognised, it could
potentially be regarded as
a misrepresentation of the
travel agent’s B-BBEE status,
which is a serious offence.
“Everything needs to be
recorded meticulously and
in the right way to avoid a
misrepresentation of the
B-BBEE status,” confirms
Lianne.
If the travel agent records
the full amount as spend
and therefore poses as the
supplier, this also begs the
question of whether the
travel agent could be held
liable in case anything goes
wrong. TNW contacted four
different lawyers to gain
clarity on the issue, but none
could provide an answer.