18 June 2008

Dear Sir

EXPERT OPINION: APPLICATION FOR JEWELLERY PERMIT

You have asked me to provide you with an expert opinion in relation to the validity of the approach adopted by the South African Diamond and Precious Metals Regulator in regard to a licence application (for a jeweller's permit).

Incidental to your request for an expert opinion, you have supplied me with copies of correspondence between yourself and Ms M, being a licencing officer employed by the Regulator.

From the correspondence, and on the basis of telephonic exchanges between yourself and Mrs M, it appears that Ms M will not entertain and consider your licence application unless you comply with principles expressed in the Mining Charter.

As advised in consultation, I am of the view that your licence application is to be considered solely in accordance with the rules laid down in Statement 000: General Principles and the Generic Scorecard, gazetted under sections 9 and 12 of the Broad-Based Black Economic Empowerment Act of 2003, and forming part of Code Series 000 : Framework for Measuring Broad-Based Black Economic Empowerment.

Pursuant to paragraphs 4.1 to 4.5 of Statement 000, an enterprise with an annual turnover of R5million or less (such as the enterprise conducted by yourself) qualifies as an Exempt Micro Enterprise ('EME').  EMEs are to be taken to have the B-BBEE status of a 'Level 4 Contributor' and are accordingly exempt from demonstrating B-BBEE compliance, other than by providing an auditor's certificate, or accounting officer's or verification agency's certificate in relation to their turnover.

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It appears that Ms M, in calling for you to provide proof of B-BBEE compliance, is mistakenly drawing upon criteria expressed in the Mining Charter.  The status of such transformation charters is explicitly addressed in Statement 003 : Guidelines for Developing and Gazetting Transformation Charters and Sector Codes, which was also issued as part of Code Series 000.

Paragraph 4.2 of Statement 003 explicitly provides that 'Code Series 000 to 700 and any statements under those Codes remain applicable to enterprises in the sector, despite the gazetting of their transformation charter under section 12 of the Act'.  On this basis alone, it is abundantly clear that Statement 000 (issued as part of Code Series 000), and exempting you (as an EME) from proof of B-BBEE compliance, should be applied in the consideration of your application for your permit.

For the sake of completeness, it might be noted that the Mining Charter has not yet been gazetted as a sector code under section 12 of the B-BBEE Act.  The Mining charter currently at best only serves as 'evidence of the commitment to promote B-BBEE in the applicable sector'.  Even when gazetted pursuant to section 12 of the B-BBEE Act, it will '…not (be) binding upon organs of State or public entities'.  (see paragraph 4.1 of Statement 003.)

I am accordingly firmly of the view that your application should be considered by the Regulator on the basis of your deemed 'Level 4 Contributor' status, and that Ms M's insistence upon compliance with Charter criteria is entirely improper.

It is customary, when providing an expert opinion, to state one's qualifications.

Briefly, I am the co-author, with Chris Van Wyk (of the National Empowerment Ratings Agency) of the leading work on BEE, being the BEE Service : Empowermentor, published by LexisNexis.  I hold the degrees BA(Hons) LLB, am an advocate of the Supreme Court of Appeal, and a director of Mazars Moores Rowland, Chartered Accountants and Auditors.

If Ms M wishes to discuss this opinion with me, she is welcome to contact me at (021) 405 4000, alternatively 082 370 6654, or by e-mail (wouter.scholtz@mazars.co.za).

Yours sincerely

WOUTER SCHOLTZ
Director
Mazars Moores Rowland