Paul Janisch

Consulting, opinions and speaking engagements and a few other topics that I know quite a lot about

If you are looking for a realistic perspective of empowerment in South Africa and southern Africa (including Namibia, Zambia, Zimbabwe and Botswana), I am able to provide that perspective at your AGM or any other presentation. It's relatively clear from this blog that I know what I'm talking about. Over the last 20 years I've gained a very thorough understanding of the following topics

• Government procurement
• Parastatal procurement
• BEE trends within Africa
• Impact of BEE legislation
• Multinationals and empowerment within Africa

And I am very happy to provide you with an overview of these topics.

In addition I have consulted to a wide number of public and private organisations throughout South Africa on

• Public Private Partnerships
• Listed shareholding analysis
• Tax advice on BEE initiatives and tax structures (through a partner)
• Opinions on empowerment commitments that may be contractually binding
• BEE plans for tenders
• Joint Venture BEE certificates
• General opinions (similar to this one)

Or if you need someone to come in and find those points within your organisation for your next verification please contact me and we can discuss what is required. You can email me or phone me on (+2783) 227-1375.

PEER LEARNING FOR EFFECTIVE CHANGE MANAGEMENT

A story was told to us recently about 42 pupils whose school went bankrupt in their final year of high school.  Not having the financial means to move schools, the pupils decided to teach themselves and look for support in neighbouring schools where it was required.    The pupils identified subject experts, in some cases, sub-category experts, and these people taught their peers.  The person who taught them mathematics is a friend of ours.  In telling the story he made a very strong observation.  People relate very well to their peers when it comes to being taught.  Possibly even better than they do with teachers or experts.  The reason behind this is simple.  That peer has no authority over her fellow classmates, they speak the same language and are able to stand up to the person giving the lesson.  Because there’s no power play, both the pupils and the “teacher” were more relaxed and receptive to the transfer of knowledge.

The broader message here is that peer learning has a bigger impact on the learning of and adapting to new systems than companies may be aware of.

Hareclitus wrote “The only constant in life is change”.  He noted this about 2500 years ago.  Strangely, nothing has changed.  Change still disrupts our existence, in spite of our consistent resistance to it.

This resistance to change remains a massive challenge to the implementation of large software and hardware systems in companies around the world.  So much so that change management, as it is most often referred to, forms a major part of each implementation and is regarded as a critical component of any rollout.  Statistically the odds of success are not expected to be great.   McKinsey and Company noted in 2016 that “Research shows that 70 percent of complex, large-scale change programs don’t reach their stated goals.”  McKinsey observed in the same article that “Common pitfalls include a lack of employee engagement, inadequate management support, poor or non-existent cross-functional collaboration, and a lack of accountability. Furthermore, sustaining a transformation’s impact typically requires a major reset in mind-sets and behaviors—something that few leaders know how to achieve”.

The decision to change or upgrade an existing system is almost always taken by the executive team and IT department.  Service providers put together an implementation plan that inevitably follows the traditional method of senior management directives and so it flows down to the ultimate user.  And at that point the message becomes convoluted.  Some think they could lose their jobs if they don’t use the system.  The fear of the systems extends beyond the technical knowledge to use it.  People may feel their superiors will judge them if they don’t use it.  They may just be plain scared that they might not be able to use the system due to its novelty and complexity. 

Most of the literature covering change management talks about a top-down approach.   Get senior management behind the process and then filter the message down to the users.  If this method worked then the percentage of successful applications would be higher.  Using senior management to “drive” this transformation is antiquated, and contributes to the ultimate lack of success.  This is a type of stick approach.  Relying on (implied or otherwise) intimidation as an incentive to create new behaviours.  Sweetening the deal with a carrot could also be viewed as demeaning and hence counterproductive. 

I'M NOTS

Returning to the school example at the beginning of this article.  Peer learning is an extremely powerful and effective method of the general adoption of complicated systems.   Some might remember the scene in Monty Python’s “Life of Brian” where Brian’s followers wait all night for him outside his house.  When he eventually addresses them, Brian becomes increasingly frustrated with the crowd telling them that they are all individuals and different, a sentiment that is echoed back to him by the adoring crowd.   A lone voice calls out “I’m Not” and is quickly told to keep quiet.   

There’s an “I’m Not” in every organisation, individuals who stand out.  Often these “I’m Nots” are the type of people that embrace change.  In the case of new IT systems, we might call them the early adopters. 

“I’m Nots” are a neglected resource because they can and should be used as flag bearers for the adoption of new technology.  We can’t change a person’s fear of change but we can show that there are people who have risen above that fear and are willing to share their knowledge of the new processes.  In many cases we have found that the same “I’m Nots” relish in the system and have worked out certain efficiencies that the primary vendor is unaware of.

Peer learning in practice

The “I’m Nots” are the key here.  It still remains a complicated matter of encouraging these “I’m Nots” to start teaching their contemporaries but this process pales in comparison to the wider acceptance of a new system.  Whilst peer learning is a very natural process it often lacks that strong element of formality that ensures that it’s taken seriously.  Our method is to create a series of INTRATERNSHIPS in the organisation that formalise this informal process.   INTRATERNSHIPS are a formalisation of informal training.  It sets up times for training with agendas and outcomes, all managed by peers. 

We call these people INTRATERNS because they are in effect interned as employees.  This adds weight to the programme by formalising the training.  At the end of a cycle, which is typically about 12 months each person on the programme is awarded a certificate.  In addition we provide the organisation with a recognition certificate which lets both internal and external stakeholders know that if key people exit the company, tasks. can continue.

The trick is to run a peer learning programme in parallel with the formal change management process.  The terminology used in Oracle’s process is intimidating and somewhat old fashioned, it still looks at the top-down methodology, thereby creating an us-and-them sentiment.  The top down methodology is guaranteed to be more successful if you see the executives learning from the people who are going to actually use the system daily.

And the school.  Forty-one of the forty two people made it through their final exams, one person being thrown out the school for being disruptive.  Those same graduates then started a fund to purchase the school and the land from the government.  It’s almost fifty years since these matriculants took control of their finals and St Charles is one of the top schools in South Africa.

Paul Janisch and Rudolf Rautenbach are South African a peer learning buffs.  Peer learning does not replace formal learning and training, it reinforces it.  It’s a sort of training micro-dosing.  Whether it’s formalised or not, it happens in every organisation.  Formalisation of the process harnesses the power of internal knowledge.

They can be contacted on [email protected]

Why should we do it?

It's a question I hear more often now.  Why should we bother with a BEE certificate?   I know of a large company that went out of its way to get to a level 2 last year that is asking whether their clients and customers are at all concerned about a BEE certificate.  I know of a few companies that have gone with non-compliant BEE certificates because their clients are saying - give us a certificate.  One of the requests was from Vodacom, which is the worst BEE nazi in existence. 

There's something going on and this is a huge threat to the BEE industry.  It's an undercurrent that started with Trump and Musk and was followed by the various legal actions led by the largest law firms (maybe not quite in that order).  I wrote before that when Cyril phoned Musk and Musk told him to change the law to allow Starlink to operate here,  Cyril's only response was that it was the law.  He had no statistics to show that the programme is working for the country.  He has no statistics because there are none.  There are a number of people who have made a lot of money, both legitimately and illegitimately.  We have a government that is more than happy to pay an extreme premium to black service providers, in many cases AN EXTREME premium.

Business has had enough.  I realised this yesterday when I was talking to the client who doesn't know whether they want to do this anymore.  I said to them that I think the conversation this time next year will be very different.  This year I am advising them to go through the process, mostly because they've done a lot of stuff and I can keep the costs right down for everything else.  Next year they may not do it at all, and I'll have nothing to convince them to change their minds.

For BEE to succeed it needs to deliver.  Parks and Recreation's dead in the water BEE fund is not the way to go now.  If BEE is to survive we need major concessions for foreign investment.

Let's say you wanted to report fronting to whoever and you don't know what to do - why didn't you ask me first?

As is the blogger's wont, we love to create improbable scenarios that cover as many possible fronting incidences.

South Africa loves racism, the anc loves racism the most because it gives them license to hide behind their own incompetence and malfeasance.   Almost every case that I'm aware of that the BEE Commission has investigated has dealt with black shareholders being diddled.  And this is why they've lost at least four high court cases because they were so hellbent on proving racism that they got eaten at the courts.  They are missing out on a number of easy convictions because they don't expand their capabilities to include other forms of fronting. 

The definition of fronting is very broad

Fronting means a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes. Fronting commonly involves reliance on data or claims of compliance based on misrepresentations of facts, whether made by the party claiming compliance or by any other person. Verification agencies, and /or procurement officers and relevant decision-makers may come across fronting indicators through their interactions with measured entities.

And when it's discovered

In order to effectively deal with the scourge of Fronting, verification agencies, and/or procurement officers and relevant decision makers are encouraged to obtain a signed declaration from the clients or entities that they verify or provide business opportunities to, which states that the client or entity understands and accepts that the verification agency, procurement officer or relevant decision maker may report Fronting practices to the dtic. Intentional misrepresentation by measured entities may constitute fraudulent practices, public officials and verification agencies are to report such cases to the dtic.

At its core fronting is fraud and must be investigated as fraud.  

It's not just the authorities that take an interest, it's the press too.  They love a good story

A SCENARIO (EXTREMELY UNLIKELY BUT MAKES FOR GREAT PRESS)

We have a company called TROTTER (not pinched from Only Fools and Horses), who turns over about R3bn.  I think for these purposes we'll make the fronting allegation about four years old, you'll see why it can't be current.  TROTTER goes off to BALANCING BELINDA (BB) verification agency and asks them to measure their 2020/21 financial year.  TROTTER operates in a competitive environment and as such needs to be at least a level 4, but they want to be a level 2 so they go for 2 levels of YES (0utsourced to a third party to manage).

The verification is completed and they come out at about 82 points, a level 4 which they needed because the scorecard before this one is also a level 4 in order to benefit from YES.  But there's a problem (this is why this just can't be true) the certificate that was issued by BB is based on the 2013 codes and doesn't consider bolshie's 2019 amendments.  Nevertheless TROTTER canters on towards the YES.  For some reason they cancel the YES programme during the verification (after 8 months).  They still expect the YES though.  BB notices this problem and gives them no YES.   TROTTER unfortunately trades for a year on level 4 BEE certificate, knowing full well that the wrong codes were used.

A year later TROTTER does it all over again and they get their level 2 with YES.

LET'S LOOK AT A FEW OF THE ISSUES

• The certificate is in fact invalid, it never was valid.  TROTTER traded with it nevertheless.  I don't think it matters that they knew, they should have known.  BB should have known and if there was a consultant then the consultant should have known. 
• It's difficult to figure out what the score would have been if they had used the 2019 codes (skills and procurement).  You can take the information and put it into the new scorecard but that's not an accurate reflection.  Being on the cusp of a level 4 they could actually have been a level 5, or worse a level 6 because they didn't meet the sub-minimum for either skills or procurement.
• The subsequent certificate is in jeopardy because the VA should have seen from the prior BEE certificate that the certificate that they based the YES on was fake.  They might get away with saying that we'll use the certificate from two years back.  But they remain some form of an accessory. This might impact all certificates that came after that.  I would investigate, five years of fronting.  That's even better press.

AND THEN

Someone picks up on this and feels that they need to expose TROTTER's fronting.  This is what I would do

1. Lay a charge of fraud at your local police station.  It's going to sit in a file until it ends up at an investigating office and this may take months, maybe years. Fraud never prescribes, you have plenty of time (best ask a lawyer first)
2. Take your charge of fraud and the evidence and both certificates to SANAS.  Ask them to withdraw the certificates because the first one is fake and the second one should have known the first one was fake.  SANAS can get a little bit aggressive about these things. It's not unlikely that they will suspend BB and the subsequent VA if there was a second one involved.
3. Send those two withdrawn certificates to the BEE Commission.   It's going back a bit but get them to put it up.
4. Lodge a complaint of fronting with the BEE Commission.  Attach the evidence and proof of laying the charge.  I would speak to them directly and tell them that you've got something that they might actually win.
5. Because this is anti-competitive why not approach the Competition Commission.
6. If there's a problem with the YES, you might want to speak to YES themselves.
7. And then tell the presidency if it's YES related.  This is a presidential initiative (good luck here but maybe you'll find someone to talk to)
8. I wouldn't bother with the dtic.  I have no faith in them, they'll probably hear about it after the case is concluded

This is extreme but it's the beginning.  At some stage the press will hear about it.  I sometimes think that certain publications have access to the BEE Commission because I've seen some complaints making it into the press. I certainly think that journalists speak to the police, they'll hear about it somehow.  The business press would like to know about this. The awful and unread koerant from Cape Town will probably write something that says "Dr I'mbeyondhelp Slaphappy condemns this white monopoly capital abuse of transformation laws and how he is the doyenne of everything empowerment related, specifically when he's under attack - which is always."   

Here is why it's important to an incompetent government (the anc part) to win a BEE case.  Stephen Grootes is correct in his oped. 

BEE has generally been broadly accepted across society.  Now this may be changing.  The main reason for this is that its biggest supporter, the ANC, is losing support so quickly.

The anc part of the GNU needs a victory to show that it is serious about empowerment and the curtailment of white collar crime.  The NPA has had a poor conviction rate.  A case like this is not complicated, it will be properly defended with the side choosing mpofu as its counsel guaranteed to lose.  It will go on for a long time.  And every time it goes to court the press will be there.  TROTTER will be attracting the wrong attention.

The BEE Commission might also get round to winning something.  They may even get a conviction under the BEE Act. This is before the fraud charge is heard.  The consequences are dire if successful (there's this thing inside me that still doesn't have faith in the BEE Commission - but maybe they'll get something right)

A natural or juristic person convicted of fronting practice(s) in terms of the B-BBEE Act may be liable to a fine of up to 10% annual turnover or a maximum prison of ten (10) years. Further, any natural or juristic person convicted of an offence in terms of the B-BBEE Act may not for a period of 10 years from date of conviction, conducting business with any organ of the state or public entity and will be registered in a register of the tender defaulters with the National Treasury.

TROTTER is a large organisation turning over R3bn, the fine could be as much as R300m.  Add on the fraud conviction and its consequences, more money and the extreme reputational damage inflicted upon TROTTER and y ou have a very wounded TROTTER.  Not so much a trotter but now a slow walker.

THIS IS EXTREME

But it does highlight the potential consequences of a fake BEE certificate.  I don't know what's worse, the fine or the press. 

I'VE NEVER DONE THIS BEFORE BUT IF YOU HAVE ANY OTHER IDEAS.  SEND ME A MESSAGE AND I'LL ADD IT TO THE BLOG

 

 

 

 

 

Proof that SANAS is behaving like a legislator

The email below was sent out by a verification agency because SANAS found a certificate to be non-conformant. 

SANAS (or the person that represented them - I wanted to write moron, but I thought that would be rude, even though I don't know who the moron was), decided to look into the codes and offer an interpretation.  When they found that their interpretation differed to the VAs the issued a non-conformance.

If you want to know whether SANAS can do this then read here.  They can't, that's not their job.   I covered it in that post.

Just an important point to take note of, in preparing for your Clients 2025 Financial year, with regards to Enterprise & Supplier Development contributions.

The Definition of SD/ED contributions state – “ with the objective of contributing towards the development, sustainability and financial and operational independence of the Beneficiary”.

Attention is given to the Beneficiaries Independence.

Where the ME and the Beneficiary “share” the same shareholders and/or directors, the ME must show the Beneficiary’s, financial and operational independence.

• Is the Beneficiary an independent operating business or just an extension of the Measured Entity;

The initiative must show the development and empowerment of a new, independent business and not “taking money out of the one pocket and putting it in the other”.

This note is pure interpretation. 

EXCEPT IT'S THE CORRECT INTERPRETATION

I can't retract my moron moniker.  I still think that SANAS is almost always the problem. This blog is the voice of me and my crusade against arbitrary power.  I know that most of the players in the industry feel the same way.  But there's no real desire to cut them down to size, other than that very important SERR Synergy case.

Why is it correct then?

After ranting over this interpretation I decided to check the verification manual.  My problem is that I can't argue with legislation if it's clear.  I suppose you could argue that it only applies to enterprise development because the verification manual was published way before bolshie bob's economy destroying BEE codes.

4.10 The Verification Agency shall ensure that Enterprise Development contributions were with the specific objective of contributing to the development, sustainability and financial and operational independence of those beneficiaries  (to expand - going concern, liquidity and control of directors on ED beneficiary)

My advice is make sure your beneficiaries don't have the same directors as your company.  You can have a minority shareholding (49%), which I think is a good idea.

Remember people, BEE is a game.  There isn't a single corporate in South Africa, big or small that will tell you in private that they believe in the process anymore.  If it's a game then we must play by the clear rules - everything else is open to interpretation.

In which the potential future of empowerment policies is discussed

There’s no doubt that the black economic empowerment Pandora’s box has been opened.  The resistance against the policy is steadily increasing.  I have laboured this point ad nauseum on this blog. 

A question that I cannot adequately answer to myself is “why is Paul Jansich so opposed to a policy that he derives a living from?”.  I have answered this question multiple times in my head.  I’ve written about this often on the blog. I’m now going to give you the 2025 answer.

I started writing this blog (in July 2006) it was because I believed in the process.  I thought that we could actually do something for the country.  The blind optimism is demonstrated in the second post

This does not mean that government is going to cut back on its broad-based BEE programme.  They can't afford to.  The object of BEE is to narrow the gap between the first and second economies, if the programme is discontinued South Africa will be in bigger trouble than Zimbabwe.

Don't put your BEE process on hold because of this, you will still need to demonstrate your BBBEE status.

It didn’t take long before I started writing more critical posts.  And then it was downhill.  I realised that both the government and large corporates were not committed to the concept.  Lip service abounded at the time, WE ARE COMMITTED TO TRANSFORMATION, TRANSFORMATION IS A BUSINESS IMPERATIVE (etc – sickening actually).  In fact those large corporates were just government lackeys, doing the government's dirty work whilst the government went about looting the country. 

The next phases was the realisation that BEE had become a political whipping tool.  It was a smokescreen for the anc’s corruption policy.  They could easily claim that we weren’t committed to transformation and hence were racist, which would give them a licence to continue its looting policy.

And so, under that awful bolshie bob (Rob Davies) the dti felt emboldened to amend and create BEE codes and policies that punished non-black owned companies for being…….. non-black owned, whilst promoting black owned companies for… being black.  The underlying message was that if you don’t extend your ownership to black people then you’ll have to pay a fortune to comply.  In fact bolshie was so impressed with this marxist delusion (yes I see the contradiction here) that he submitted a draft amendment that said any company that had 51% black ownership, irrespective of turnover should be promoted to a level 2. 

That same draft gave us the bursary requirement under the generic codes.  At that point our bolshie seemed to think that BEE could solve social ills, like the costs of tertiary education – which had come to a very violent head.  It seems clear to me that this was perhaps the last straw for the users of the codes, these are the most expensive points in the entire BEE scorecard, as a result compliance with this has largely been rejected.  So unpopular is this lunacy that it has not found its way into other BEE codes.

And so we find ourselves in 2025 and the anc component of the government is getting it from all angles.  There’s the legal code challenge, multiple challenges from Sakeliga and Elon’s salvo.  Elon’s attack is probably the most concerning for Cyril.  It’s his brazenness that probably grated the most.  To quote Tim Cohen

If this broken telephone is accurate, the subject of SpaceX internet was raised at the meeting, but the discussion lasted less than 60 seconds. Ramaphosa was explaining how legally it was necessary to participate, as South Africans say, in SA’s black economic empowerment. 

Apparently Musk said simply: “I don’t ever give away my equity. Change the laws.” Ramaphosa continued, and Musk said again: “Change the laws.” And that was that on that topic. 

Musk is a rather unstable individual  but he has the ear of the world, he’s that powerful.  If he says it then it’s a matter of time before the Chinese, Europeans and the English start saying similar things.  At that point Cyril will be forced to locate his testicles and make some sort of a decision.

I have belaboured the Legal Code challenge far too much but I feel that my Big Five Friend (law firms that is) is missing the actual point of this challenge.  Norton Rose (and the other firms) must have contacted their large clients and said they were challenging this code.  The reputational risk to Norton Rose, specifically, is huge.  But they went ahead.  Which implies (strongly I argue) that all their largest clients, I’m referring to the BIG FIVE’s clients here, would have known about it.  It’s possible that some of the larger government departments, like the revenue services, would also have been informed.  If Norton Rose went ahead then they received some form of a blessing from those large companies.

And this is where the next phase of retaliation comes from, within.  If big business doesn’t object to the Legal Code challenge then it’s a clear sign that they’ve had enough of this senseless policy.  Judging by the number of hits I get on this post there is some sort of interest in corporates relaxing BEE requirements.  As with etolls, BEE faces a similar path, simply large companies losing interest.   We have a while to go but if pressure comes from outside then it will happen.

It seems I love quoting myself.  It would be easier for the anc to defend a policy if it was making a difference.  You could say to Musk, look what it’s done.  Because of our policy most people in the country have smartphones and hence would be able to access Starlink.  You cannot link BEE to the number of smartphones owned by the desperately poor,  you cannot link BEE to any economic growth.  The only direct link is the small number of people who masquerade as businessmen and women who have made an ugly amount of money in a ridiculously short space of time.  All of them have the anc to thank for this. They are not contributors to the economy, other than their consumption of prestige international brands. 

The solution has to be a total re-think.  The government is not an equal partner in this process, they are mindless legislators, as Norton Rose so adequately pointed out.  They need to accept responsibility for the school going population, from ECD onwards.  It’s the school system that will churn out the next workforce.  This has failed beyond expectation, and we expect almost nothing from the anc government.  They need to fix up service delivery, sort out crime and convict the corrupt. 

Only then can we expect a BEE policy to stand a chance of succeeding.

It took me a few hours to write this.  I’ve just noticed that it’s been said a million times.  And nothing will happen.  The consequences are yours to face Cyril.  It’s absolutely clear that you are the worst of all the anc presidents.  Not because you stole like zuma, it’s because you did nothing and will no doubt continue doing nothing. 

WE CAN’T SAVE YOU MONEY ON DISABLED AND BURSARY SKILLS SPEND

No one can.  But we can save you an absolute fortune in general skills development spend (6-8 points depending on the code) and achieve better training results

We’re sure that this is not the first email you have received from training service providers telling you to you need to urgently get your BEE skills development spend done before the end of this month.

However we are confident that we can get you those skills points for substantially (up to 95% less) less than the target spend amounts.

CASE STUDY ONE – MULTINATIONAL FINANCIAL SERVICES COMPANY

The client needed to spend R10.5 million to achieve 14 points under the Financial Sector Code (FSC).  This is spend on black people at the various levels of management.  We couldn’t get the unemployed skills spend points.  That is more often than not a raw cost.  We got the balance of the points by making use of our INTRATERNSHIP programme.  The cost to the client was less than 5% of the target spend.

IT’S ALL ABOUT INTRATERNSHIPS

The INTRATERNSHIP programme is inward looking and focuses on training that’s vital for your organisation.  It looks to reinforce the skills and knowledge that exist within the organisation.   It’s supplementary to external training. 

CASE STUDY TWO - A R5BN A YEAR COMPANY

That had spent a huge amount of money on outsourced disabled learnerships.  This would have generated 11 points on the generic scorecard.  We implemented an INTRATERNSHIP programme and their skills’ development score went up 4 points.  We found R22m of skills spend in the company that they were unaware existed, this was against a target of R10m.

WHY INTRATERNSHIPS

• INTRATERNSHIPS create a training and learning culture within the organisation. Everyone is a trainer and recipient of the training
• INTRATERNSHIPS teach staff efficiencies that perhaps only a few know about
• INTRATERNSHIPS lead to continuity, even in times of change. An INTRATERNSHIP programme spreads knowledge across the organisation.  It reduces silos of knowledge.  If critical people leave then stakeholders can be assured that tasks can continue
• INTRATERNSHIPS become the industry standard. Once a person has completed the programme they are awarded a certificate co-signed by the organisation and RISE BUSINESS CONTINUITY. To quote one of our clients “We are the first company in our industry to implement INTRATERNSHIPS, in two years’ time all our competitors will be following suit.  We will have set the industry standard by then”.
• INTRATERNSHIPS concentrate on internal knowledge and training and cost a fraction of external training.
• ORGANISATIONS get to ultimately control the quality of the information being imparted.
• INTRATERNSHIPS are not limited to a class of employee. Every employee is able to take part in the process..

CASE STUDY 3 – YOUR COMPANY

Each INTRATERN is regarded as a CATEGORY C Intern.  This means that salaries of each black person on the programme are regarded as skills’ spend.  We can get you up to 12 points at a much lower cost.  If you want the balance of the points we will try our best to help you, but that’s not our focus.

BEFORE YOU SIGN THAT CHEQUE

Please talk to us first.

It pays to litigate - you get some fantastic concessions. Legal Code challenge content

SERR Synergy posted this on LinkedIn but I've taken it from their blog.    For those with short memories might not recall how codes were introduced and then immediately applicable.  If I remember correctly the dti said you should have known that the draft was going to be similar to the final.   That's a whole can of worms there - the final was inevitably a carbon copy of the draft.  Don't forget the anc arrogance that we have had to live with in the last 20 odd years.  Clueless lawmakers deeming themselves too important to listen to the people.

But things have changed. A legal challenge to the legal charter from the big five law firms.  Everything is different now.  My friend tells me that the dtic were very worried that they would lose the urgent application and didn't want to lose two cases in a row, contrary to what I speculated in my last post.  Here the Legal Practice Council, who is the second respondent in the legal challenge, decided to have a workshop and discussion with the "industry stakeholders", which seems to have excluded at least one of the big five law firms (typical behaviour).  I'll let SERR takeover.

One of the primary concerns was the absence of key institutional structures necessary for compliance. For instance, the Legal Charter Council had not yet been formed, and the Legal Sector Transformation Fund where legal entities were required to make specific donations, had also not been established. These uncertainties left many legal firms in a difficult position, unsure about how to meet the new requirements.

Legal Sector Steering Committee engagement

Recognising these challenges, the Legal Sector Steering Committee held an engagement session with industry stakeholders on 4 February 2025 to clarify the implementation of the Legal Sector Code.

During this session, it was confirmed that any Legal Sector Measured Entity (LSME) whose financial year had already commenced before the publication date of the Codes, being 20 September 2024, still had to be measured under the Revised Codes of Good Practice (the so-called General B-BBEE Codes).

This means that entities with financial years ending between September 2024 to August 2025 will be allowed to be measured under the Revised Codes of Good Practice once more.

For example, measured entities with a February 2025 financial year-end, will be measured under the Revised Codes of Good Practice.

This is serious backtracking and a very poor attempt at conciliation.  Again the arrogance is alarming.  We'll give you about nothing and in exchange you'll do what we tell you to do even though the structures that are vital to comply aren't in place.   And then probably saying you'll get used to it and like it and implement it.

Things are not going well with this type of legislating.  The South African and the Orange Moron are decrying our redress policies.  It seems that the catalyst was Cyril gazetting (again extreme anc arrogance) the Expropriation Act.  This wasn't agreed to with other GNU partners and he went ahead because he is too weak and arrogant to figure out he's answerable to a country and his GNU partners.  Now South Africa is gaining unnecessary attention. We can do what we want as as a sovereign country.  But the attention we are getting is not good for us.  It is getting so bad that Cyril ends up calling Mush to explain the expropriation act. 

It would be one thing if these so-called empowerment policies had actually benefited the economy and the people.  Cyril could easily defend it under those circumstances.  But it has denuded the country, stripped us of resources and impoverished every one, except a very small number of people. 

And this is why the legal challenge is so important.  It's a barometer with the business sector saying we have had enough. 

Takes balls to listen Cyril.  I don't know where you left yours.

A non lawyer speculates on the Norton Rose/DTIC

That non-lawyer would be me.  I did four years of law in the last century.  I needed another two to complete the degree.  I understand the concept of law but I'm not a lawyer so I speculate wildly.  Here's the next episode in the Norton Rose saga.  I wrote a little bit about it last week.  This article refines my thought processes and was published by Moneyweb this morning

Norton Rose vs the legal sector BEE code

It’s very obvious that the dtic blinked first …

 

The preceding week has been busy for those who choose to litigate in the name of black economic empowerment (BEE). Sakeliga has now lodged two cases (see here and here), the Dimension Data executives have been given leave to appeal against the damning judgment in the property fronting case, and Norton Rose Fulbright SA (NRFSA) withdrew its urgent application for the suspension of the Legal BEE Code.

The latter case interests me the most. I wrote about it in this publication a few weeks ago. For me, it is the most significant legal attack on empowerment legislation that we have ever seen.

I need to preface this with a disclaimer. I am not a lawyer. I did study law but never followed through. These opinions should not be viewed through a legal prism.

NRFSA gave the Department of Trade, Industry and Competition (dtic) et al until 24 January 2025 to respond to its urgent application for the suspension of the Legal Black Economic Empowerment Codes of Good Practice.

The biggest risk it faced in its application to have the legal code suspended (Part A) was whether the judge in question would have viewed the application as urgent. I have heard that it can be a lottery in terms of who hears these cases, with some judges taking a dim view of empowerment litigation. My sources had their doubts that they would have been successful in their urgent application.

With that in mind, Norton Rose must have been somewhat relieved when the dtic approached it directly to discuss this action.

As a result, the urgent application has been put on hold, and Part B, the application for the removal of the code from the law books, will be heard in the next few months.

Certain articles have averred that Norton Rose backed down in their urgent application. I don’t think there is any substance to this assertion. If Norton Rose was concerned about the success of their urgent application then the dtic must also have been aware that the odds of a successful urgent application failing were stacked in their favour, yet they chose to negotiate.

To my non-legal mind, this strongly suggests that the dtic knows that they have a weak case and must be aware that the legal brains that they are able to muster do not stand a chance against the combined brain power of the largest law firms in South Africa.

All the dtic has done is delayed their fight by a few months. This seems to be a huge strategic blunder.

If the urgent application had failed, then the second part of the case could have waited for years until it was heard. By then, the code would have become established, with legal firms figuring out how to get around it. The case might not have proceeded at all.

It’s very obvious that the dtic blinked first. It’s a tactical error that will probably work against them. Sadly we also didn’t get to see their responding affidavit for the urgent application, but we’ll most likely see a more comprehensive one in a few months’ time.

What can you expect from a BEE consultant and how do they differ from a verification agency

A post that I might have written in the past.   My stats tell me that this is post is number 1293, which is not that much if you consider that the blog is almost 20 years old, I started it in August 2006. 

There are multiple players in the black economic empowerment world. 

1) There is the client.  That company that needs a BEE certificate

2) There is the person at the client who handles this process

3) There is the verification agency (VA) that gathers the evidence and gives you a score

4) SANAS (my nemesis) the agency that issues licenses to VAs to operate. 

5) Finally the companies that want to receive the BEE certificates.  Certificates are fine, there some companies that are being lead around the BEE Hive and set rules for affidavits that are ludicrous.  The mines are the ABSOLUTE worst

A BEE consultant sits between 2 and 3.  They are the people that you hire to arrange the process, make sure you do everything right and then get you a scorecard.  These are the people that have the necessary relationships with the VAs and can get things over the proverbial line.

There are a few types of consultancies as far as I can see

Number 1

These are the expensive ones.  They have a number of people working for them, each person handling a client.  They behave themselves and do everything by the book.  You pay for the privilege of their custom.  Their professionalism extends to their dress and their fantastic use of contemporary corporate jargon.  They get results, often at great expense. Tend to work for the largest companies (and SOEs).

Number 2

These are the transformation folks.  They are up for doing the right thing, doing it because it's right.  There are a lot of these.  They know how to manipulate the BEE Commission's opinions into binding processes that you'd be far too scared to challenge.  They have a wide network of beneficiaries for all types of causes.  They'll get involved in everything.  I think there's an element of fear there.  Good dress sense and just enough knowledge to confuse. 

Number 3

Number 3 work on compliance.  The better ones know how to interpret the various BEE codes to their clients' benefit.  In some cases they may use an interpretation from someone that serves their client best, even though they disagree with the interpretation.  They may then reject that interpretation for the next client.  They know that BEE is expensive, they know it's a necessity but they also know that their clients are not going through a BEE process because it's the right thing to do. Their clients are doing it because they have to.  They don't want to spend unnecessary money.  They want results and they want those results for as little money as possible.  The cleverer consultants don't get involved in any internal processes in their clients.  They just find points.  Dress sense is often sorely lacking and as a result they may be more inclined to do  virtual meetings.  Their waistlines increase because stretchy fabric hides the fallout.

AND THEN THERE'S RUDOLF and ME

We're number 3s.  We have saved our clients a ugly amount of money over the years.  Easily in the hundreds of millions if I have to think about the last 20 years.  We go for results.  We look for points and we find them.  We charge per engagement and don't do retainers.  We can sort everything out ourselves and have relationships with everybody if needed.

I like being us.  And we are really good at not liking SANAS.

 

 

 

 

 

 

Two BEE related cases. DimDat and Norton Rose

For the uninitiated DimDat was a slightly derogatory name for Dimenson Data.  I worked for them so many years ago, many memories have faded but the nickname has not.  DimDat was the darling of the JSE in the late 90s.  It even made it into the FTSE 100.  It had a certain culture that I found very predictable.  There is a recognition that the main people (similar to the list of people being sued) weren't that likeable.  There was an arrogance there.  That was more than 20 years ago, I can't comment now.

They have appealed their judgement and claimed

"The BEE structure was fully compliant with all BEE rules and was sanctioned by [law firms] Eversheds and Webber Wentzel acting for NTT, and Webber Wentzel acting for the empowerment entity," the former directors said in a statement on Wednesday.

"There is compelling evidence that NTT elected to abide by the transaction which had achieved the BEE result NTT sought and that it in fact relied on and benefitted from the transaction."

This is good news.  As I wrote before

The six gentlemen in question have a lot of money.  A hell of a lot of money.  But then so does NTT (the shareholder of DimDat).   The pyscho six are going to appeal and it will end up in the Constitutional Court at some stage – read in MANY years’ time.  It must go to the constitutional court because it is the best case of fronting that I have seen.  Thus far there has only been one case and that dealt with the big trains at PRASA.   This will absolutely test the mettle of empowerment legislation.  Fronting is fraud and hence the conditions for fraud need to be proved.  But the Constitutional Court might give us some objective test for fronting and may even be forced to consider the constitutionality of BEE altogether.  

This is a great segue into the Norton Rose BEE action.  News24 wrote an article yesterday about this landmark case.  I don't like the heading

Top law firm backs down on new BEE code interdict - but the fight isn't over

Norton Rose Fulbright SA (NRFSA) has dropped its bid to suspend the operation of a new legal sector code that came into effect in September.  But the top law firm has not dropped its opposition to the code, saying it remains "unconstitutional", "unimplementable", and "will not achieve the very objectives it seeks to achieve" in its current form. But following a case management meeting on Tuesday, it said it had agreed to a proposal put forward by the Ministry of Trade, Industry and Competition not to try to interdict the code.  In return, it hopes to be able to argue the merits of its application at a sooner date.

Norton Rose didn't back down, the DTIC struck an interim deal with them.  This is a case of who blinked first and the government blinked.  We can speculate but I don't think we are far off the mark in assuming that the DTIC knew they had no leg here.  I was told, as a demonstration of how clueless their legal team is, that their attorney maintained that the sentence announcing the arrival of the legal codes doesn't mean that it's retrospective in application.   The attorney's correct but it shows a clear lack of understanding of the practicalities of the BEE process.  Parks and Recreation wrote 

(I) hereby publish the Legal Sector Code and determine that these Codes will come into effect on the date of this publication.

Norton Rose's financial year is Jan to December.  The Legal Code came into effect on the 20th of September 2024.  Norton Rose went to great pains to explain that they had spent a lot of money on things that the generic codes are happy with which then amounts to nought in the new codes.  They explained that they would have three months to make up everything they need to do (additional expense required and advocate briefed inter alia) to do anything on the scorecard.  However they can't go back and start the BEE period from the 1st of September 2023 to end 31 August 2024, because they've been verified already on those 2023 months. And they can't wait until 30 September this year to finish a year because their certificate expires in April 2025.  The next BEE scorecard would be issued in late November 2025.

It's a small thing that it shows how badly beaten up the DTIC will be.  They blinked first and it's very likely that they will lose.  We now don't have to wait for two years for a case, we can expect this to go to court in June this year.