Paul Janisch

How do you rate?

The rumours are flying all over the place.  ABVA members are telling their clients that they should only accept ABVA certified rating certificates from their suppliers - creating the impression that both ABVA and SANAS are a mafia.   Although they may be rumours I have come across one company that will not accept a self-rating certificate and insist on a verification certificate.   

I am a strong advocate for self-rating for a few reasons:

• Most of the work Caird does involves us assisting companies in rating themselves.  In many cases this rating is submitted to a competent verification agency to sign it off  (I work very closely with BEE-Matrix - whose methods and processes follow the letter of the law, they keep me on my toes).  So it is a threat to my business.
• There are approximately 250,000 entities that need to be verified every year (excluding EMEs).  If each is to be verified then it will slow the whole business process down considerably.  A slower business process means a lethargic economy.
• A self-assessed scorecard that a company's CEO has signed off has to carry as much weight as a verification agency's stamp of approval.  The CEO is putting his company's reputation and relationship on the line if they lie.  This could mean losing the client.

If this rumour is true - do the codes contain any justification for independent verification?

Verification agencies make their written debut in Code 000 paragraph 10 - Framework for the Accreditation of Verification Agencies.  The significant section is 10.1

10.1 Verification of BEE compliance is encouraged (my emphasis) and to this end, the dti will from time to time issue clear guidelines on the verification process.

Now to analyse this word ENCOURAGE.  Answers.com defines it as:

1. To inspire with hope, courage, or confidence; hearten.
2. To give support to; foster: policies designed to encourage private investment.
3. To stimulate; spur: burning the field to encourage new plant growth.

This is the same definition I would give the word. 

Can it then be that the codes have another definition for the word encourage?  We need to look at legislation that forces a certain type of behaviour.  And what better than the Companies Act and its requirements for auditors (after all a BEE verification agency is a sort of auditor).   Section 269  deals with the appointment of an auditor.  This is a long section so I'll use one subsection.

(2) If no appointment of auditor of a company is made under subsection (1), the directors of the company SHALL (my emphasis) appoint the first auditor of the company within twenty-one days after the date of incorporation of the company.

Back to Answers.com for the definition of SHALL

1. Something that will take place or exist in the future: We shall arrive tomorrow.
2. Something, such as an order, promise, requirement, or obligation: You shall leave now. He shall answer for his misdeeds. The penalty shall not exceed two years in prison.
3. The will to do something or have something take place: I shall go out if I feel like it.
4. Something that is inevitable: That day shall come.

I have to conclude that the word ENCOURAGED was used on purpose, if the drafters of the codes were insistent that a verification agency must be used then they would have used a word like SHALL or WILL.  The codes do use the word SHALL in a few instances, so it's not like they have half made up their minds.

ALSO - the word verification does not appear in the codes again until we get to the definitions.  Nowhere within Code 500 is there any reference to a verification agency.  The word verify does not even feature in the codes at all.

Conclusion - the codes DO NOT prescribe the use of verification agencies.  And Lionel October is on record as saying that “government will allow a business to do its own assessment."

What about EMEs and verification?

Code 000, paragraph 4.5 provides EMEs with a fair amount of leeway in getting their status verified.

Sufficient evidence of qualification as an Exempted Micro-Enterprise is an auditor's certificate or similar certificate issued by an accounting officer or verification agency.

So where do the verification agencies fit in?

A verification certificate does carry a certain amount of weight but they might not be applicable in all circumstances.  I recommend companies insist on an independent verification certificates under the following circumstances.

1. If a supplier is very dependent on you for business.  It would be in their best interests to protect this relationship on all levels.  An independent verification certificate is a very good demonstration of their commitment to the relationship.
2. Your biggest suppliers. In other words exercise the 80/20 rule.  80% of your purchases will come from 20% of your suppliers.  They should supply you with an independent certificate.
3. If the score looks a little fantastic.  It is easy to get a very high score on the QSE scorecard - I have a client that is a husband and wife team that are a level 3 contributor just because of the nature of their business.  But level 4 and higher contributors on the generic scorecard should ring a few warning bells.  If you receive a self-assessed scorecard (or from a rating agency you've never heard of) with this type of score I would insist on another assessment.
4. All listed companies should have a verification certificate.

ABVA verification agencies

ABVA is not the be-all and end-all of verification associations, although I have not come across any other such association.  Some agencies may go through the SANAS process and not become members of ABVA.  Therefore the thing to look for is not so much the ABVA logo but the SANAS logo (or whatever body does the accreditation - there are rumours that the SANAS/dti relationship is a bit rocky.)

Start with a rumour - end with a rumour.  Where rumour never reaches!!!!

Tropical PFA and a work in progress

I tend to use the blog as a repository for ideas for future articles or my next book.  This post is the beginning of an idea that I have that will turn into something bigger in the future.  And today's topic is

Where do BEE and the PPPFA connect and how can I bitch about the procurement practices of certain parastatals?  

I suppose the first question to ask is - who is bound by the BBBEE Act.  The codes tell us on page 9 (paragraph 3) that (the hyperlinks below are for the same document)

3.1 The following entities are measurable under the Codes;
3.1.1 all public entities listed in schedule 2 or schedule 3 (Parts A and C) of the Public Finance Management Act;
3.1.2 any public entity listed in schedule 3 (Parts B and D) which are trading entities which undertake any business with any organ of state, public entity or any other Enterprise;

Schedule 1 of the PFMA is therefore expressly excluded.  Entities that make up schedule 1 are constitutional institutions and include the IEC, the public protector and the municipal demarcation board. 

Schedule 2 are the major public entities.  There are 18 in total and they include ESKOM,DENEL, DBSA, Telkom Transnet and the snukered SABC.  I was therefore correct in my February posting that Eskom's antiquated ESKADAAT 6 must be brought into line with broad-based BEE. 

Now  onto the  PPPFA

I posted something on the PPPFA and ESKOM and Telkom last month.  In that post I concluded that Telkom and ESKOM practice somewhat unconstitutionally because of their procurement practices.  In fact this sentiment is shared by the AHI who argue in a paper that ESKOM's exclusionary procurement policies are in fact unconstitutional.  But they aren't bound by PPPFA and hence can create any preferential procurement policy they want.  What I find strange is that both ESKOM and Telkom have their own rules and Transnet opts for broad-based BEE.  Why is Transnet operating in the now and those two not?

And now to the bitching

This article in Business Report states "Telkom is threatening not to renew the contracts of multinational suppliers that are reluctant to meet its 30 percent black equity requirements".  The article is not very well written and seems to veer off its opening paragraph and talk about  BEE  credentials and broad-based BEE.    In fact it  doesn't really conclude too much at all - but it has opened up a little bit of a debate within my mind.

It pisses me off that a company who has a monopoly and hence I am forced to use them for my fixed line communications, has made insinuations that it will never do business with me. 

This would sway me to move away from them as soon as Neotel is able to offer me a fixed line telephony and internet service.  And I will.

If this is true then why the hell do the big multinationals take this from Telkom and other similar institutions

Think about it -  say Telkom insisted that Microsoft do a BEE deal or they lose Telkom's business.   If I was the CEO of Microsoft South Africa I would say "no BEE deal and we will no longer supply you with software and support".  Can you imagine the havoc this would cause - almost every desktop (and a whole bunch of servers) within Telkom would have to be migrated to another package like Shuttleworth's Ubuntu Linux.  Besides the cost of this migration, the loss in working hours whilst people learned to run the package would be enormous.  Productivity would drop substantially.  And then you have to consider the support that Telkom would need to run on a daily basis. 

There is little doubt the Microsoft has great broad-based BEE credentials, I read somewhere that they are well placed to apply for equity equivalents because of what they've been doing for years.  And this alone should demonstrate their commitment to South Africa and BEE.  The article suggests that this is not enough for Telkom.

I think the time has come for companies to start standing up to these bullying tactics and calling Telkom and ESKOM's hand.  They must learn that this is an economy we all contribute to it in some shape and form.  Almost every company in South Africa will play by any rule that government has created, BEE included.  However each company's contribution will be measured by what they are capable of.  We should not be penalised for who owns us.

Deaf choir

I was listening to Radio 2000 the other night and they were interviewing Carien Marais who is the marketing manager of the Transoranje School for the Deaf.  The school has a choir that sings in sign language and have been invited overseas to perform at a festival or event.  And they need R140k to do this.

I was listening to Carien talk about brand exposure and benefits to sponsors - the kind of thing that I love hearing.  This is a good cause, the majority of the kids come from extremely poor backgrounds and this would be a great opportunity for them.   

They need money and if you know of any company that would like to make a donation or if you want to make a donation you can contact Carien on 082 480 4866 or the school directly on 012 386-6072 or email them.

On the subject of sign language

Before I became part of the Black Daniels I played in the Chalks.  There were a few people who came and went but the final four were me, Jeremy Daniel (also from the Black Daniels), Ryan Fisher (who is now my lawyer) and a drummer who is still in a major sulk so I won't mention his name.  The drummer was really good at promotion and managed to get one of our songs play listed on Radio 2000.  I got this excited SMS from Jeremy a few days ago telling me he heard it being played.  I think that's quite exciting.

There are about three of four different versions of the song - but I think this is the best version so far.  The song is called Bad Habits and I wrote it. 

Triple P Fanny Adam

I make use of Google alerts.  You type in a keyword and it will send you an email on a daily basis telling you about any sites that talk about the subject you are interested in.  It's really good for marketing departments and PR companies.  One of my keywords is the PPPFA (Preferential Procurement Policy Framework Act) and it led me to a comment posted on the South African Federation of Civil Engineering Contractors (SAFCEC) web site.   It's a really good web site for the construction charter and BEE and they have a tool that you can use to rate yourself in terms of that charter.

I surmise the note was written by Pierre Blaauw of SAFCEC.  He figures there are two options open to government procurement and construction companies when it comes to preference points.  The first is the PPPFA and RDP goals which are contained in the Act itself.  The second is section 10 of the BBBEE Act which says that government must use BBBEE principles in creating a preferential procurement policy.  Blaauw correctly notes that the construction charter's section 12 gazetting would preclude it from being used in government contracts.  It makes for interesting reading and provides a good insight into the principles of preferential procurement.  You'll have to find it on the page - use the find function in your browser and put in PPPFA.

neED

  Whenever I consult on matters BEE I am always at pains to state to each client that it is vital that they allow (what my good friend Howard Rybko likes to call) the "greed gland" to operate.  In other words, always ask the question "what's in it for me".  You see I come from the school of thought that thinks that if you get something beneficial out of anything then it is likely that you'll stick it out for longer.

I believe that the problem facing enterprise development is that it is viewed as a tax or a donation with companies reluctantly shelling out cash for the 15 or 25 points or part thereof.  What bullshit is this!!!  If your company is not getting a tangible benefit from your enterprise development then don't bother.  I am being serious about this - handing out money for the points is not good for your business. 

Nor is it good for the recipient.  If a recipient takes the cash and does not appreciate the risks associated with the money then no one wins.  I was told by a company that they now have to try and force their enterprise development projects to conform to a certain standard through SLAs.  The beneficiaries are quite happy to plod along in their mediocre fashion and take whatever aid they get. 

Another problem with enterprise development is going about it.  If you want to do it properly then get  some help.  Get in an organisation that is going to take a look at your business and see how an ED strategy is going to benefit your business directly.  Unfortunately for me I am not the right person - but I know of some fantastic companies that do the most amazing work and yield results.  I'll list them.

Enterprise Development Alliances (EDA).  Run by Rienzo Colpo (Rienzo has left Caird to concentrate on this aspect of empowerment).  He's good at this stuff - I watched him work on a project for a church group and the concept was quite brilliant an innovative.  I've attached their corporate profile.

Social Advantage.  Kim Marr's company.  It's been going for a few years now and Kim is definitely someone you want on your team.  She's a straight talker who believes in what she says and delivers the results that she sets out to achieve.  She has many years of experience in this field going back to her time with the Shuttleworth Foundation.  Here's her corporate  profile.

The Third Line.  I have not spoken about Mel Lewis and her company before and this is an omission.  I have enjoyed working with Mel. She also comes from a NGO background and like Kim and Rienzo believes in the work she does, the results reflect this.  I haven't got Mel's corporate profile but as soon as I do I'll post it.

Marisa Buitendag.  Marisa is one of the few BEE "implementors" in corporate South Africa who actually knows what's going on (I can list a few more people but I fear they might get embarrassed).  She has a solid knowledge of all aspects of empowerment and the most incredible network of people that she can call on to assist her in these projects.   She has committed half of her time to her old company and she's rapidly running out of the balance of the time.  I recommend you contact her soon. Send me a mail and I'll give you her contact details.

All four of the above companies have worked together on projects before and use each other to share ideas and roll out projects.  You cannot go wrong with any of them or all four of them.

Raizcorp. Allon Raiz is a major celebrity in South African business circles.  For good reason - he is passionate about what he does (this word gets bandied about so often, but it does apply in his case).  He knows about incubation and producing sustainable enterprises.  He's looking for all the help he can get in achieving this goal.  He has my endorsement.

AND FINALLY... WIIFY

Yes, what's in it for you.  I am talking to a major financial institution about an ED system that everyone can get involved in.  And there will be a tangible benefit for those companies that take part.

Why isn't everyone doing this?

The Business Day carried a special feature on the City of Rustenburg yesterday (Thursday 5 July, 07).  The Greater Rustenburg Community Foundation (GRCF) took a quarter page ad entitled "BBBEE, social responsibility and you?"  The ad tells the reader how corporates can gain the maximum number of points (erroneously listed as 20 points) for their CSI/SED scorecard by contributing to the GRCF. 

The copy is very comprehensive explaining what the GRCF does, how they will match the donor and the cause and how the corporate can stay involved in the project.  And finally they provide a tax benefit to the donor as well.

This is how it should be - each legitimate cause should be making these kinds of overtures to corporates and other donors.  This ad operates on a business level - the kind of speak that corporates understand.

They don't have a website but if you want to contact them you should speak to Christine Delport on (014) 592-1525

Jimmy's in the news

It's a good idea to take an objective view on current affairs.  Jimmy Manyi is certainly deserving of a more balanced view even though what I read in the press seems to be worthy of the occasional dig.  Jimmy's back in the news today.  The Sunday Independent is carrying a feature on graduate employment today, and Jimmy takes up a large percentage of column inches today.  There is a little more info on Mr Manyi's background.  I was unaware that he holds down a full time job at Tiger Brands as the group executive of corporate affairs.  I also (embarrassingly - I must stress) didn't know he is the chairman of the BMF.

He is carrying one hell of a torch and it doesn't look like he's going to let it go out in a hurry.  The only problem he faces is that the legislation is not going to allow him to achieve the transformation he want.  One article in the Independent to day (Transformation relies too much on white women, equity commission complains) discusses Jimmy's latest plans to up the fines for non-compliance of the EE Act to 10% of turnover.  This will force employers to follow the rules but it lacks the teeth to effect the transformation that Jimmy is set on achieving. 

And it must stay as it is - you cannot force companies to transform by legislation.  If you could then the BBBEE Act would be binding on every company operating in South Africa (it isn't).  This doesn't mean that it shouldn't happen.  There has to be some other kind of method to achieve this - you don't want to end up clutching at straws like our northern neighbours and drafting moronic laws that require virtually all publicly traded companies to cede controlling interests to “indigenous” citizens. 

dti explains

Kim told me that the dti has published their explanation to the codes on their web site.  I have glanced through it and it seems as though they've explained a lot of the stuff that wasn't clear in the published codes.  I surmise that EmpowerDex were asked to write this - amazing how they get to do a lot of stuff that doesn't seem to get out to tender.  It's 123 pages long and does seem to flow rather nicely. You can get it off the dti's site or download it from here. 

Thanks Kim