Paul Janisch

2009 BEE awards

I was looking through my predictions for 2009 and have to (humbly) confess that the Nostradamus way is not my calling.

• The FSC is probably going nowhere
• A bunch of charters made section 9 gazetting
• BEE scorecards have become necessary tools in doing business but are not a competitive advantage. It seems that each industry has a certain standard and if you don't meet that standard then you are at a disadvantage
• Treasury actually published updated regulations for the PPPFA and they included scorecards
• Verification agencies were accredited and before the elections too
• Can't say whether Empowerdex lost their market share to NERA – but they do seem to have lost the empowerdex.com domain

Now onto to 2009. It was one hell of a year for BEE as a policy. This is what I think were the most significant events

• Accreditation of verification agencies

I never thought this would happen. But it did and it looks as though a few more will make the cut too. I've prepared a spreadsheet that explains how much work verification agencies have on their hands in the next few years. I was fiddling around on a VERY FAMOUS verification agency's website and they proclaimed that to date they had done about 2000 certificates since they started. I have news for you VERY FAMOUS verification agency, you are going to have to do about 6,494 (I like to keep my speculative figures precise) next year. This is about 26 per day. If you'd like to check my figures - please do.

As a little postscript I have been very hard on the old VAs (but not hard enough on ABVAngelis) – I have just completed a list of procedures for a VA hoping to get through SANAS. This is a lot of work and a very expensive process. I expect I'll be doing a lot more of that next year.

• Rob Davies taking over the trade and industry ministry

This was a weird one. It seemed that Rob wasn't that interested in BEE and that he inherited a mess from Mandisi. I stand by what I have said about Rob, I think he's pushing for compliance over transformation, hoping that compliance will lead to transformation.

• Section 9 Charters

There were a bunch. Some gazetted by Mandisi and others by Rob.

• New PPPFA regulations

A bold move, even if they are in draft form. I'm not going to speculate as to when the final document gets published.

• NABC starts making a noise

The National Association of BEE Consultants. This is a total waste of time. As much as I dislike ABVA, at least they are organised. The NABC has no common agenda and lacks unified leadership. I cannot see how they are going to add any value to anything ever (oops there I go wearing my Nostradamus hat again)

• BEE advisory council

Good move Zumachine Gun. Let's see what they do in 2010.

• Expected demise of the FSC

The FSC seems to be dead in the water (on this subject the drafter of the new FSC annual report pinched almost everyone of my ideas from last year – don't they say imitation is the greatest form of flattery. It would have been nice to see a document that stuck to the actual tender requirements).

Good luck for 2010 – I am hoping to fulfil the Charlie Christian mantra throughout the year with each client (it is said that Charlie would play guitar if he got all three, but he was known to settle for two out of three)

1. Learn something new
2. Get paid
3. Have fun

And on the subject of fun – can anyone spell AC/DC.

Feel free to add your highlights in the comments section.

FNB rethinks 'racial' bursaries - hmmmm

Solidarity took FNB to task about their allocation of education bursaries for employees' children. The November issue of Treetalk (FNB's newsletter) offer financial support to children of African, Indian, Coloured and Chinese employees earning less than R100,000 a year.   This is a very well reported story indeed. 

I'm not in the way of getting involved in politics and I am no fan of trade unions so I'm not going to discuss the merits of Solidarity's complaint.  The thing that I picked up on was the comment on meeting with FNB CEO Michael Jordaan and Solidarity's  Dirk Hermann

The union said yesterday that during talks between Dirk Hermann, deputy general secretary of Solidarity, and FNB CEO Michael Jordaan, it had been agreed that the bank would include whites in allocating bursaries if the law allowed for such a step.

Apparently FNB had been advised by lawyers

According to legal advice obtained by FNB at the time regarding the transaction, those who benefit from black empowerment must exclusively be black.

LEGAL ADVICE!!!!!!!!!!!!!! You paid for legal advice of this quality?  I think you were ripped off Michael.  The correct advice goes along these lines. 

Paragraph 3.2 of code 700 (DTI) clarifies what socio-economic development contributions are.   It is 3.2.2 that is most important here:

 The full value of SED contributions made to beneficiaries is recognisable if at least 75% of the value directly benefits black people.

Even the FSC implicitly concurs with this paragraph

13.2    CSI means projects aimed primarily at black groups, communities and individuals that have a strong developmental approach and contribute towards transformation.

You don't have to consult your dubious lawyers Michael - you can happily go ahead and include white people in this scheme and still earn your BEE points.  Any B-grade BEE consultant or verification agency could have told you this.

I know there are those (like my odd cousin and friend Joe) who feel that this is perfectly fair, after all whites did it to black people during Apartheid.  I don't agree, we as South Africans have a responsibility to invest in the future of all South Africans.  This country is still suffering under that policy with low education and literacy levels.  And this will always be a burdon on the country and tax payer.

Michael - you charge me R0.50 (fifty cents) for every email I send to people when I pay them from my FNB bank account.  I don't mind if you continue ripping me off with these excessive charges if you have an equitable CSI policy. 

 

Namibia's mining charter mooted

This comes from a recent Namibia mining report that you can buy for $500 US.  Or you can read the summary here.

In May 2009, there were fresh media reports that Namibia is thinking of following the lead of South Africa and introducing a mining charter, designed to increase black ownership of mineral assets. South Africa's legislation, introduced in 2004, compelled mining companies to sell a 15% stake in mining assets to local black investors by 2009, rising to 26% by 2014.

New Mining Charter coming soon?

Interesting article in the Miningmx about the Mining Charter.  The new charter has been finalised and will be made public by Jan or Feb 2010.  It is doubtful whether the existing Charter has been successful.  It fell horribly foul of the BEE Act and in all probability stifled investment in the minerals sector.  Perhaps this is why the DME gazetted the Mining Codes of Good Practice.  This same document is somewhat of an oddity but still sticks with the sentiment of the actual charter.  It doesn't provide a scorecard per se, but a series of requirements that have to be complied with.  It's more like an on/off switch - you either fully comply or you don't.  Very unscorecard like.

We'll see what the new one looks like.

More Emex bullshit

  The so-called EMEX Trust has been around for a long time.  They are accredited.  But that is about all that they've got.  They aren't known as the best at what they do.  And this is why

I got this email from Gert du Preez of the Emex Trust.  Gert is the Marketing Manager of this illustrious organisation - and boy oh boy can Gert market.

The pressure on enterprises to become BEE compliant will probably increase dramatically over the next few years.

Can't disagree with you there Gert.  I would suggest that the pressure is already here.  Now for the meaty bit

The Government for instance does not accept tenders if a company cannot provide a valid BEE certificate.

Really Gert, and where did you get this information?  Is there something you know that no-one else does.  To the best of my (well researched) knowledge - the PPPFA regulations advocating scorecards are still in draft form.  I suspect that you are spinning a little yarn here - or as you might better understand "jy praat fokken kak".  

Then there is something about a product that I can offer my clients as a value added service.  The email is devoid of detail as to what this product is - but I have been invited to contact them to find out more. 

This reminds me of Bernard van der Walt of BEE Rating Solutions and some of his sensational emails from last year.    Bernie has stopped with his sensational emails at least. 

Once again - I invite Gert to respond to this post.  I'll post the response as well.

Caird Code Rule #1 – Is BEE applicable to you

A while ago I was doing a presentation to the American Chamber of Commerce on Equity Equivalents. One of the delegates was an apparel manufacturer who asked my why his company should consider the programme I was proposing. I was a little surprised that such a company would even consider equity equivalents as an option. Why would they need to, they sell takkies, T shirts and caps. Every single one of their products are sold to a consumer who is very unlikely to use BEE status in their decision to buy their product. Edgars etc might ask them for their BEE status but I have my gravest doubts that they will not stock those products in their stores because that company does not comply with their BEE wishes. And it is also unlikely that Edgars will incentivise their sales staff to push a local product over the imported one. Can you imagine the conversation

Consumer: I'd like to try on these Adidas shoes.

Sales assistant: Please sir would you consider these Dlaminis. They are locally manufactured and Edgars will get more BEE points if we sell these.

Consumer: No I will not you horrid sales assistant you. I'm off to Sportsman's Warehouse.

This fictitious interaction exposes the deepest flaw in the implementation of BEE viz if the average joe is the end user then BEE is not going to be very important. This means that BEE can really only be applicable when the consumer is some sort of a corporate or government entity.

The general rule here is that if your business caters for consumers then it is unlikely that BEE will ever affect you. This would include restaurants (that don't serve alcohol), shoe shops, clothes shops, plumbers, electricians, pool companies, record shops, news agents, retail jewellers. As with any rule there are exceptions.

1. Any restaurant, hotel, pub or anything that serves alcohol requires a liquor licence. And those licenses are handed out by the DTI. And the DTI asks a bunch of BEE questions in allocating these licenses. I have written countless BEE plans for liquors wholesalers and retailers that have to be submitted with each renewal.
2. Shops looking to rent in malls that are owned by parastatals like Transnet or Eskom. I have heard that your BEE status is important to these types. ACSA is another example – the annual tender for renewals for shops in the airports require BEE credentials. I don't know who drafted those BEE questionnaires but they are so badly written they are an embarrassment (mind you so is ACSA). I haven't come across private property owners asking for BEE credentials.
3. Manufacturing jewellers have to comply with the Mineral and Petroleum Resources Development Act of 2002, (MPRDA). The requirements for this are exactly the same as those for a mining licence. I won't comment on this right now but suffice to say – this abomination requires its own future post.
4. Anything that can be used under section 10 of the BEE Act. I haven't really seen this being used, although I have worked on PPPs where the legal advisors have anticipated it in the PPP agreement. The DTI has taken a cautious path when it comes to section 10 because I believe that they recognise that over-regulation will stifle the development of the South African economy (as if we aren't over-regulated already). Technically speaking they could shove section 10 in the way of almost everything to achieve the BEE Act's transformation goals.

What about those entities that think they might need a BEE scorecard but don't

Charities and other section 21 companies that are looking for SED money

Paragraph 5 of Code 000, statement 004 states very clearly that their BEE status is not a consideration in determining whether they will be beneficiaries of SED contributions

The status of Socio-Economic Development Contributions made to any of the types of entities in paragraphs 1 and 2 under Code series 700 is not dependent on such entity's scorecard result, but rather the nature of the contribution itself and the identity of that contribution's beneficiaries.

There are some NGOs/section 21s who provide certain types of services to corporates to raise money for their core activity. Under these circumstances they become a supplier to that corporate and might be required to produce a specialised enterprises BEE scorecard (statement 004).

Entities or companies providing enterprise development services

Now this is a very common occurrence. There are many private companies providing these services, Endeavor, Raizcorp and ED Alliances are three that I know rather well. This practice is contemplated by code 600, paragraph 3.2.5.12

payments made by the Measured Entity to third parties to perform enterprise development on the Measured Entity's behalf

However it does not appear that these companies actually need to produce a BEE scorecard to provide ED services. One of the exclusions under Code 500 (Preferential Procurement) is empowerment related procurement – more specifically (paragraph 6.5.2)

investments, loans or donations qualifying for recognition under any statement under Code series 600 or 700

This means that the expenditure is excluded and hence a BEE scorecard is not needed.

PPC new BEE rating and the construction code's applicability

This is very interesting.  PPC announced that the have moved up from a level 4 to level three in their latest rating.  This is actually so important that they have made a JSE SENS announcement as well.

They haven't actually updated their website so I haven't seen the certificate but I surmise from the article that they used the DTI's codes to get there. 

PPC met its objectives in almost all of the Department of Trade and Industry’s code of good practice scorecard pillars, with notable increases in scores relating to employment equity, enterprise development and socioeconomic development

If they did use the DTI's codes then this brings up an interesting debate about which scorecard they should follow.  I presented a Construction Codes seminar around the country earlier this year and one of the delegates came from a cement manufacturing company and asked why she should attend the breakfast they are a manufacturing company that derives its income from the construction industry.  This posed a bit of a conundrum so I looked at the code itself

Code 2000, paragraph 3 (précised) says

Any company that conducts any construction-related activity must determine what percentage of their turnover is derived from construction
if the majority of their turnover is derived  from construction related activities then the charter is applicable

The construction sector is defined under the interpretations and definitions (page 29) as

all enterprises that are involved in the

• creation
• expansion
• maintenance

of fixed assets related to residential, or non-residential buildings, infrastructure or any other form of construction works in South Africa

This is difficult, manufacturers like PPC are indirectly involved in all three bullet points.  Is this link then strong enough for them to find the construction code applicable to them.  The available evidence suggests that the verification agency doing PPC might have thought that there was no strong link between them and the construction code.  However before I make any rash conclusions I need to consider

Date of applicability of the construction code

The preamble to the codes (notice 862) announces that

this notice is effective from the date of publishing (5 June 2009) and means that the Construction Sector Code is binding on all stakeholders operating in the construction sector

Does this mean that if the code falls into your measurement period then you are suddenly bound by it?  I would think not - but I have heard of VAs who seem to think so.

It is possible that the measurement period that PPC used might have pre-dated the gazetting of the construction code and that's why they used the DTI's COGP.  This sentiment is now common cause - there is nothing in the construction code that says it is retrospectively applicable.

Namibia's BEE is getting closer - so they say

Namibian Mines and Energy Minister Erkki Nghimtina announced that Government was nearing completion of the long-awaited Transformational Economic and Social Empowerment Framework (TESEF) that would compel mining companies to empower communities within which they operate.
Addressing an annual general meeting of the Chamber of Mines in Windhoek a fortnight ago, Nghimtina said TESEF would compel all licence applicants to “clearly and convincingly” show their commitment to empower previously disadvantaged Namibians.

It's been mooted and discussed for a long time.  Certain mining companies in Namibia have developed their own BEE charters in anticipation of  TESEF.  Perhaps we had to wait for the elections? 

Motsepe re-evaluated

Tim Cohen wrote a rather hard hitting comment about Patrice Motsepe's strange comment about nationalisation in yesterday's Business Day

“My belief has always been, if nationalisation is what is in the best interests of SA, I’ll support it, whether it’s nationalisation, or whether it’s socialism — if the policies are what will improve, uplift and create a better lifestyle, better living conditions …” 

It's a bit of a character assasination than anything else, but I believe that Cohen is right.  Patrice has made an obscene amount of money (something that NUMSA believes should be nationalised as well) from BEE and as a result should be the uber-capitalist. 

Hmmmm............................... so very disappointing.  You'll never see someone like Raymond Ackermann ever going for something like this.  In fact you won't see the great Marxist, Robert Mugabe going for it either.

ABVAcuousness

I was sent an email by Louis McLaren telling me that the certificate I issued might not be accepted.  I sent him a mail back telling him that it was perfectly legal in terms of notice 32467.  I then got a response from him telling me that a VA would not accept it because ABVA says it won't.  I then mentioned that the VA is not in a position to decide who are what certificates are acceptable.  I have blogged about this in a great amount of detail before.

I need to stress that Louis is a highly respected man in this industry - he is not part of this tirade.  At all times he kept the name of the VA away from me.

This dimwit (who is nameless to me) has a similar intelligence level to Bright Matonga  - in fact I'll call him/her that name.  This is Bright's response (peppered with my comments.

"His statement that no verification agency may decide what to accept or not clearly shows ignorance on the side of the individual in question.

Really?

It is the precise function of a verification agency to decide on the validity of evidence presented to it by a measured entity.  The procurement official of that measured entity may have decided what to accept as sufficient proof for its procurement purposes but for verification purposes verification agencies have to make their decisions within the context of a legislated regime which prescribes what is acceptable evidence or not.

Questionable legislation.  Tell me Bright have you actually read the verification manual?  It is a document drafted by someone who might be marginally cleverer than you.  The English and exemplary BEE knowledge of the drafter/s make for comedic reading indeed.  Here are but two examples

• Establish the existence (?) proof through the AMP201 (page 64).  What the hell is an AMP201?  It doesn't exist in a South African legislative context.  I somehow think they are referring to an EMP 201.  If Bright's drafter friends don't even know this then what are they doing drafting this riveting document?
• There are no local production (5.4.6.1 - page 69).  Lovely stuff - something my corporal might have uttered and he made no bones about the fact that he spoke English very reluctantly.  Bright, could you be my old corporal?

Whilst it might be regarded as "law" for now - everyone knows that this document would be thrown out of a court of law. 

The decision of the verification agency can therefore not be arbitrary but must have a sound legal basis.  The interpretation of ABVA on the particular matter is based on the current legislation issued on the matter.  Although controversial, it is the only interpretation that stands the test of legality.  I would love to hear the legal - not policy or emotional argument, for the view adopted by this individual.

Yes Bright this is ABVA's interpretation.  Confirmed to me by Andile (is BEE really my strongpoint?) Tlhoaéle.  And this is the most important point - it is not a point endorsed by the DTI or SANAS.  Whilst Andile avers that it has some legal backing because of the definition of a verification agency in R47-02 it still lacks legitimacy.  And this is another perfect example of ABVAndalism and ABVAingloriousness. 

I suggest he starts off by providing me with the legal definition of the term "unaccredited verification agency" that does not result in an absurdity"

I just did you knucklehead.  And I have a little news for you I have heard the Sipho Zikode asked the question why your little association should be the only one that gets to play BEE god.  He suggested at a recent meeting that SAICA, ACCA or any other association should also represent their members who are VAs.

My advice to you Bright is wake up, read the gazetted legislation and then work your pathetic little backside off from the 1st of February next year, because you are going to have to do about 50 verifications a day.  In the meantime stop hiding behind ABVA's skirt tails and service your clients not your immature ego.