Paul Janisch

I still haven't seen the new mining charter

If anyone does have a copy it would be very appreciated if you could sent it through to me.  That is before the final one is published in August (ish).

I did mention Peter Leon in an earlier post today.  Mining Weekly conveniently interviewed Peter today.

Leon said that the important aspect of the historic 13-point declaration was that it was a government, labour and business joint venture.

"The big change is that, in the past, the Department of Mineral Resources has simply told mining companies what to do through regulations. This is the first time, since the Mining Charter was agreed back in those difficult days of 2002, that the key players in the industry, including labour, have got together and agreed a way forward."

The 13 points they will commit to are:

1. promote investment;
2. establish a long-term infrastructure planning mechanism;
3. innovate;
4. accelerate exploration;
5. add value through beneficiation;
6. promote the country's ranking as an investment destination;
7. develop skills;
8. advance employment equity;
9. boost near-mine communities;
10. convert hostels into family units by 2014;
11. develop enterprises through procurement;
12. realise 26% equity ownership by 2014; and
13. monitor and evaluate the implementation of the joint declaration.

Leon said that the declaration confirmed that the Mineral and Petroleum Resources Development Act (MPRDA) would be "significantly amended" during the Parliamentary session next year, in order to give effect to the joint declaration.

"One of the very important things that this document recognises is that the architecture of the MPRDA, and not just its implementation, is defective. There is now an admission by everybody, including the government, of the need to go back to the drawing board and fix the issues in the Act, like Ministerial discretion and lack of compulsory time periods for licensing."

Andrew left a comment about sustainability in the mining industry.  Valid point - but this in itself cannot be a footnote in a transformation charter.  It needs to stand on its own - perhaps it will find itself in the new MPRDA.

Mining industry under scrutiny

The department of mineral resources will be stepping up its monitoring and evaluation of the mining industry to ensure that transformation does take place, Minister Susan Shabangu said. "We cannot have... an industry controlled by a Mickey Mouse, we have to be serious. One of the things we are going to do is increase monitoring and evaluation," she said at the signing of a mining industry strategy for sustainable growth and meaningful transformation in Pretoria.

Shabangu said various practices of the mining industry were unacceptable.These included workers' conditions, black economic empowerment contracts where black people were considered tokens, community empowerment projects and skills shortages.

She said the department also had a responsibility to defend the industry.

SA to retain black ownership target in mines

South Africa unveiled the country’s new mining plans today, but stuck with the previous mining charter’s target of transferring 26% of the ownership of mines to black people by 2014. The revised plans will seek to speed up black ownership, skills development, employment equity, procurement, housing and living conditions, and mining beneficiation.

“The 26% target is confirmed for 2014,” South Africa’s Mineral Resources Minister Susan Shabangu said.

Just like Peter Leon suggested.

I'll post these things as they come up.

S.Africa to launch new mining charter on Wednesday - just in time too

From Reuters

South Africa will launch a new mining charter on Wednesday to increase black ownership in the sector after the previous agreement failed to do so, the department of Mineral Resources said on Tuesday.

"The leaders of government, business and labour will be signing a declaration as a sign of their support for the strategy," the department said in a statement.

A review of the previous charter was prompted by concerns that a target to transfer 26 percent of ownership in the industry to black people by 2014 may not be met.

The revised charter will seek to speed up black ownership, skills development, employment equity, procurement, housing and living conditions and mining beneficiation.

Careful with those Acts, Eugene

Not much is happening in Junsbeck at the moment.  For the first time in a long time I actually have time to blog - I'm not as compulsive as Fred Wilson, although I wish I was.  So, whilst I wait for the next game to come on I'll write about an upcoming court case that has huge ramifications for the future of all legislated charters (mining and petro-chemicals etc).

The studies confirm that mining transformation is not where it should be - well at least KIO Advisory's study has found this. I haven't read the whole report and can only comment on what I have read (which is almost nothing).  It comes just in time to justify the new Mining Charter, which is now very overdue.   Those bits of the report that I have read say that the ownership target is nowhere near it should be.  Knowing the ANC government as well as I and everyone does - we can be sure that those statistics will be thrown back at the mining sector and might inspire the department to withhold licenses because the transformation targets have not been met.  Maybe.......... but then maybe not.

JSE-listed fishing company Oceana and its subsidiary, Blue Continent Products, are taking government to court, frustrated that its five applications over the past two years, seeking the transfer of fishing rights or quotas from third parties, are being declined or ignored by Marine & Coastal Management (MCM).

At the centre of their legal challenge is a transfer policy, effected last July, which states the minister in charge of MCM must approve every transfer. It also lays out the rules for the transfer of rights, placing importance on black ownership and management instead of the broad- based socioeconomic impact.

The policy is trying to ensure that a 100% black-owned rights holder should sell its rights to another 100% black- owned entity so as to not dilute the transformation. For example, if you’re 80% black-owned, you can’t transfer to a 70% black-owned company.

But Oceana is challenging this policy, saying it’s unlawful, invalid and should be set aside. It argues that government is assessing transformation too narrowly — it doesn’t use the broad-based black economic empowerment (BBBEE) codes of good practice. Elements of employment equity, preferential procurement, skills development, enterprise development, and socioeconomic development, which account for 70% of the weighting of the BBBEE scorecard, are excluded in the transfer policy.

What Oceana is arguing is that their level 4 BEE status has to count for a hell of a lot more than this narrow-based view.  A precedent will have long term repercussions for the mandatory equity targets in the mining charter.  As the FM said in the opening paragraph of this article

The state is in for a bruising legal battle over fishing rights, which could have far- reaching, precedent-setting consequences for transformation, not only in the fishing industry but across the economy.

Bring it on I say - there is far too much arbitrariness in this process.  And it must violate numerous constitutional rights - one being the right to work.  Surely an employer that violates certain pieces of legislation like the Basic Conditions of Employment Act must face the consequences.  But I cannot see how empowerment legislation should be allowed to prevent an employer from employing people because they cannot meet certain targets - this cannot be fair or constitutional.

As with similar legislation - we'll let the courts decide.

Santal Claus crucified

An urban legend has been told about a certain Japanese hotel that decided to get with the Christmas spirit

A few Decembers ago a Japanese department store, desperate to appear westernised and with-it, mounted an extravagant Christmas display, featuring a life-sized Santa Claus, crucified upon a cross.  The Economist.   "Santa Christ." 25 December 1993   (p. 77).

A similar "cross-cultural" mishap can be found in a tender document advertised by Amatola Water acting as implementing agent on behalf of Joe Gqabi District Municipality.  It's a bog standard (pun intended) tender/bid invitation that tells us it's a 90/10 bid.  Check the tender conditions - especially the first two

• Preferential Procurement Policy Framework Act (PPPFA) principles shall apply, whereby submissions will be evaluated accordingly to the provisions of the Act.
• Broad Based Black Economic Empowerment (B-BBEE) Status will be scored in accordance with the DTI Codes of Good Practice and bidders must submit their valid B-BBEE verification certificate, as issued by a SANAS accredited verification agency,with their tender, in order to be eligible for B-BBEE points.
• The following evaluation criteria will be applied: Price 70 points, Quality 20 points and B-BBEE 10 points.
  

Now for those of you who are well versed with the PPPFA - you will know that the 2001 regulations govern the PPPFA.  You'll also know that the draft regulations from last year do advocate scorecards - but they are just that, draft. 

And this is where I get confused.  This tender clearly states that the PPPFA applies.  Then they state that BEE scorecards will be used to determine the preference points.  My real confusion comes in the pricing regime - the old regulations state that R500k is the cut off point between the 20 and 10 points.  The draft regulations state the R1million is the cut off.

Which one is it?

If you are interested in bidding for this then what I would do is submit a bid and when you aren't awarded to you you can take poor Amatole Water to court for contravention of the PPPFA.

Someone should tell either Ms P. Granger (Tel: (043) 707 3772 | Fax: (043) 707 3770 | E-mail: [email protected]) or Amatole Water's CEO - N. Mnukwa that they are courting disaster.

It was the title that put me off

It's a very sensational heading but Zungu does make a little bit of sense. 

Sandile Zungu, Executive Chairman of Zungu Investments Company and member of President Zuma's newly established BBBEE Council, says that SA's corporates are unpatriotic because they are not prepared to implement BEE in a meaningful way. This, he cautions, will have dire consequences for the country in the longer term.

I don't know why he chooses to use such a strong and unwarranted word. Agreed if BEE is not properly implemented then we'll have a problem - but why the hell can't people like Zungu stop criticising what's not being done and talk about what is being done. 

I'll tell you why he does this - it's because the overwhelming message from our esteemed government is one of criticism.  He's just following the trend.  Take a look at this

The government certainly seemed suitably welcoming last week when Volkswagen SA opened a new distribution centre in Centurion and announced that it would make further investments in its Uitenhage plant (R500m).

Not only will the plant be making many more VW Polos for export, it will also create a few thousand more jobs. And with VWSA planning to increase the local content of its Polos from 40% to 70%, there should be some new jobs, too, at the component manufacturers and other local suppliers.

The trade and industry minister was there last week to welcome it all. So too was Deputy President Kgalema Motlanthe .

But the disturbing thing last week about Motlanthe, in particular, was that he gave VW such a qualified welcome. He wasted no time laying into the company, and its industry, for failing to do their bit for black economic empowerment. After a cursory remark or two about how nice VWSA’s investment was, and how wonderful was SA’s new (but as yet unimplemented) industrial policy action plan, the deputy president moved straight along to the findings of a Wits University study of the metals, engineering and automotive industries. The study, he said, showed a “less than rosy picture” of broad-based empowerment in these industries. Only 1% of the businesses were black-owned. The race and gender mix wasn’t right at all. Skills training was no good either.

The Business Day then poses the very relevant question

You have to ask, does the government want jobs or doesn’t it? Does it care whether private companies invest? Does it understand the risks companies take to invest?

And comes to the conclusion that

When governments invest, they do so with other people’s money: for companies it’s different, but it’s not clear how well politicians appreciate that.

Hence Zungu using the word unpatriotic.  In fact Mr Zungu suggests that the government is the dog's bollocks

"It is in the long-term interests of business and the country that we should embrace socio-economic transformation that has been promoted by a caring South African government," he said

Yeah right Sandile, this is the same "caring" government that passes an act that is binding on itself and yet does not actually come up with a vehicle that it is able to implement.

And as a passing observation - this is taken from the big fours' annual reports.  The figures are in millions.  In other words the banking sector invested about 867.9million rand in enterprise development.  You can't tell me that is unpatriotic Sandile.

Institution	NPAT 2009	SED spend	ED spend
ABSA	7,502	75.02	225.06
First Rand	7,838	78.38	235.14
Nedbank	5,412	54.12	162.36
Standard Bank	8,180	81.80	245.4
TOTAL	28,932	289.32	867.96

A few Namibian facts – not sure how accurate they are

This is taken from a letter sent to the Namibian, the writer chose to remain anonymous. I've extracted a few select facts.

Namibia is now 20 years old.

• Black Broad Based Economic Empowerment (BBBEE) and affirmative action policies have only benefited relatively few, who are connected with little change for the masses. (Got to watch out for this boys - huge problem here) Women in general, have been left behind.
• Most can't understand English (official language) – not sure whether this refers to women or the population in general
• It has 2.1 million inhabitants.
• HIV infects about 250 000 citizens.
• About one in four pregnant women is HIV positive.
• There are about 250 000 orphans and vulnerable children, mainly as a result of AIDS.
• The unemployment rate for adults is about fifty percent.
• The poverty cut-off line is about N$7 per person day.
• The average woman in Namibia has about five children.
• Rural, illiterate women tend to have more children than urban, literate women.
• The population growth is about three per cent per annum.
• In order to provide work, six per cent economic growth is needed. At present the economic growth is one per cent.
• Life expectancy has fallen to below 50 years.

If they want to fix this problem they need a properly designed TESEF policy. Not one that mimics South Africa's, but one that takes the best of SAs BEE programme (and there is a fair amount of good) and models it into the Namibian model. If anyone wants my 2 cents' worth email me.

They just can’t do it

You might have read that recent Mzwandile Jacks article where he quoted the ultimate bright spark, Keith Levenstain. Our PLT is quoted as saying "We would like to see the government and public enterprises obtaining a scorecard because it would show the government's commitment towards its own policies". Beautiful words – sadly uninformed and stupid. It's one thing to mouth off (as Levenstain does) but it's another thing to mouth off and actually know what you are talking about (which Levenstain doesn't).

I'll help our learned friend. Simply put – the government cannot do it.

The codes would love to let us think that government can implement them. After all the codes are really only applicable to those entities contained in schedules 2 and 3 of the PFMA, and by implication the MFMA.

Code Series 000, Statement 000: General principles and the generic scorecard – paragraph 3

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;

To then add more credence to this statement they created a separate scorecard for specialised entities (Statement 004: Scorecards for SPECIALISED Enterprises). This scorecard is actually applicable to government entities – the complete list is

• companies limited by guarantee;
• Higher Education Institutions:
• Non-profit Organisations:
• public entities and other Enterprises wholly owned by organs of state;
• Public Benefit Schemes; and
• section 21 companies: and
• specify scorecards applicable to Measured Entities subject to this statement

Unfortunately the codes don't specify a scorecard so we have to guess what it might look like. This is the first problem – no scorecard is specified.

Now onto the actual scorecard.

Ownership

Strange that they left this element out. Logically they are right – the government (and section 21 companies et al) cannot be owned. However the ANC has somehow managed to convince Hitachi that they are black owned enough to be a suitable BEE partner. Be that as it may – ownership is excluded.

Management

This is one element that a government entity can implement and implement it well. They do it anyway – although it does seem as though it follows a jobs for buddies regime as opposed to merit.

Employment equity

Similar to management. In fact they are a little too good at this element, possibly even illegally too good at (as Captain Barnard will attest).

Skills development

This is where things get interesting. The government cannot favour any one race group over another when it comes to training. And the skills development element requires a vast amount of money to be spent on the training of black people (simply put) – this is quite easy to do in the private sector but not in government. They can however achieve these targets if the overwhelming majority of their staff are black – but does this then mean that they would need to request extra money from treasury to achieve it?

Any government policy that states they will favour the training of one race group over another is a huge problem and is discriminatory – which the constitution outlaws. More on this in preferential procurement.

Preferential procurement

The PPPFA might favour certain types of entities but it CANNOT and I stress CANNOT favour those entities at the expense of others. I mean, it can't exclude bidders from bidding because they don't fulfill a certain criteria which preferential procurement has to do. I'm not going to go into the finer details of the PPPFA, and I don't recommend that you ask Levenstain to explain them to you either. The best thing a government department can do is measure their procurement, it cannot target certain types of entities at the expense of others. This would be a gross violation of section 217 of the constitution. Tenderpreneurs are a different type of targeting – not something that preferential procurement envisaged either.

Enterprise development and SED

Both are no-goes. Complete and utter no-goes (not sure how to spell that). Firstly they measure it using NPAT (or some other convoluted way which no-one understands), and NPAT is not something that government understands or needs to measure. Secondly that if a government department did try and implement these two they could not favour 50% black owned companies and 75% type charities because this would be discriminatory. Thirdly if they wanted to do this they would have to go off to treasury and ask for more bucks to do it – and there is no way treasury would give it to them.

Technically speaking they can actually measure these two elements (according to Obed de Swardt). Every non-profit entity can declare a profit in the form of a surplus and it would be a percentage of that that would be measured – but I can't see that this would work in a government context.

 

I have been a little verbose here but it is abundantly clear that the DTI has not figured out a method to include government departments in their broad-based system. I told the same to Mzwandile when he called me about this story but he chose to go with Ajay Lalu (Udge – I hope you were quoted wrongly in this article because if not it does not bode well for your knowledge of the codes). My thinking is that the DTI is acutely aware of this problem and has decided to leave BEE in the capable hands of the private sector. Unless of course they are going to throw this problem at the BEE Council just to test their mettle.

You've got to be living in another world if you aren't getting into the world cup spirit. I was at Melrose Arch this morning and it is madness - I heard very little English being spoken, and the English I heard didn't sound very South African. Saw lots of sombreros and other types of garb. Welcome people - this is going to be the best world cup ever. Can't wait for it