Paul Janisch

Don't use Jetline Hyde Park

Don't use Jetline Hyde Park
That's right. I went in there to get a document scanned and emailed to me. A man, who didn't look up at me, says it'll be R2.50/page - which I thought was expensive but palatable. He then says "and R15 to email it to you." Fuck them. Use any Postnet they'll do it for a fraction of that cost. I reiterate - don't use Jetline in Hyde Park!

On how the BMF is an inherent danger to society

The title is loosely inspired by either AA Milne or Kenneth Grahame - I can't be sure.  The terribly relevant Black Management Forum has issued a little notice about the PPPFA.  And I paste

The Black Management Forum has made a submission on the Preferential Procurement Policy Framework Regulations through BUSA as a member organisation.  "The BMF is dissatisfied with the PPPF Act and calls for its total overhaul or repeal and replacement by the Procurement BBBEE Codes of good practice", said Tembakazi Mnyaka , the BMF Deputy President.  The overhaul suggested by the BMF includes the following provisions, "50 of the 100 points be allocated to BBBEE compliance, a minimum level 4 contributor for Public Service compliance, remove all thresholds irrespective of value, implement 30% set- aside on government procurement and include a mandatory audit by the Auditor General of Public Sector BBBEE compliance", continued Mnyaka.

Now I have heard the totally disgraced jungle utter these same words before (could it be that he is too shy to talk out at the moment?).  What their deputy president is actually asking for is an amendment to the constitution.  Because what they are asking for is stipulated in section 217 of the constitution.  Check it

Procurement
217. (1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.
(2) Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for -
(a) categories of preference in the allocation of contracts; and
(b) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.
(3) National legislation must prescribe a framework within which the policy referred to in subsection (2) may be implemented.

217(3) actually refers to the PPPFA.  It's section 217(1) that is relevant though especially the words fair, equitable, transparent, competitive and cost-effective.

If you follow the BMF's recommendation you are going to have a huge problem with fairness and equitability.  Any set aside cannot ever be viewed as fair or equitable (and they have been outlawed by Treasury anyway).  A set aside precludes certain types of bidders from submitting bids - in other words if you are not a level 4 player don't bother bidding. 

This then impacts on cost-effectiveness.  Two reasons are given (by me)

1. By eliminating a series of bidders (including foreign companies) you might not get the best price. 
2. You pay a premium of 50% for empowerment (the BMF is requested for a 50:50 regime for empowerment).  The corporate coffers would be dry very soon if we let this crowd loose on government procurement. I was going to mention that this is a ludicrous suggestion - but I have never seen anything from the BMF that isn't ludicrous.

Enough of that for now.  The BMF website is very short on jungle's expulsion from the DoL (sorry, I meant suspension).  But if you want a lovely overview of Manyi the personality and why perhaps he was suspended - you must read Chris Barron's piece  Pay special attention to the last paragraph

Could there possibly have been a misunderstanding or a problem of interpretation, I asked the Norwegian embassy? "No," I was told.

So the question now is whether we should let the BMF attack our constitution or not - your comments would be appreciated.

More on the mining charter

Two articles caught my eye on the mining charter. 

Tim Cohen wrote a piece yesterday on the mining charter and how the industry has descended into a corrupt mine field.

In the new South African mining strategy , the industry managed to include the notion of “sustainable growth” along with the requirement of “meaningful transformation”, which has been arguably the only thing the department has really cared about until now. The department has often painted itself as the sole and crusading believer in transformation, which is just nonsense. Mining companies in general are not so stupid they don’t realise the need to compromise . What has changed is the realisation that all the discretionary items that have been put into the new legislative and rights formulations have resulted in creeping and debilitating corruption.

The department typically turned a blind eye , thinking perhaps it was an unfortunate side-effect of transformation . But it was actually eroding the industry, as investment levels show.

Cohen notes

In Australia, investment is considered so important that a popular prime minister falls within a month of threatening that investment climate. All mining companies had to do to reverse a decision to impose a super mining tax was to threaten to pull their expansion projects.

Not quite the same with our government - as Hilary Joffe concluded in her article today.

Shabangu’s comments (any company that sold its empowerment stake to non-empowered shareholders would just have to do another deal) were a depressing reflection of how little appetite there is in the government for a rethink. Policies often do prove to have unintended, even damaging, consequences. But it takes bold leaders to admit that, and even bolder ones to throw out the articles of faith and start again. 

Quentin Wray's blog actually calls for a lot more government accountability but does not absolve the private sector's involvement in the transformation process

It is easy for the government and the ANC to blame (transformation) failings entirely on the business sector rather than critically examine its own role in the failure of its policies. However, it is also all too easy for business to put all the blame on to the government. Both sides are wrong.

What we need is a new approach to the whole thing. Government must start delivering what it has promised rather than blaming others for its failures and business must embrace the notion of doing the right things because they are right rather than just required. Unless this happens, at some stage, there will be no more give from either side and the simmering antagonism between the business community and the government will evolve into something far more sinister.

Both sides have massive extortion power - the private sector can withhold investment and cut jobs and the state can capriciously pull licences - and it would be a tragedy for all of us should the relationship to degenerate into a tit-for-tat, my stick is bigger than yours battle.

HILARY JOFFE: Could SA’s BEE billions have been better spent?

From today's Business Day.  Joffe is referring to the latest BEE book - "Jenny Cargill: Trick or Treat : rethinking black economic empowerment". 

Cargill points out that it cost the big four banks 2,5%-3% of their market capitalisation to transfer 10% of their equity to black shareholders. Which implies that giving the shareholders 3% free would have transferred the same economic value as trying to sell them 10%.

I have ordered this book off Kalahari.  On the subject of books - have you noticed that Vuyo Jack's book is no longer available on the shelves.  I went to every bookshop between Sandton and Benoni and could not find it.  Thankfully my good friend Fiona Khan donated a copy to my worthy cause.

And another quote from the Joffe article

Then there’s the thorny “once empowered, always empowered” issue. If the black empowerment partners sell their stakes, does the company get the full credit for a deal done, or must it start again? This is crucial, for companies and black shareholders.

I know that many of the bigger companies in South Africa are waiting for more clarity on this once empowered rule.  Once shares vest then scores go down - ask Absa, they are the first to feel this.

Back to Joffe

If firms have to keep doing empowerment deals forever to comply with the rules, the cost to the economy will be incalculable. One way around this is for companies to lock the black shareholding in for good. If they bar the black shareholders from selling at all, then they are not transferring wealth: the shares are worthless because they can’t be traded. If they insist the shares can be sold only to other black people, the effect is to slash the value of those shares, because the pool of investors who can afford to buy them is so small they will have to be sold at a deep discount.

Apparently there were behind-the-scenes talks on this among the mining stakeholders, but Mineral Resources Minister Susan Shabangu wasn’t persuaded, telling reporters that any company that sold its empowerment stake to non-empowered shareholders would just have to do another deal.

I really hoped that this myopic view would find itself lost to antiquity. 

Caird’s letter to the Prime Minister of Namibia, HE Nahas Angula regarding TESEF

(Betcha you didn't know I could be this formal).

I am writing to you, not as a citizen of Namiba, but as a keen observer of the South African broad-based black economic empowerment system. I have been eagerly awaiting the publication of the final TESEF document and would appreciate the opportunity to discuss a few aspects of the South Africa B-BBEE system that might assist TESEF in its ultimate success.

1. Identifying the underlying reasons behind B-BBEE

If recent civil unrest over service delivery and unemployment in SA are indicators then they must be pointing to the fact that South Africa needs to address these critical areas. B-BBEE does make reference to these issues but they have got lost underneath the narrow-based notion of ownership that still persists and is a fundamental driver within the public sector. South Africa (and judging by your draft document, Namibia) needs more jobs and a more skilled population. It almost appears that for SA is too late to steer the focus towards this.

A new wave of black intellectuals are now rejecting the notion of 25% ownership of a business and advocating 100% black ownership in key areas (minerals, financial services etc). South African had great success in this field during the Apartheid years where the government insisted that the Afrikaners should own certain aspects of the economy (a policy of volkskapitalisme). South Africa desperately needs this – a new financial institution that can adequately compete with other large intuitions' would have a huge impact on job creation and competition. (I am aware of the difficulties of achieving this – but the methods to achieve this have not yet been exhausted).

1. Transformation should not be enforced via a stick method. Carrots should be offered

The need to transform is often forgotten and when targets are not achieved the South African government threatens to opt for a stick approach. People by their very nature are acquisitive and as such tend to perform better when they can derive some benefit from the process. A tax rebate system (for instance for those companies that achieve the 30% target of production spend on labour) is one of the most effective methods. There is little doubt that if a rebate is offered then the transformation process will operate more effectively. Admittedly a programme like this is open to abuse – but if such a rebate is offered then it is the responsibility of the company applying for the rebate to adequately prove that they qualify for it.

1. Building on preferential procurement

The preferential procurement element is the cornerstone of BEE's adoption in South Africa. The consistent requests for BEE scorecards over the last five years has seen a large number of companies producing some form of BEE scorecard. The preferential procurement element however falls short in understanding human spending patterns. To a large extent it is a lone voice in the drive to stimulate local production. A greater harmonisation between importing tariffs, production stimulation and other types of legislation will make this a success. South Africa is trying to achieve this with the draft industrial policy action plan (IPAP).

A solution might be a relaxation of preferential procurement requirements where jobs or skills are created.

1. Celebrating successes

Transformation is a process and each step needs to be analysed and where there is success then it should be noted. This is sorely lacking in the South African context – our politicians seem to be more at home criticising the process as opposed to recognising the successes it has achieved (and there are many).

1. Public and private sector involvement

At present the South African public sector does not appear to have the legislative support to actually implement BEE. The drafters of the legislation seem to have omitted to take this into account. As a result the transformation of South Africa's economy seems to be driven by the private sector in isolation. Any far-reaching policy must have mechanisms built into that allow for all stakeholders to participate.

 

I wish you the best of luck with this process and will be watching it keenly – Namibia is in the best position to make a truly meaningful contribution to the African transformation process.

 

Paul Janisch

Constitutionally Speaking - Pierre De Vos

Constitutionally Speaking is Pierre De Vos' blog and is vital reading.  I think I'll see if I can have a chat to him about BEE and the constitution at some stage.  I have certain views about the reason why it is a voluntary process as opposed to a mandated one.  I think Pierre would be able to give me a little more insight into it.

This is his latest post on the Topsy Foundation ad which has really shaken South Africa.  It completely dents Mbeki's credibility (if there is anything left to dent after Selebi).

The story of Selinah: WWMS?°

Jul 4th, 2010

by Pierre De Vos

Listening to SAFM this morning, I was alerted to the advert below, showing in the most stunningly visual and moving manner that those who question(ed) the link between HIV and AIDS and the potential benefits of anti-retroviral treatment have a lot to answer for. Wonder what former President Thabo Mbeki would make of it.

Writing to then leader of the opposition, Tony Leon, Mbeki said the following in 2000:

In your letter to me of June 19, you make the extraordinary statement that AZT boosts the immune system. Not even the manufacturer of this drug makes this profoundly unscientific claim. The reality is the precise opposite of what you say, this being that AZT is immuno-suppressive. Contrary to the claims you make in promotion of AZT, all responsible medical authorities repeatedly issue serious warnings about the toxicity of antiretroviral drugs, which include AZT.

On 28 October 1999, Mbeki told the members of the National Council of Provinces:

Two matters in this regard [the demand to make AZT available in the public health service] have been brought to our attention. One of these is that there are legal cases pending in this country, the United Kingdom and the United States against AZT on the basis that this drug is harmful to health. [This claim was untrue.] There also exists a large volume of scientific literature alleging that, among other things, the toxicity of this drug is such that it is in fact a danger to health. These are matters of great concern to the Government as it would be irresponsible for us not to heed the dire warnings which medical researchers have been making. I have therefore asked the Minister of Health, as a matter of urgency, to go into all these matters so that, to the extent that is possible, we ourselves, including our country’s medical authorities, are certain of where the truth lies.

And of course the later Minister of Health also had rather dangerous and bizarre views on the matter. Dr Tshabalala-Msimang, launching an anti-TB campaign on 15 March 2003 said the following:

In my heart I believe it is not right to hand them [AZT and other ARV drugs] out to my people.

The late Peter Mokaba, who died tragically under the influence of this denialism told The Star the following on 4 April 2002:

We have seen colonization, we have seen imperialism, we have seen apartheid … and all of them used against us as a people. [Africans have] won their liberation and now they are fighting another war and they are being psychologically terrorised once more because people want to sell [ARV drugs] and make profits. And there is no benefit in those products. The only thing that can really happen is that once you touch the antiretrovirals you can go one way.

This is the story behind the advert.

° What Would Mbeki say.

More grants than jobs - lifted content

I don't like lifting stories wholesale but this is a very important story.  I've editied down a bit.  It comes from the Business Report.

South Africa has more people receiving money from social grants than there are people with jobs, according to Mike Schussler, the chief executive of Economists.co.za.  There were 13.8 million grant recipients and only 12.8 million people who worked.  Grants and other expenditure, had to be funded by 5 million taxpayers. "Unless more people get jobs there won't be enough taxpayers to pay the social grants of the future."

The problem lies with the government, according to Schussler. By increasing its work force and setting the pace in wage increases, the government is making it unaffordable for the private sector to employ more people.

Schussler said employment in the private sector had been crowded out because the public sector paid a premium for labour. Wages in the government sector rose 53 percent since 2006, while the private sector paid 49 percent more than that over that period. And he pointed out that, during this period, inflation rose 30 percent. "So real increases were 19 percent in the private sector and 23 percent for government employees."

In addition, the government is increasing the size of its workforce. Since 2006, employment in the private sector contracted by about 2.9 percent, while jobs in the government sector grew by 13.6 percent. As a result, 20 percent of the work force is employed by the government, and 24 percent by the broader public sector.

Government wages now absorb more than 12 percent of gross domestic product (GDP) - one of the highest ratios in the world. Schussler said it was higher than the figure for the UK and the US and way above that of Japan, which was a little more than 6 percent. It is also higher than Greece, Italy, and Spain, as well as Ghana, Kenya, and Nigeria. In the past it was only about 5 percent.  This situation creates a negative environment for job creation.

The number of discouraged job seekers grew by 25 percent over the past 10 years, "twice as fast as the population, which has grown 12.7 percent". Discouraged job seekers are those who have given up looking for work. He said the formal sector added just 2 percent a year to the employment numbers, or less than a quarter of a percentage point each year.

Schussler said, if South Africa's employment rate were about 64 percent of the adult population, in line with the rate in many other African countries, 20 million people would be employed - 7 million more than at present.

Schussler said lower interest rates did not always improve job creation, nor did a weaker rand. He said an increase in capital formation (building economic infrastructure) "may assist in the medium term".

He also suggested cutting red tape, for instance opening the skies to competition from foreign airlines which would bring more tourists to the country. And he advocated a focus on the services industries, which provided 70 percent of jobs.

But, he said, in the long term the real remedy was education.

"People can't get decent jobs without getting decent education," Schussler said.

TESEF fest? In other words Namibia’s BEE codes are coming

Ndaambe Haikali, a banker from Namibia, very kindly sent me a notice that is circulating on paper (not on the internet). It's called "Have your say on TESEF" and invites citizens to  submit comments before the 15^th of July this year. They have committed to launching this programme sometime next year.

The document makes for interesting reading because it tells us (those of us who don't know that much) a fair amount about the Namibian economy. For instance 75% of the national productive assets are owned by 25% of the population, foreign multinationals and absentee foreign owners. When you read through the document you'll get a sense that TESEF (Transformation of Social and Economic Empowerment Framework) is very much about trying to give Namibia back to the Namibians. It is this process of Namibianisation that underpins the whole strategy.

Namibianisation in itself is nothing new – it's been around for many years and was mostly felt in the allocation of fishing rights. It is defined as "a process to encourage the active and greater involvement, participation and benefit of Namibians - especially of Namibians previously excluded (during the Apartheid regime) from the fishery sector. Incentives are offered to companies that are at least 51 percent owned by Namibians (e.g. quota levies, long-term fishing rights)." This same concept is a constant across other charters – the Namibian Financial Sector Charter being one example.

The drafters have followed the basic guidelines of South Africa's broad based BEE but have set a longer period to achieve these targets – a total of 35 years. What isn't very clear from this document is whether the time period is 35 years or whether the cut off date is 2035. Anyway by 2035 the TESEF process should have produced 60% of the population as middle class, 20% upper middle class and 20% lower middle class. 

35 years is a long time - a regime change could negate the entire process. 

TESEF has six elements

  1)    Ownership

Target is 80% in the period 2029 – 2034. 20% must be achieved in the next 5 years.

2)    Management

Very similar to South Africa. The difference here is that I sense that Namibianisation includes ALL Namibian citizens, not specifically black ones.

3)    Employment equity

They have suggest a target of 30% of production costs to be spent on labour. Not much else is explained here but at face value this is a scary target. Hopefully they'll tie this in with skills development to try and create a skilled labour force.

4)    Entrepreneurship development

This incorporates preferential procurement. At least 30% of procurement should be allocated to businesses owned by PDIs (yes they use that term too and define it as "victims of former apartheid policies") within the next five years (probably up to 2016).

As an aside - the biggest problem with South Africa's preferential procurement is that it wants local procurement but there is no real harmony between this and import duties and the like. In other words local production should be used even if it costs more than importing the same product. In a consumer market this just won't work. If Namibia is to achieve a similar goal then it must try to encourage value-added production. I know that the Fishing Rights programme has tried to address this.

5)    Human Resource and Skills Development

A target of 2% of turnover for skills development is very high. The only SA BEE code that I think that was properly thought out is the skills development code. The emphasis on learnerships has the greatest potential for the economy. There is talk of a Training Levy in Namibia, which is probably similar to our Skills Development Levy.

6)    Community development

No transformation or social upliftment programme can exist without this. It looks like they are going to make this a tax (2% of a wealthy individual's estate should be invested in community development) for other corporates it is 2% of profit (the type of profit is not  specified). That is not a good idea – community development is a voluntary thing and should stay like that. The introduction of BEE has seen a lot more giving in South Africa than before. Corporates are really getting behind this. I had a little debate with Kevin (holding onto confidential documents) Lester yesterday.  He is in two minds about this tax – referring to the Lotto money being distributed. I am completely anti the idea of a government distributing money to charities. Especially our esteemed government.