Paul Janisch

EMEX responds

Dear Paul,

We have noted, with interest, the comments you have posted on your blog with respect to the Emex NPO Sustainability Certificate.

Emex is in the process of compiling detailed information, for your benefit, on the history and development behind the NPO Sustainability Certificate as well as its relevance within the South African market. This information will be send to you during the course of next week.

We trust that after reviewing this information you will be in a position to render an informed opinion on this product.

Kindly note that our rights herein are reserved.

We trust you find the above-mentioned in order and look forward to constructive discussion herein.

Kind regards

 

Corne Bester

Legal & Compliance Manager

Emex Trust

Tel:  012 663 1188

Fax: 086 600 5520

Website: www.emex.co.za

 Physical Address:

117 Corner of Jean Avenue and Lenchen North 

Futurum Office Park, Block H 

Centurion

Fair enough.  However, just as your rights are reserved therein (whatever that means), I still reserve the right to claim that this is a baseless revenue stream (like EmpowerDex in the early days).  I do however applaud the chutzpah that EMEX is demonstrating in issuing this certificate.

I'll publish the justification when I receive it.

 

Got to dig EMEX. Trust me, you really should try

A reader sent me this certificate. I'm not sure whether I can tell you his name but he is a BEE consultant from Cape Town. What this certificate is, is something that the EMEX Trust (love that name) is issuing to charities – or at least one charity. It's a two year certificate that measures a charity against "Sustainable Fundamental Guidelines revision 1.1".

Michael writes

It was sent to me by a charity to whom my client had donated money for SED points.

I googled "Sustainable Fundamental Guidelines revision 1.1" but couldn't come up with anything.

Presumably an Emex Trust creation!

Just to confirm this I too Googled "Sustainable Fundamental Guidelines revision 1.1" (with the quotes) and was greeted with this

 No results found for "Sustainable Fundamental Guidelines revision 1.1".

That was a very specific search, so I removed the revisions and searched for "Sustainable Fundamental Guidelines" (again with the quotes) and came up with this

 No results found for "Sustainable Fundamental Guidelines".

I think Michael might be right. But we can't leave it at that.

The "Sustainable Fundamental Guidelines revision 1.1" are based on the following

Elements	Weighting Points
Sustainability	39
Experience	20
Governance	30
Expertise	10
Staff Compliment	5
Reach (no of provinces serviced)	5
NPO Registration	30
TOTAL	144 + %Bonus points

And then you are scored as a percentage

Level 1	≥ 90%
Level 2	≥ 80% but less than 90%
Level 3	≥ 70% but less than 80%
Level 4	≥ 60% but less than 70%
Level 5	≥ 50% but less than 60%
Level 6	≥ 40% but less than 50%
Level 7	≥ 30% but less than 40%
Level 8	≥ 20% but less than 30%

It would be wrong not to take the piss out of this pisstake certificate (which is not a BEE certificate) so I will

1. Why such an arbitrary number – 144 points plus 5 bonus points. This make it 149.
2. How do you measure staff compliment. Do you go up to the receptionist and say "my you have such a wonderful telephone voice". Or do you measure how often the CEO or head honcho compliments the staff on something or other – and what is that something or other?
3. What exactly does this get the charity? If it's not a BEE certificate then what does it do. I think it's only use is that it states that the black beneficiaries make up more than 75% of the total beneficiaries.

That's the pisstake over.

I really think this is very clever. It's a complete waste of time but if you issue enough of these, corporates may start insisting on them. This is exactly what EmpowerDex did right at the beginning of the measurement of BEE, this was even before it was possible to measure BEE. As a result of this the name EmpowerDex is almost a generic word for a BEE certificate, just like Durex is a generic word for a FL (giving my age away here – email me if you don't know what that is".

Good luck EMEX. I trust that this is going to work for you. However, if you (the reader) are a charity – don't get duped by this, it really is a load of bullshit.

BTW - I have put "Sustainable Fundamental Guidelines" in my keywords.  Perhaps this post will be the first thing you find if you Google it.

Public Protector report - Against The Rules Too (14 July 2011) 1st post

This report makes for very interesting reading, and I can't create one big post on it so I'll do it in pieces.

This quote is for those of use who are keen on public private partnerships (PPPs), it comes from page 22 of the report.

It was noted from the response of the Minister of Public Works to the Provisional Report of the Public Protector that she intends formulating a policy in terms of which the DPW will in future consider favouring the construction of buildings over leased accommodation. 

I'm sure my friends at Kagiso Financial Services would be very happy to hear about this.

 

More on the PPPFA regulations, to be specific - JVs

Nedbank asked me to give them a short overview of the new PPPFA regulations.  I gladly did – you can take a look at the presentation here. What was interesting was a certain question about joint ventures and the PPPFA and BEE certificates. 

The only clue we have to what is required is found in in the COGP - Code 000, statement 000, paragraph 6.4

6 Start-up enterprises

6.1 Start-up enterprises must be measured as Exempted Micro-Enterprises under this statement for the first year following their formation or incorporation. This provision applies regardless of the expected total revenue of the start-up enterprise.

6.2 Start-up Enterprises are deemed to have a B-BBEE Status of "Level Four Contributor" having a B-BBEE procurement recognition of 100% under this paragraph

6.3 In order to qualify as a Start-up Enterprise, the enterprise must provide an independent confirmation of its status.

6.4 Despite paragraph 6.1 and 6.2, Start-up Enterprises must submit a QSE Scorecard when tendering for any contract or seeking any other business covered by section 10 of the Act with a value higher than R 5 million but less than R35 million. For contracts above R35 million they should submit the generic scorecard. The preparation of such scorecards must use annualised data

However this paragraph speaks only to section 10 of the BEE Act which says

Status of codes of good practice

10. Every organ of state and public entity must take into account and, as far as is reasonably possible, apply any relevant code of good practice issued in terms of this Act in –

a) determining qualification criteria for the issuing of licences, concessions or other authorisations in terms of any law;

b) developing and implementing a preferential procurement policy;

c) determining qualification criteria for the sale of state-owned enterprises; and

d) developing criteria for entering into partnerships with the private sector.

Conventional tendering is not included in this definition. Legally then section 6.4 of the COGP can't apply to the PPPFA. This then means we have to look at the PPPFA regulations (paragraph 11)

(6) A trust, consortium or joint venture will qualify for points for their B-BBEE status level as a legal entity, provided that the entity submits their B-BBEE status level certificate.

(7) A trust, consortium or joint venture will qualify for points for their B-BBEE status level as an unincorporated entity, provided that the entity submits their consolidated B-BBEE scorecard as if they were a group structure and that such a consolidated B-BBEE scorecard is prepared for every separate tender.

Using these paragraphs from the PPPFA we see that it's all about a projected scorecard but a scorecard from the JV (whether it be incorporated or unincorporated). This is distinctly different to section 10 of the BEE Act. It must mean then that section 10 remains as it is and paragraph 11 of the PPPFA regulations is the requirement for all other types of bids.

When do the new targets kick in?

I was pleasantly surprised when I was asked to post something of an informative nature, something that doesn't allow me to opine in my typically cynical fashion. And so with no prejudice in my brain I write.

There are two elements that have increased targets for the years 6-10 viz

Employment Equity. Total points – 18 (including 3 bonus points)
Description	Weighting points	Interim Target (Years 0-5)	Compliance Target (Years 6-10)
Black disabled employees as a percentage of ALL employees using the ARFG	2	2%	3%
Black employees in senior management as a percentage of all such employees using the ARFG	5	43%	60%
Black employees in middle management as a percentage of all such employees using the ARFG	4	63%	75%
Black employees in junior management as a percentage of all such employees using the ARFG	4	68%	80%
Bonus Point for meeting or exceeding the Economically Active Population (EAP) targets in each category above	3

 

Preferential Procurement. Total points – 20
Description	Weighting points	Interim Target (Years 0-5)	Compliance Target (Years 6-10)
B-BBEE procurement spend from all suppliers based on the B-BBEE procurement recognition levels as a percentage of total measured procurement spend	12	50%	70%
B-BBEE procurement spend from all Qualifying Small Enterprises (QSEs) or from Exempted Micro-Enterprises (EMEs) based on the applicable B-BBEE procurement recognition levels as a percentage of total measured procurement spend	3	10%	15%
B-BBEE procurement spend from any of the following suppliers as a percentage of total measured procurement spend: suppliers that are 50% black owned (3 out of 5 points); or suppliers that are 30 % black women owned (2 out of 5 points)	5	15%	20%

 

There is no clear indication from the codes as to when the sixth year occurs. The only hint as to time in the codes comes from paragraph 13 of Code 000, Statement 000

13 2 The Minister will review the Codes following the end of the tenth year following the commencement date of this statement, despite the aforementioned, annual reviews will take place to monitor the implementation of B-BBEE throughout the economy.

It follows then that this review will be conducted on the 10^th of February, 2017.

The targets therefore measure the performance within the period that the codes contemplate. This table should explain it

Period	Year number
Feb 9, 2007 – Feb 8, 2008	0-1
Feb 9, 2008 – Feb 8, 2009	2
Feb 9, 2009 – Feb 8, 2010	3
Feb 9, 2010 – Feb 8, 2011	4
Feb 9, 2011 – Feb 8, 2012	5
Feb 9, 2012 – Feb 8, 2013	6
Feb 9, 2013 – Feb 8, 2014	7
Feb 9, 2014 – Feb 8, 2015	8
Feb 9, 2015 – Feb 8, 2016	9
Feb 9, 2016 – Feb 8, 2017	10

You'll see that the targets are very clearly split into two with the words "years 0-5" and "years 6-10".  The specific mention of 0, in the years "0 - 5" means that you are measuring from February 9, 2007.  Logic would then dictate that the period "6 - 10" must start from February 9, 2012.   I think that Vuyo "Aristotle" Jack (and Kyle Harris) would agree with me. Their agreement is actually by accident because their proof reader didn't pick up that the sentence below is actually in the wrong element

Measured entities must realise that unless they increase the measured spend from the beginning of the sixth year of measurement, their score will decrease significantly.

Page 263 (under the Employment Equity element) – Broad-based BEE, the Complete Guide

I'm willing to stake my reputation for tolerance here that the sixth year that Jack and Harris refer to is the sixth year of the codes.

What about the verification period?

I doubt that there is anyone that will disagree that this interpretation is incorrect. However the world of BEE is never that clear. The big issue here is the verification period. Everyone knows that all you have to do is measure a 12 month period. Does this mean that if you measure from 1 July, 2011 to 30 June, you should measure your EE and procurement targets in two phases; 1 July to Feb, 8 and then from Feb, 9 to 30 June? It might be measurable but I wouldn't know how to allocate a score on this, you'd have to use some sort of average system.

That can't be it. I put it to you that if your measurement period ends beyond half way through year six then you must use the enhanced targets. In other words if you are rated on the period from September, 2011 to the end of August 2012 then you must be measured using the new targets. Everything before that must be measured using the 0-5 year targets.

Thanks for asking for this post – now distribute it freely and invite me to present at your next conference for a nominal fee.

TESEF and Windhoek

Did I mention that Windhoek is one of the nicer African cities?  If I didn't then it is an incredible omission.  I was last there about seven years ago and it has changed so much since then - huge buildings have gone up, there are malls and fantastic hotels.  It still hasn't lost its old charm and Joe's Beerhall is still a hit.

Obed de Swardt and I went up there at the request of a few Namibian companies to go and talk to them about BEE/TESEF and the like.  It was a fantastic experience, the hospitality and warmth is something we all should experience.

This is what we learned.

1. TESEF falls under the Office of the Prime Minister.  It would appear that the Prime Minister is somewhat alone in this process.  There is a school of thought that it should fall within the  Namibian DTI.  
2. The issue between the Office of the Prime Minister and the DTI might be the reason as to why TESEF still remains a strategy.   It might just be that the Prime Minister is pushing for TESEF on his own and not getting a great deal of support from the rest of the Namibian government.
3. A rumour suggests that TESEF will be replaced by the New Framework on Equality & Empowerment (perhaps the new acronym might be NFEE).
4. The Namibian Financial Sector was tabled in 2009.  This is a great document that focuses on the Namibianisation of the financial sector, it speaks of BBEE (broad based economic empowerment). Namibianisation should be a greater priority than BEE - a startling percentage of the Namibian economy is in foreign hands.  

I'll be back soon.  

Inconsequential consequences. Or does it really matter

There's been so much press on this issue of fronting.  It's a hot topic and dominates the DTI and BEE Advisory Council's public ruminations.  Every time Rob talks about BEE then it's about fines and blacklisting and the wrath of all the deities etc, etc, etc (or yada, yada, yada as Seinfeld might say).

In spite of all this there are clearly very few or no consequences if you are caught fronting.  In fact the real risk is that someone threatens to expose you and goes off to the press to say all sorts of nasty things about you.  Let's go back to my post about Econobee's fronting.

It is very clear to me that a company that purports to be black owned when it is not is fronting.  The websites I referred to in that post are still up and the Econoserv CK documents still show the same two shareholders.  The DTI know about this, they have all the information.  And the consequences for the Levenstein dynasty?  Zero, nada and nyet.  In fact I suspect that Keith Levenstein knows this fact.  His model is far more effective - send rude emails to companies who have (in his opinion) been issued with the wrong scorecards, and if they don't adhere to his demands he goes to the press.  This is a very real risk to the threatened - you can imagine what the consequences would be for any company, especially a listed one.   Would allegations like these not potentially impact on that company's share price (and other stakeholders).  

This is how a loose cannon regulates an industry that the official bodies do not wish to manage.  

Yet fronting is still a scourge (according to the DTI and advisory council).  My sources tell me that the DTI will tell you (very second hand information) that they receive 3 fronting complaints a day.  Let's assume the first one started in March 2007 then this means they would have received about 3500 complaints (you figure out how I came to that number).  My sources then tell me that in fact they have only received about 60 complaints and not prosecuted a single one.

So are there any consequences to fronting or bad BEE behaviour other than naming and shaming?  I don't think so.  Another case in point is that Abacus post of mine where they patently contradicted a prior BEE certificate.  There is no recourse here - sure ABVA can make a note of this, possibly discipline them but that's not really censuring them.

It's the wild west out there, make sure your loose cannon is loaded.

The DTI's big stick

Do we need to be concerned about what Rob and the souls are the DTI are sprouting from their mouths,  especially when it comes to enterprise development?

The first thing I paid attention to was Rob muttering  "companies would have to be actively involved in fostering small businesses" in April this year.  I thought this was the stupidest idea ever (amidst all the competition for stupid ideas), and I have not changed my opinion on this.  However it has now found a close competitor.  

This quote is attributed to Sipho Zikode who is the deputy director-general for empowerment and enterprise development at the DTI.  He mentioned this at the launch of the NEF's ED plan (which we need to approach with a great deal of caution).

Zikode gave warning at the launch that there were proposals to increase the requirements of the scorecard. He aimed his warning specifically at so-called qualifying small enterprises.  We have found that some of these companies quote things they were going to do anyway as part of their empowerment efforts and claim that as a credit for participation in the transformation of the economy"

And then threatened us with 

"That is why there is a proposal now that all seven elements will have to apply (to these companies too)."

Let's go back to the first paragraph, it's quite clear that he is referring to enterprise development (he was after all speaking at an ED launch).  Is he saying that ED should be extraneous to your business - like Rob is suggesting.  In other words if you do do something that benefits both your business and the ED beneficiary but it is linked to your business you can't claim the points.  That's how I read this. 

This is quite simply ludicrous.  And again it demonstrates how little the DTI understands both capitalism and how BEE might grow the economy.  Which of course should not come a surprise considering that Rob is a serious player in the SACP.

But then who are we as the people who actually pay the taxes that fund the tenderpreneurs and other scam artists to tell the DTI how to go about BEE et al.  What the fuck, we'll try anyway even though we know that we will be continuously threatened with more onerous policies, taxes and other types of blackmail, for so-called "lack of transformation".  Never once has the DTI actually recognised the BEE strides that the private sector has made in the last four years - it's always another threat and another law.   What the DTI should do is claim (undeserved) credit for what has been done - maybe that's the converse approach.

And so, as a result of a clear lack of understanding, the DTI is going to make compliance even more onerous.  The upshot will be that scores will drop dramatically.  If this should happen I will go on a single person crusade to educate the larger corporates that they cannot expect such great scores under procurement because the DTI have now made it twice as difficult to comply with a concept that they barely understand. 

 

BusinessDay - TIM COHEN: Monday comment

Personally, I wonder whether it isn’t time for a review of the equity portion of BEE anyway. I wonder whether it would not be much simpler to just create a fund to benefit all black South Africans.

Listed companies would then be required to deposit a proportion of their dividends into this fund.

Hence, BEE would not become a burden for struggling companies, or even high-growth companies for that matter, since neither issue dividends.

When it comes down to it, at the end of the day, BEE deals essentially consist of dividend set-asides anyway, and the amalgamation of risk would help all beneficiaries.

It has the great advantages of simplicity, equity and certainty.

What about it?

via www.businessday.co.za

Not a bad idea Tim. This was after he wrote the immortal
"THERE is one aspect of the nationalisation debate that I don’t think has been considered sufficiently — if the ANC is really considering nationalisation, shouldn’t BEE in the mining and banking industries be put on hold until the policy has been decided one way or the other?"

You really should read the whole article because it's a great summary of the very complicated issue between ICT and Arcelor Mittal (and Sishen).

Put your BEE certificates on your website

Please!!!!  It's not an unreasonable request.  Why play coy with the thing - you need it to do business so just put it up there.