It's a short post. I still haven't written my letter to the dtic about these SANAS notes that I have seen, I am sure there are many others and if a reader has something else I would appreciate you sending them onto me. I have enough information to ask a few questions and I have submitted what I have to an investigative journalist who should be asking all the parties where they get the right to do this.
In discussing this with the journalist I started to look at the processes that are required for an amendment. I thought that it might lie in the generic codes. It doesn't - it sits in the BEE Act. This is more persuasive because it's a piece of legislation (bolshie thought that the BEE Act trumped the Constitution, at least he knew there was a Constitution, most of the ministers in zuma's cabinet didn't know it existed). Codes are supportive and do not carry the same weight as legislation. Section 9 appears to be the most relevant - for the record I am referring to the BROAD-BASED BLACK ECONOMIC EMPOWERMENT ACT 53 OF 2003 AS AMENDED BY ACT 46 OF 2013. The best version can be found here.
9. Codes of good practice (1) In order to promote the purposes of the Act, the Minister may by notice in the Gazette issue codes of good practice on black economic empowerment that may include— (a) the further interpretation and definition of broad-based black economic empowerment and the interpretation and definition of different categories of black empowerment entities;
(5) The Minister must, before issuing, replacing or amending a code of good practice in terms of subsection (1)— (a) publish the draft code of good practice or amendment in the Gazette for public comment; and (b) grant interested persons a period of at least 60 days to comment on the draft code of good practice or amendment, as the case may be.
I was going to go into a long discussion of how Yuneal's interpretations were wrong in law (in so far as the codes are concerned). I don't need to because subsection 1 makes it clear that an interpretation must be made via a gazette. Gazetting then becomes a type of amendment and follows section 5.
SANAS opinion remains an opinion and carries no more weight than my opinion. They are null and void. I know that every verification agency is petrified of SANAS. I don't think it's because they're worried about processes. I think they are scared that some arbitrary SANAS employee or deployee may provide a non-conformance due to a difference of interpretation.
This can't wait anymore. I have the locus standi to lodge a query with the dtic and I will. It will be respectful and I will post it up here and will send emails every three days requesting a response - this is business critical.
Zuma unveiled the plan to scrap tuition fees for students from poor South African homes and freeze tariffs for those from working-class households on Dec. 16, two days before Cyril Ramaphosa replaced him as leader of the ruling African National Congress and two days after a body representing the 26 state-owned institutions said each would raise fees by 8 percent. The University of South Africa, the country's biggest with more than 400,000 students, held fees at 2017 rates, it said Dec. 7.
He says Zuma's action had undermined the recommendations of a Commission appointed to look into funding for higher education which had found that the country had no capacity to fund free tertiary education. "That announcement to say we are moving to a new scheme 14 days before it had to be implemented messed NSFAS big time, exposed the extent to which NSFAS didn't have a system. It increased the number of NSFAS beneficiaries and what was worse with that decision, it ignored the work that was done by the Heher Commission and the transitional measures. That's why we have agreed with the Treasury now that it will go back to the Heher Commission."
And of course the wasted Afrikaner Niehope slams Blade. That idiot isn't worthy of a hyperlink
Grootes, as usual, wrote the best analysis of the student crisis in the Daily Maverick
there has been a litany of cynical political promises, missed opportunities and simple governance and competency mistakes which may have exacerbated the discontent. And Covid-19 has made it all so much more unbearable. Unfortunately, even though the way students are taught is undergoing radical changes, it is unlikely to improve in the near future. The protest by Wits University students this week stemmed from the same dynamic that has led to protests at universities during the start of every academic year since at least 1994. It relates to students from poorer families who through their own hard work qualified to enter higher education institutions but cannot afford to pay the fees. At the same time, the demand for higher education has risen as our demography has changed and the number of young people who qualify through the system has increased. And yet, capacity has not come close to meeting demand.
Those with a basic knowledge of BEE would ask why bolshie bob's lunatic provision that companies need to be pay 2.5% of their payroll on bursaries for black students at higher education institutions hasn't resolved this problem. The answer lies in the preceding sentence. IT WAS SHEER LUNACY. It actually goes to show the depths that bolshie would go to to pander to the incompetence that zuma was. I come back to this question so often – who on earth would have agreed to that provision. It's too difficult for my BA in History and Law brain to extract financial information from annual reports so this won't be very comprehensive
Name
Gross remuneration in annual report
Target bursary amount
NPBT
Impact on NPBT
Dischem
6 709 000 000
167 725 000
868 844 000
798 023 075.00
Pick 'n Pay
2 832 837 000
70 820 925
1 736 000 000
1 568 275 000
The table shows that both companies have a large amount to spend on bursaries in terms of the BEE skills targets. It's unlikely that they are doing it, and few others are, because it's too expensive and has a significant impact on their bottom line. On top of this there are no tax benefits offered like those with learnerships. More importantly, most importantly, it would appear that companies wishing to comply with that provision are simply not. They're telling the dtic to get knotted. Companies are going for the cheaper points – learnerships and disabled. I was dealing with a massive company and they told me they don't have the R40m odd that they would need to spend on bursaries – so they won't.
The problem was that bolshie bob was so keen to please his political boss, zuma, that he decided to solve the problem by adding in an additional BEE requirement. In fact he was so keen on this idea that he tied it into the YES programme. The early drafts of the YES BEE benefit were tied to the bursary programme. If you didn't get all the bursary points then you couldn't benefit from the YES programme, he retracted this when the people that were supposed to pay this money told him to smoke his gulag ganja elsewhere.
If companies complied with this, would we have had an innocent bystander murdered on the streets of Braamfontein? Unlikely. But companies were never going to comply with this. The target is too high. What worried me at the time and continues to worry me is that the dtic will set new BEE targets to meet some other social crisis.
And this not going to stop – the even more clueless BEE commissioner is now hosting a BEE Conference at some stage. I was sent the press release. Looking at the speakers it's very likely that they are going to wax lyrical about the untransformed business sector – I wouldn't be surprised if white monopoly capital makes an appearance every hour or so. So speaketh the awesome awdoz
"Our annual national status reports on transformation show that of the 6% of the payroll, the public and private sectors only managed to spend 37% in 2017, 49% in 2018 and 49% in 2019, and this could be improved significantly to fund higher learning education and offer more on-the-job training through internships and learnerships"
The fact that there's no money for this escapes the useless people at the dtic (awdoz and SANAS included). I have said this so often – the BEE scorecard was designed for a growing economy. That's a feature that the anc is incapable of delivering on. Still I take heart from the corporate fuck you attitude. I think it was the IRR that was talking about a tax revolt recently. The revolt has already begun.
And not to be outdone it has decided to up the ante on skills development. I still maintain that 2.5% of payroll spent on bursaries is unaffordable for almost every company in this country - specifically ALL OF THE USELESS SOEs.
Tourism is unfazed by this. Fuck it - we'll just make the total spend 7% split between 4% on black people and 3% on bursaries. They have provided a concession - where you can provide bursaries to school going children. This is a sector that is supposed to stimulate the economy. And they put this spoke in the wheel without tyres.
It's for comment - you can get it here. I'm not sure that it's worth commenting on this - the ANC government is not known to read comments. I wonder if this is as a result of the brilliant education system that the ANC has systematically created to provide us with MPs who can't read.
By the way (but related to the education system) - panyaza lesufi is demonstrating tendencies that indicate that he is more than an out an out racist, he is the one who will bolster the demise of the public school education system with his institutional hatred of the Afrikaans language . He's almost better than manyi.
The Daily Maverick is becoming the most valuable source of fine journalism in this country. There is nothing that comes close to it. By the way they are looking for financial support, if you are so inclined you can read more about this here.
Back to the Maverick. Dirk de Vos wrote a fantastic article over the weekend. I'm not a Marxist fan nor that familiar with his theories, but I do know that that inept commie bolshie bob is a massive officianado. de Vos sets up his argument thus
In general, socialists continue to favour top-down direct interventions by the state preferably supported by “evidence based” research. When decision-making follows a process of identifying a problem with the objective of solving it by reviewing evidence and evaluating options, what we mostly get instead is some predetermined solution with evidence selected to favour the pre-selected solution. That type of policy making process is faulty because we cannot know the full ambit of what the problem is all about or that a whole number of factors will change once the policy is known. Goodhart’s Law shows the dynamics at play: Individuals who are aware of a system of rewards and punishments will optimise their actions within this system to achieve their own best outcome.
In other words policy makers come up with a solution to a problem without spending much time figuring out whether they actually know how to solve that problem. de Vos turns his attention to black economic empowerment and its raison d'etre
A good example of a failing policy is Broad-Based Black Empowerment (BEE) legislation and its regulations. The problem of lack of participation of black people in the formal economy and racial inequality is the problem to solve.
And in one sentence he sums up the fuck up that is best described as bob's folly
What we get is a a complex scheme of BEE regulation and arcane rules.
He could stop there, the points is made, but he's far too an analytical journalist.
The only interesting thing about BEE regulation is about they reveal about what the drafters of the rules think private firms work. Well, they don’t work in the way the BEE codes suggest they do. They work in all sorts of different ways. Still, the BEE regulations provide a system of rewards and punishments. They are also thoroughly gamed: they get manipulated by a range of actors from failing white-owned companies, specialist BEE advisers (I'm one you know - in the business of making white people look black) , funders, crony capitalists and those with a talent for manipulating state procurement budgets.
I think he must have been reading this blog. All this bullshit about voting rights and board meetings and the like - these are done by large companies. Since when does the average smallish to large business actually sit down and conduct a board meeting? bolshie bob obviously knows the answer. I once heard that idiot being interviewed on the radio and telling all those who care to hear his deluded voice that he will insist that CEOs start getting involved in the operations of small black businesses. Huh? - what would a CEO or even a high end employee be able to tell a small business about running their business. It was Anglo, in their submission of comments on the revised codes who asked the very pertinent question. What do we know about running a supplier's business? We are miners - we mine shit and then send it off. But we could start working on companies upstream - we could advise them on the best ways to manage the raw materials we produce. No! says bolshie bob. It's all about suppliers. What fucking drivel. Back to de Vos
Sadly, the response to the unsatisfactory outcome is to swap out some of the original rules, sub-rules and sub-sub rules with a whole raft of new rules that are equally misguided and arguably worse because they are combined with additional rules addressing issues of enforcement.
And so we bring in the awesome awdoz and SANAS. SANAS is so concerned about process and paperwork that if has failed to take into account that all companies are doing is producing documentation to support stuff. The actual benefit that is being derived is not measured. de Vos absolutely hits it here.
Black empowerment won’t be advanced by better enforcement of BEE regulations. The whole scheme of BEE is wrong-headed.
And he correctly concludes with
Of course, the original problem, namely the exclusion of the black majority and inequality has not gone away and, in some respects, the original problem has got worse.
I can only hope that Cyril is reading this. I have lamented often on this blog as to why have they made the codes so difficult to understand and even harder to measure. I think I know one of the underlying reasons and this has to do with lobby groups like the broke black business council - who are now returning to BUSA (apparently Cyril wants business to speak with one voice). I suspect that these lobby groups are attempting to use apartheid-style policy making where you make a certain class of people adhere to "arcane" rules and exempt others - thereby making it easier for that exempt class to gain access to the lucrative government business (a broke government I need to stress). It's all in the name of trunceformaysheeyin.
There are a number of black commentators who are not in favour of bolshie bob's new amendments. I spoke about Andile Khumalo's article in the Sunday Times a few months ago. We now have an opinion in one of oddball's publications written by Karabo Mashugane. I don't read surve's newspapers or online publication at all. However I have a rather old Google Words search for BEE and this article came up. Mashugane comes from a small business perspective, his concern is that the promotion of large businesses to higher BEE levels because of their black ownership will have an impact on smaller business. He laments both the instant promotion and the fact that the new proposed amendments allow for all significantly black owned businesses to become enterprise and supplier development beneficiaries irrespective of size. He very correctly observes that
Enhanced recognition has been roundly criticised for sending empowerment back to pre-2007, when BEE consisted of issuing shares to the politically connected and not much more. The amendment gives the impression that black people, no matter how successful, carry no responsibility for empowering their less fortunate countrymen and contributing to job creation and economic growth. Black ownership, even if only on paper, now carries a very high prize and offers a hassle-free existence for all corporates. It frees them from having to bother with employment equity, skills development, preferential procurement, SME development and socio-economic development.
He writes persuasively and has most certainly considered his position. He posits
All these changes taken together appear to signal a renewed focus on ownership of companies, almost to the exclusion of all other elements. A lot of us are wondering if the dti is suffering from battle fatigue and giving up on the broad-based part of black economic empowerment. There is another perspective, though. Perhaps the dti decided to retract enhanced recognition because of the backlash it received. Maybe the second additional changes are being offered as an alternative solution. Allowing corporates to multiply their procurement spend with black-owned businesses by “a factor of 2” on their scorecards gives the black-owned businesses a competitive edge, which makes it unnecessary to exempt them from compliance with B-BBEE.
Mashugane seems to be of the opinion that the immediate promotion for certain levels of black ownership,irrespective of turnover, is not going to fly. I get the impression that this was another poorly thought out amendment that was hastily drafted. I think that his opinion should be read - it makes a strong case for the development of smaller black businesses. He concludes with this paragraph
Black ownership alone should not be enough to get preferential market access. They should be required to meet a B-BBEE compliance threshold, say level 4, to qualify for the “factor of 2” clause. Policymakers must discourage a culture of free rides or unearned entitlements, especially for beneficiaries of B-BBEE.
And then most pertinently
All things considered, I feel compelled to venture one more wish: that the dti will explain to South Africans exactly what they are thinking and doing as they engage with the public on the Gazettes.
Exactly - we'd all love to know. At the moment there is not enough of an economy to support the most basic of elements.
Whilst the play is in play the ushers hand out thesetwo documents which will have to substitute for a programme. The ushers inform the audience that they have 60 days to comment on the two documents. hlaudi looks at the documents and sees there is writing on them, being neither literate nor compus he discards them.
The scene - a room in a prime office in Meintjies Street Pretoria. A nondescript bearded man in a drab SACP fleece reaches for the telephone. He dials his secretary.
Secretary - Minister Davies?
bolshie bob - who's Minister Davies? My name is bolshie ................ wait a second, my real name is Davies and I am the most destructive minister in Ramaphosa's cabinet. Yes, I am Minister Davies. (Pause). Please get me the BEE Commissioner.
Secretary - I'll see if the awesome awdoz is in her office.
A few seconds later the mighty commissioner comes on the line.
awesome awdoz - good morning bolsh..... I mean minister.
bolshie bob - commissioner I see that we really have set the cat amongst the pigeons with our last amendments. We cannot stop now - these idiots (and that fucking blogger) are reading this drivel we put out.
awesome awdoz - the trick minister, is to put in subtle little things that they will never pick up on. I have a few ideas.
bolshie bob - I'm all ears and within the next thirty years I'll have a great beard like Karl Marx
awesome awdoz - we are in the process of removing the modified flow through from black ownership and that illusive level 2 that those evil Afrikaner accountants from Edenvale have found as a loophole. Well we need to ensure that enterprise and supplier development beneficiaries must be 51% black owned using the modified flow through principle.
bolshie bob - on that point awdoz, sorry commissioner, these white companies that have to implement broad-based black economic empowerment are using the same entities as both enterprise and supplier development beneficiaries. We need to separate the two - one is on the suppliers' database and the other is not.
awesome awdoz - I'll make a note of that minister......... that is your title isn't it? Another thing that's been troubling the black owned companies who turnover more than R50m is this business about splitting procurement into EMEs and QSEs. I think we might have received a few complaints from white companies about this - but they are just being racist. Let's just combine the two into one section - reduce the points from seven down to five and give the extra two points to 51% black owned suppliers.
bolshie bob - up the black owned targets as well. And can we have some clarity on whether black women owned is more than 30% or equal to 30%. Let's just make it a straight 30% - it'll be our concession to these moaning liberals.
awesome awdoz - there needs to be a simplification of procurement. I'm not sure whether the president will be happy with us excluding black owned businesses turning over more than R50m from BEE. These poor struggling megaconglomerates are going to have to implement the scorecard, we have to do a few things to help them................
bolshie bob - (interrupting) get rid of the new supplier requirement and make the 51% black owned multiplier 2 from 1.2, and throw in an incentive for 51% black women owned companies as well. And for Trotsky's sake make sure that we emphasise the flow through principle.
awesome awdoz - what do we do with those 51% black owned megaconglomerates that might not be instantly promoted? They are pissed off that they get nothing out of our system? Could we not make them ED and SD beneficiaries? I know a bloke called Nemo who would like some free money to buy the new Rolls Royce SUV, he is absolutely convinced that this will make his business more sustainable.
bolshie bob - just make sure that these extremely profitable companies actually spend money on ED and SD. Put in that industry average thing that Stats SA is supposed to release every quarter...........
A heckler from the audience shouts "they never fucking do you useless commie wannabe, maybe you should actually do a little research before you shoot your mouth off."
bolshie b0b - do it. And this absorption thing under skills. They're taking the piss. Absorption means a long term contract which is the same thing as permanent employment. Just make the definition of long term contract, working until they retire. These companies are just putting people on learnerships forever - and you know why awdoz? (He doesn't wait to correct himself) It's because they can carry on claiming their salaries for skills development spend. They could be using this money for bursaries. This economy is buoyant and just making the masses poorer - there's plenty of money for this external spend. Stalin knows that we could do with another 100 thousand graduates with a BA in History and Law, easiest people in the world to employ.
awesome awdoz (giggling) - minister bob, you know I said we should put in something subtle that they wouldn't pick up on. Well I think we should leave the net value formula definition in the definitions as it is.
bolshie bob - yes. The one that refers to the net value formula being found in annexe 100 C?
awesome awdoz - Indeed, 100 C - the annexe that discusses rules for employee share ownership scheme.
bolshie bob - it'll be our little joke then.
The curtain closes with the players unaware that they in fact are the joke.
As I've said before, the dti will push through anything it wants because it knows that no one will ever raise a stink about their legislating by decree. If they ignored 550 comments when pushing through their last attempt at transformation then they will ignore comments again. But if there are enough comments then we can all group together and force them to explain what they have done.
There was an interesting article written by Andile Khumalo in the Sunday Times yesterday. I can't post a link that works because you have to be an online subscriber to read it. It's called "Is this the end of broad-based BEE?" Khumalo, like me, is somewhat nonplussed by the instant promotion to a level 2 if you are 51% black owned. He writes (edited a bit)
If a large company is 51% black owned it becomes a level 2 without measuring its contribution to management control etc. How can this possibly make sense? Surely this is taking us back to the days when ownership was the only relevant measure of whether or not, and to what extent, South African corporates were contributing to economic participation by black people..... We are essentially back to pre-2007 when BEE was all about giving shares to a few high-profile black individuals and doing nothing about the inequalities that permeate every aspect of South African society....... It seems to me this change spells the end of broad-based BEE and implies the reversal of all the difficult progress that has been made against tremendous resistance.
Again I apologise to Andile Khumalo for not putting up a link to this article. But you can read more about him here. And I apologise to anyone who takes exception to me reading the Sunday Times, I actually don't want to but I've got to know my local newspaper seller who told us that he makes R4 (four rand) a paper and sells about 20 papers a week. I pay him R50/paper which is double the cover price and feed him every week - he also gets a Christmas bonus. He's the only reason why I and others in my neighbourhood support him - Iqbal can get knotted I refuse to read any of his publications.
Back to Andile - he's spot on here. You're not going to solve South Africa's woes by changing the ownership structure of businesses. bolshie bob could argue that by changing the ownership structures where companies are majority black owned that you will be able to influence societal change. We all know that bob is just a deluded commie - this will not happen in the short term and we need short term gains. People like Andile will become "investors" in these massive businesses and will be paid a lot of money to tell the verification agencies exactly what they need to hear. And those businesses will continue as they have.
14 days people - 14 days to submit your comments. And I've already written them for you. Please submit the comments. Our business future depends on it - and if davies gets away with this then he will make other amendments that will further erode the economy. Everything you need to know is in this blog post.
Here are my comments. It took about a day to draft them. The word document is here - please download these comments and make all the changes you want, but most importantly send the comments to Jacques Manus. The dti claims that they received 550 comments on the the revised codes and they probably ignored all of those that suggested their amendments were ridiculous. I would like to get a factor of 10 out to the dti. If they publish a document that we know ignores these comments then I will embark on a campaign to get this administrative active reviewed under PAJA.
Thank you for affording us the opportunity to comment on the proposed amendments to the current generic B-BBEE codes of good practice. The 2013 codes have been given four years to make their mark within the business community. In some cases they have been successful and in many cases not – in fact they have resulted in large numbers of companies falling off the BEE radar altogether due to their complexity and the priority elements. I welcome the Department of Trade and Industry’s willingness to amend the codes to reflect current economic and political challenges but will take the opportunity to provide the department with an overview of the challenges facing many companies in the implementation of the revised codes and their allied industry charters. It is hoped that the DTI will consider these comments as being constructive as they are intended as such.
This response has been divided into three sections.
Specific comments on statement 000
Specific comments on statement 300
General comments. These are based on the experience that many companies have gone through in attempting to comply with the revised codes
Statement 000
Use of the flow through principle for enhanced recognition
This is a fair amendment – no comments are submitted under this
Paragraph 6.3 under statement 000, specifically promotion of 51% black owned companies (using the flow through principle) to a level 2 and 100% black owned companies to a level 1
I speculate that black-owned companies alerted the department of trade and industry to the complexity and expense of compliance under the revised codes. This is perhaps the reason why the minister has decided to exempt those companies from adhering to each element. I would like to draw the following to the minister’s attention
As the number of 51% black owned companies increases – as they will, so will the requirement to comply under the codes disappear. This means that procurement (which is the cornerstone of empowerment in South Africa) becomes obsolete. If these large black companies are no longer concerned about empowerment performance then they will make use of service providers who themselves do not need to comply with any scorecard. These same majority or totally black owned companies will not make any contributions to supplier and enterprise development as well as socio-economic development. In short there will be a greater drive to get 51% black owned using schemes that the Commissioner will not be able to keep up with. The empowerment process eventually disappears, and the social and economic ills of the current South Africa remain
I refer you to paragraph 3.4 of ”South Africa’s Economic Transformation: A Strategy for Broad-Based Black Economic Empowerment”. Specifically paragraphs 3.4.1 and 3.4.2
3.4 Key principles
3.4.1 Black Economic Empowerment is broad-based.
Societies that are characterised by racial or ethnically defined wealth disparities are not likely to be socially and politically stable. The process of BEE seeks to accelerate the deracialisation of the South African economy and fast track the re-entry of historically marginalised communities into the mainstream of the economy.
3.4.2 Black Economic Empowerment is an inclusive process.
A more equitable economy will benefit all South Africans, individuals and enterprises. The process of BEE is an inclusive one, and all enterprises operating within South Africa can, and indeed should, participate in this process. This strategy will be implemented throughout all sectors of the economy and is not limited only to those enterprises that derive income from government procurement or those where the sector is regulated by government.
The revised BEE codes (in paragraph 2.2 of statement 000) states ”In interpreting the provisions of the codes any reasonable interpretation consistent with the B-BBEE Act as amended and the B-BBEE Strategy must take precedence”
Promotion of large enterprises to levels that render them immune from any form of BEE performance under the remaining elements appears to deviate from these two principles contained in the strategy. Promotion on the basis of ownership is narrow-based and excluding those companies from scorecard criteria is not inclusive. I submit that this is an unreasonable deviation from paragraph 2.2 of the revised codes and paragraphs 3.2.1 and 2 of the strategy document.
I refer the minister to the conclusion of the president’s state of the nation (delivered on 16 February 2018). Please consult this website for a complete transcription of the speech.
Together we are going to make history. We have done it before and we will do it again – bonded by our common love for our country, resolute in our determination to overcome the challenges that lie ahead and convinced that by working together we will build the fair and just and decent society to which Nelson Mandela dedicated his life.
As I conclude, allow me to recall the words of the late great Bra Hugh Masekela. In his song, ‘Thuma Mina’, he anticipated a day of renewal, of new beginnings. He sang:
“I wanna be there when the people start to turn it around
When they triumph over poverty
I wanna be there when the people win the battle against AIDS
I wanna lend a hand
I wanna be there for the alcoholic
I wanna be there for the drug addict
I wanna be there for the victims of violence and abuse
I wanna lend a hand
Send me.”
We are at a moment in the history of our nation when the people, through their determination, have started to turn the country around. We can envisage the triumph over poverty, we can see the end of the battle against AIDS. Now is the time to lend a hand. Now is the time for each of us to say ‘send me’.
Now is the time for all of us to work together, in honour of Nelson Mandela, to build a new, better South Africa for all.
The minister, by excluding every company with the requisite levels of ownership from attempting to contribute to the welfare of all South Africans is not keeping with the message of hope that the president offered a beaten and battered South Africa.
Suggestion
Perhaps it might be an idea to promote a 51% black owned large entity to a level 8 and 100% owned to a level 7.
Start-up and join venture certificates
The clarity is welcomed.
Youth Employment Service
The inclusion of the YES is welcomed. It is more welcomed if all companies irrespective of ownership are incentivised to make use of the service. There is no doubt that the inclusion of YES in a BEE scorecard environment will result in a number of positive developments for the programme and for black economic empowerment. It is somewhat perplexing that the minister would see fit to set onerous targets for companies to meet in order to comply.
As the minister has learned if you set unreasonable targets then such noble schemes like the YES will fail at the outset. The minister’s withdrawal of full compliance with paragraph 11.2.1.2 is very welcomed. However I beg the minister to consider the feasibility of setting any type of restriction other than the YES targets themselves. Paragraph 11.2.1.2 refers. The minister has already decided that significantly black owned companies need not concern themselves with the YES promotion because they have already achieved an unfair advantage by way of their ownership. It stands that the companies that would benefit the most would be those that have between 0 and 50.9% black ownership. Setting priority element targets in order to gain the advantage is a dampener on the programme at the outset. I return to the likelihood that large black owned entities have already alerted the minister that compliance with the codes is both expensive and onerous. The targets set in 11.2.1.1 are counterproductive and will result in the YES suffering. That the minister has seen fit to set an even larger financial target for black further education bursaries makes the compliance a tall task and not likely under the current Zuma-torn economy. Also consider that the likelihood of meeting the priority level under procurement will become reduced as BEE scores start dropping significantly – demotion under this sub-element is an inevitability.
Suggestion
Drop all priority element targets for a company to gain the benefit of achieving and over achieving the targets under YES.
Amended Code 300
It is not known where the minister got the figure of 6% of payroll for the spend on skills development of black people, it probably comes from the original target of 3% of payroll – which is a more affordable target. The revised target is simply not achievable in terms of Rand spend. When considered in the context of what constitutes skills development of the code it appears that compliance can only be achieved by sending black staff on a number of courses which will take them out of the workplace. Academic qualifications are a small part of a person’s ability to fulfil a function in the workplace. In effect the code does not encourage work excellence which will weigh against any employee’s potential to advance in an organisation.
A positive consequence that has resulted from the revised code is that more black staff members are embarking on learnerships etc because their salaries can contribute a large amount to meeting this 6% target.
By setting a target of 2.5% of payroll on bursaries for 4 points the minister is surely expecting failure. He would do well to assess the cost to the average small, medium and large company and then consider whether companies are able to begin to afford a fraction of that amount. Under the amendment this target only applies to companies with 50.9% black ownership or less. The minister may know that these expenses are direct expenses and have the potential to threaten the profitability of almost every company wishing to comply with this target. The table below are figures derived from a number of annual reports and should be seen as an illustration of the cost.
The cost per point is unlikely to induce companies to support this programme. This could result in not meeting the 50% average across all three priority elements. This has a potential impact on meeting the targets under 11.1.2.1 of statement 000. Thereby threatening the success of the YES.
Company
Salary bill
Target spend (6%)
Target bursary spend (2.5%)
Standard Bank
14 796 000 000
887 760 000
369,900,000
MTN
6 709 000 000
402 540 000
167,725,000
NASPERS
8 738 000 000
524 280 000
218,450,000
AECI
2 976 000 000
178 560 000
74,400,000
FirstRand
10 620 000 000
637 200 000
265,500,000
Telkom
9 861 000 000
591 660 000
246,525,000
Nampak
3 535 000 000
212 100 000
88,375,000
JSE
405 000 000
24 300 000
10,125,000
Nedbank
9 349 000 000
560 940 000
233,725,000
Suggestion:
Drop the target to no more than 0.5% of the leviable amount. You would have a far greater uptake and it would generate much better goodwill with the government’s potential voters.
Paragraph 2.1.1.3.
Changing the word disabled employees to people could have a very positive impact on skills development of black disabled people. Other BEE codes have used the work people in place of employees. Skilled disabled people have a better chance of gaining meaningful employment.
Paragraph 3.4
The clarification is welcomed.
Paragraph 5.8
Please remove this paragraph. It negates all training that a black person may receive in a foreign branch or country. If the object is to skill up black people I cannot assume that only South Africa is able to skill up its own people in a bubble. People could go on training overseas and gain vital skills that might meet the minister’s industrialist programme as an example. If the intention of black economic empowerment is to provide skills to black people then surely best practices developed in a foreign country must contribute to the achievement of this goal.
General comments
Removal of priority elements
The BEE Commissioner has in all probability got her finger on the pulse on the uptake of these BEE codes. Many companies who have not opted to extend ownership to black people are unlikely to get to a better level than a 7 or 8. It does not serve the future of black empowerment to continuously punish these companies to the extent that they will either never improve their score or it will decrease. If empowerment as a programme is designed to improve the lives of black people across the board then any genuine programme must be considered and rewarded. The priority elements are a deterrent to the programme’s success. A cynic would observe that they have been put in place as a punishment for not meeting high levels of black ownership. It would be in the minister’s favour to conduct a poll on employees to establish whether they are happy to be employees and not specifically shareholders. The poll should also consider the value of the shares in the average company and whether these shares are actually worth the black person’s investment to own them.
Suggestion:
If empowerment is to succeed then the priority elements must be scrapped.
SANAS
There are, at last count, 70-odd verification agencies (please see SANAS’ webpage for the total number of active BEE verification agencies. It’s estimated that these 70 agencies are servicing in the region of twenty thousand companies (Editor note - there are 69 active agencies, here's the latest list). There is a ridiculous bottleneck. SANAS is solely to blame here as they have the set the requirements to become a verification agency at such a high level that there is no incentive to increase this number. In fact it appears that the number of verification agencies is steadily decreasing. The loss of IRBA has had a detrimental effect on the issuing of BEE certificates. Some other method or issuing authority needs to be created to meet this demand.
The Minister should become more available to those companies that are compelled to comply with the BEE codes – not only those who are exempt.
There is a perception that the minister has a closed-door policy when it comes to discussing challenges faced by businesses in the country. This policy become very entrenched under the last president resulting in an atmosphere of resigned hopelessness. The Ramaphosa administration has ushered in a certain positivity where it is felt that all people in the country can contribute to its future, not a select few. I would encourage the minister to open dialogue with the business community and start taking business into his confidence and hearing their concerns as this programme’s success relies on them. We have seen in Namibia that their NEEEF scorecard is being modified to meet business’s concerns. It is possible to achieve empowerment’s goals by considering all perspectives.
I thank you for the opportunity to submit these comments and hope they are received in a positive light, as this is the intention.
Not really my work, I have to thank my friend Feeeeeeeeeeee for pursuing this. I wrote the last blog post on the subject because a useless verification agency (that I will never use again) refused to recognise that the company was a specialised NPC and that the ICT code hasn't got it's stuff together to do something about these incongruities.
As it turns out the ICT Code Council was aware of this. Feeeeeeeeeeee pursued them doggedly and they sent her this attachment, which has this to say
3.1 CLAUSE 8.2. B-BBEE RECOGNITION LEVELS FOR A QUALIFYING SMALL ENTERPRISE (QSE), SPECIALISED QUALIFYING SMALL ENTERPRISE AND SPECIALISED GENERIC ENTITY APPLIES TO THE AMENDED B-BBEE ICT SECTOR CODE SERIES AICT000 STATEMENT AICT000 / AICT600 STATEMENT AICT600, AS IS INDICATED IN THE TABLE BELOW:
The table in question shows the levels contained in the dti's generic codes. That should put this to bed - not that I expect the verification agency in question to note this.
Just for the record the verification agency I'm referring to is not Honeycomb - I used them once and found them remarkably unprofessional and dubiously respectful of the referral. I won't use them ever again and you would do well not to as well.
It seems to have started with this article, although I would like to believe that my play in one act really clinched the deal. Bruce Whitfield wrote
The Department of Trade and Industry (DTI) has added an unexpected new financial requirement to companies that participate in the Youth Employment Service (YES). It threatens to undermine its ambitious goal of getting one million young people to gain workplace experience within three years.
The DTI will require companies wanting BEE recognition for their participation to contribute 2.5% of their company’s payroll to bursaries before they can qualify for benefits under its codes.
About 100 companies have signed up for the initiative but YES CEO Tashmia Ismael says some are concerned that the new financial requirement places an unreasonable burden on firms. “The word deal-breaker was used by some companies,” Ismael said, “They are telling us this will influence the decisions they make.”
The YES campaign had anticipated the funds it raised in the early stages of the project would provide it with a kickstart to encourage smaller and medium enterprises also to open their doors to interns on short term work experience contracts. The 60 day DTI consultation process means a delay for the implementation of the project until June. “It’s not going to fly,” one CEO told me on condition of anonymity. Large companies are expected to engage actively with the DTI over the changes.
Not that such journalism has ever swayed our esteemed Stalin disciple from straying off the path of completely destroying the economy. But this time it might just have. Last night I got an email from my friend Thinus with this article attached.
The Department of Trade and Industry (DTI) has agreed to remove an onerous bursary target previously set as a precondition for any firm seeking to receive empowerment credit for their participation in the newly launched Youth Employment Service (YES) initiative. In an unusual step, the department made the adjustment in the middle of a 60-day public-comment period.
I don't trust bolshie bob at all. So I had to check - and it's true!
Preliminary comments received since the Gazette on 29 March 2018, are indicat-ing concerns regarding the proposed qualification criteria “11.2.1.2” which re-quires entities to score full points on the 2.5% target for “Skills Development Ex-penditure on Bursaries” in order to qualify for the Y.E.S BEE recognition.
the dti views the participation in Y.E.S to be in line with the objectives of B-BBEE policy and has keen interest that there be maximum impact resulting in empowerment of young South Africans. In order to create certainty and ensure rapid take up in Y.E.S, the dti has agreed to delink the Y.E.S and the Bursary target of 2.5%. This means that the Bursary contributions will not be a precondition to obtain BEE recognition as a Y.E.S participating entity.
This is a significant victory for business. I think it suggests that the presidency is listening to the challenges faced by business in South Africa. bolshie bob lives in a red bubble, he seems to think that business has all the money in the world to subsidise his fantasies, perhaps Cyril has reminded him that he can't rule by decree.
However the underlying message here is that this 2.5% of payroll target is too high. If the comments suggested that this was a dealbreaker then what these comments are saying is that the 2.5% of payroll is too much money. And it is too much money. This kind of money doesn't exist in the economy at the moment. It might have been a better idea to set targets as a percentage of staff. If you want an idea of how much money we are talking about take a look at this post from 2014. These figures are from about 2012. Standard Bank would need to spend about R400m on bursaries. Even a mid size company would have to spend well into the millions. And don't forget that black business doesn't have to contribute to this at all.
Comments are due by the 28th of May this year. My comments will be posted on this blog by next week.