Paul Janisch

Public-Private Partnerships can deliver critical infrastructure if developing countries tackle financing and governance issues - UNECE

Developing countries must do more to create transparent, accountable business conditions if they are to raise the capital needed to finance critical infrastructure.  This was a key theme underscored at PPP Days 2012, the premier global meeting for senior policy makers on Public Private Partnerships (PPPs).

"PPPs are facing new and greater challenges due to the global financial crisis, increased regulation and because some banks are reluctant to provide funding, particularly long-dated debt.  Multilateral development banks can play a pivotal role by helping governments find the right PPP structure and mobilize commercial finance," said Philip Erquiaga, Director General of the Asian Development Bank (ADB)’s Private Sector Operations Department.

Andrey Vasilyev, Officer-in-Charge of the United Nations Economic Commission for Europe, highlighted the role that PPPs can play in assisting countries to meet the Millennium Development Goals through the modernization of infrastructure and the improvement of public services, raising social welfare around the world.

“With these weakening economic conditions, developing countries have less fiscal and monetary space for remedial measures than they did in 2008-09.  They need to prepare for the possibility of sources of financing drying up while creating the optimal business conditions for delivery of their infrastructure programs,” said Clive Harris, Manager for Public-Private Partnerships at the World Bank Institute.

According to the Private Participation in Infrastructure database of the World Bank, the number of developing countries with new infrastructure PPP (PPI) projects in the first half of 2011 was the lowest since the early 1990s.  PPI investments, excluding those in India and Brazil, have fallen by 34% compared with the same period in 2010.

In order to promote PPPs that are financially viable, governments need to establish governance frameworks to help with project selection, development, tendering and management.  These frameworks should allow for openness and transparency of public sector budgets and private sector contracts, which are crucial for addressing corruption and fraud.  Multilateral development banks can help identify good practices in disclosing information on PPP contracts and engage stakeholders such as parliamentarians and national audit authorities so that they can play an effective role in the oversight of PPPs.

via www.unece.org

Designated sectors in terms of the PPPFA regulations

Besides power pylons, the ‘first wave’ of designated products also included rolling stock, buses, canned vegetables, clothing, textiles, footwear and leather products and set-top boxes.

via www.engineeringnews.co.za

This is in terms of section 9 in the 2011 PPPFA Regulations. Now you know

The new codes exist - according to the New Age

The codes are being amended by the Department of Trade and Industry, which has worked closely with the presidential BEE advisory council. A document containing the proposed amendments was recently presented to the cabinet.

Among the proposals is that rules relating to ownership be tightened. Analysts say this tightening may kill many bad deals.

“There are many of them (bad BEE deals) out there,” said Ajay Lalu a director of BEE consulting firm Black Lite. The new rules could trigger a new wave of BBBEE deals as corporations rushed to comply.

The document, seen by The New Age, will be released for public comment soon.

via www.thenewage.co.za

I spoke to Sibonelo about this document. What I really wanted was a copy of the document - which he politely declined to hand over. However he did confirm that he has seen both a document and the infamous presentation. He told me that the document was a work-in-progress still and was sitting on Rob's desk.

We need to be very afraid - this is not a necessary evil, it's a validation of the ANC's take on race and ethnicity.

The ridiculousness of the Manyi-inspired EAP targetting system (de Vos content)

Taken from Constitutionally Speaking.  The good professor opines thus:

I would suspect that these provisions, read holistically, might well be interpreted by a court to mean that the duty on employers to strive towards equitable representation of suitably qualified people from designated groups in the workforce requires them to take into account the regional and not national racial demographics when it formulates its affirmative action targets. As we know, the Department of Correctional Services’ current policy (which uses national racial demographics) in effect places an absolute barrier on the advancement of “coloured” correctional services personnel in the Western Cape – especially given the bloody-minded manner in which it is reportedly being implemented. Under the current plan, if a Western Cape officer working the Department of Correctional Services wishes to be promoted, he or she will almost always have to move to another part of the country.

Although the “coloured” personnel can, of course, apply for jobs elsewhere (where there is not – in the offensive words of Jimmy Manyi – an “oversupply of coloureds”), this requirement would place “coloured” members of the Department of Correctional Services in a very difficult position. If their roots are in the Western Cape, if their families live and work here, and if they speak predominantly Afrikaans, one of the dominant languages in the region, such employees may in effect be forced to choose either never to be promoted or to uproot themselves entirely. This may force many of them out of the service of the Department altogether.

This interpretation of the Employment Equity Act would be in line with the Constitutional Court’s jurisprudence on corrective measures as developed in the Van Heerden case, in which Deputy Chief Justice Moseneke stated that it was not constitutionally permitted to impose corrective measures on a group if those measures constituted “an abuse of power or impose such substantial and undue harm on those excluded from its benefits that our long-term constitutional goal” of achieving equality in a diverse society would be threatened. The Correctional Services Department’s policy may therefore be declared unlawful and not in line with the carefully interpreted provisions of the Employment Equity Act.

If the court found that the Act could not be interpreted in this way, I suspect it would have to declare unconstitutional the provisions in the Act which could be interpreted as allowing an employer to ignore regional racial demographics when it imposed an employment equity plan. This would be because such provisions (interpreted to allow for national demographics to be used exclusively when formulating Employment Equity Plans) would not meet the requirements for a valid corrective measures programme developed in the Van Heerden case.

Whatever happens, unless for strategic the Department settles this matter to avoid a definitive judgment by the Constitutional Court on these vexing issues (something the Department would be well advised to do and which it might still do if good lawyers are advising it), the case will probably go all the way to the highest court, where that court will finally be able to put these highly contentious issues to rest by giving guidance on corrective measures that apply differently to people previously classified as “coloured”, “indian” and “african”.

via constitutionallyspeaking.co.za

 

Litigating for results

Most of us know that if you want to get anything done by the government you either have to bribe or litigate.  Now the former is largely undesirable so the latter is unfortunately the method of choice with us law-abiding citizens.

I would have thought that litigation would have very serious negative connotations, but an interaction with a prominent Joburg lawyer explained this in a different context.  The lawyer was referring to the DMR, a department that is very familiar with the courtrooms of our nation.  He told me that many officials are very happy to accept court orders compelling them to do something or other because this is now an official sanction for a decision that they are too scared, or otherwise, to make.  In other words - a court makes their decisions for them and there's no egg on their face for not making the correct decision.

We now find ourselves in a similar position with the DTI.  The latest notice about the migration to the new targets.  I've been told that not only is this document grammatically and technically a shambles, it's also procedurally incorrect.  Take a look at section 9 of the current BEE Act (which is largely unchanged in Rob's bill)

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

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.

The notice about the new periods is issued under section 9(1)  - 

In terms of section 9 (1) of the B-BBEE Act, the Minister of Trade and Industry is empowered by notice in Gazette to issue the Code of Good Practice for further interpretation and understanding of B-BBEE.

This notice was not published for comment and hence is unprocedural. But will the DTI provide any clarity on this?  They won't provide any clarity on anything.  The ridiculousness of this notice shows up when you consider that very few, if any, entities that measure their financial performance over a year do so from the period 10 Feb 2011 to 9 Feb 2012.  No - they tend to use proper calendar months.  I, like many of you, have clients whose financial year ends at the end of February and are going to have to measure themselves on the new targets because of the 20 day overlap.  What we have here is retrospective legislation.

And this is but one issue that we face.  And we know that the DTI is not going to help us, neither is bribery.  Our only option is litigation to force a decision.  I know this is a risky route to take,  it could throw the whole of BEE into oblivion but I fear that we need to do this.  After all - WE NEED CLARITY.

I represent a growing group of concerned people across the board who want this issue sorted out and would be willing to litigate - they do however need the money to do this. If there is any organisation out there with a desire to help us clear up these issues through our courts, we'd like to hear from you.

 

 

Pravin and the FSC

I am pleased to report that progress is being made on several financial sector reforms.

• There is now agreement between stakeholders on enhanced targets for empowerment financing and access to financial services. A revised financial sector charter code will be gazetted shortly for public comment by the Minister of Trade and Industry.

via www.timeslive.co.za

Rumours have been circulating about the updated FSC. Can't wait to read it.
Then again, Pravin has been pushing for this for a while - we'll celebrate when it is gazetted.

Transnet’s new procurement policy to demand transformation spinoffs from R300bn investment

The board at State-owned company (SoC) Transnet will complete a wide-ranging review of the group’s procurement policies by the end of March and the new policy, which will have a strong transformation underpinning, will have implications for the procurement approach pursued during the implementation of the group’s R300-billion, seven-year investment programme.

via www.engineeringnews.co.za

What would this mean?. Transnet was the first of the parastatals to request BEE scorecards. This suggests a change in the way they do things in line with the new BEE Bill.  We needn't worry that they won't be accepting BEE scorecards, they will but only those that work within their transformation structures.  As per section 12A

1. If requested to do so, the Minister may permit organs of state or public entities to determine their own transformation policies, if the Minister is satisfied that this will advance the objectives of B-BBEE and the strategic imperatives in the South African economy.
2. An organ of state or a public entity must apply any transformation policy made in terms of this section as if it were a Code.
3. In the event of any conflict between a Code issued in terms of section 9 and a transformation policy made in terms of this section, the transformation policy  prevails.

It seems very likely that the parastatals are starting to make plans in terms of this.  

Gigaba said he intended to be “hard” on the issue of transformation and would “brook no deviations” from the SoCs, which were expected to lead the way for corporate South Africa as a whole.

Yes minister - just like Eskom fair dinkum fucked up the economy with their Eskadaat, now you're giving the other parastatals a chance to destroy what's left.   

Is it too late to ask for sense to prevail?  Probably

 

Susan Shabangu, the mining charter and the BEE Act

TRANSFORMATION

The growth and development of the mining industry cannot be delinked from addressing historical inequalities and imbalances in our society. In the mining industry, we have come a long way on issues of transformation. This year we are celebrating the tenth anniversary of the promulgation of the Mineral and Petroleum Resources Development Act (MPRDA).

The MPRminerals in the State. The Mining Charter, on the other hand, introduced targets for transformation of the sector. Since the implementation of the Act and the Mining Charter, progress made in de-racialising the sector is noticeable but not yet satisfactory. Examples of areas of concern include:

• inadequate active involvement of Historically Disadvantaged South Africans in the management and decision-making of mining enterprises;
• Poor participation of women in mining;
• Low levels of local procurement and supplier development; and
• Low levels of human resource and skills development.

In his State of the Nation Address the President announced the amendment of the Broad-Based Black Economic Empowerment Act. My Department stands ready to ensure that the Mining Charter and the industry at large remain responsive to such amendment. My Department will also be dealing in a decisive manner with the incidence of non-compliance with the Charter and the prevalent cases of fronting in the industry.

via www.politicsweb.co.za

I wonder what "remain responsive" means?
Also note she still uses the HDSA definition - everywhere else it's black.

What the next codes will actually tell us (not so speculative)

(Please note that bloody TypePad makes it almost impossible to post tables.  I've had to post them up here as a seperate file).

This post started out as an open letter to the DTI and the drafters of the new bill and the impending codes.  It is too early to respond in any emotive way because anything I say would be far too speculative. However the three points below are easily gleaned from that infamous presentation.

EMEs

Is it fair and equitable to elevate black owned EMEs to a level 2 and level 1 as the case may be? This would provide a 100% black-owned EME (or 50% black women-owned EME) with an eight point advantage of a non-black owned EME in an 80/20 tender or five points in a 90/10 tender. What would section 217 of the constitution say? Would this not destroy numerous legitimate businesses that employ black people because they may never get a chance to win a government contract?

Management and employment equity

Degrees of blackness is rapidly becoming government policy. Interestingly, it's still not too bad to be a whitey in this economy, but Coloureds and Indians ought to be very concerned. The ridiculousness of the EAP targets (national targets to boot) is shown below. It is not necessary to work on the whole element, the board requirement amplifies the folly. I applied this formula into the FirstRand board. TheFirstRand annual report tells us that the company has 19 directors, 3 of whom are executive. I love the fact that for 0.14 points, the board would need 0.0324% of an Indian male on their board – would his foot be acceptable?  Proper table is here.

Criteria	Points	Targets	African Male	Coloured Male	Indian Male	African Female	Coloured Female	Indian Female
Required percentage per category			0.6918	0.1026	0.0324	0.5655	0.0855	0.0222
2.1.1  Black Executive Directors	2	50%	23.06%	3.42%	1.08%	18.85%	2.85%	0.74%
Points value for this requirement			0.92	0.14	0.04	0.75	0.11	0.03

What we do see here is that the greatest number of points can be gained by only employing African males and females – to be specific 1.68 points out of the available 2 points (84%) would be awarded if they only employed the directorial services of those people. Why bother with the others, as it is anyway boards are getting smaller. This is an obvious attempt to squeeze out the services of people like Marcel Golding, Cheryl Carrolus, Mustag Brey, Frene Ginwala etc (forgive me Cheryl but I've always thought of you as coloured).

Skills development

Once again the proposed codes require spend to be based on national EAP statistics. Back to FirstRand, their annual report tells us the following

Total payroll	6 733 333 333
3% of payroll	202 000 000
ACI employees (they don't specify a gender or breakdown into race)	21517
Target spend (6% of payroll)	404 000 000
Ave spend per ACI	18 775.85

Back to FirstRand. The last line in the table below show the required spend per person per race grouping (actually it doesn't the full table is here)

Criteria	Points	Target	African Male	Coloured Male	Indian Male	African Female	Coloured Female	Indian Female
1.1.1  Skills Development Expenditure on Learning Programmes specified in the Learning Programme Matrix for black people as a percentage of Leviable Amount	6	6%	2.77%	0.41%	0.13%	2.26%	0.34%	0.09%
Required spend			1 865 133.33	276 066.67	87 533.33	1 521 733.33	228 933.33	60 600.00

Hmmm..... so FirstRand could get five of the six points by just focusing on Africans – why bother with the others! Food for thought – I can only imagine how devoid of logic the new codes are going to be.

Food for thought indeed.

TIM COHEN: Mining study was a poor tactic that may backfire

The supporters of nationalisation will never be satisfied by an academic study. Explicitly rejecting nationalisation unwittingly fosters it by allowing its popular appeal to grow. Now it is out, the study demonstrates how fungible the findings are. This is not an issue of logic and academic analysis. It’s a matter of raw emotion

via www.businessday.co.za

It's exactly the same with academic estimates of black ownership in any industry or on the JSE. The independent findings will always be refuted by the government, because it's not in their interest to agree that transformation is happening within South Africa. The longer they allege racism and a resistance to transformation the longer they are able to hold a gun to the economy's head. Hence the lack of progress on the mining charter is entirely the fault of the mines, the fact that the global economy and government policy makes it almost impossible to comply is totally irrelevant.