Paul Janisch

BLACK ECONOMIC EMPOWERMENT AN IMPERATIVE FOR SOUTH AFRICA, SAYS Rob

Addressing the New Age Business Briefing organized by the New Age newspaper group in Sandton, Johannesburg, on Monday, Davies said B-BBEE was an imperative from the point of view of equity and had a political dimension.

"We cannot have an economy in which the people are allowed to vote in the political level but are not able to benefit from involvement in the economy," he said, adding that South Africa could not run an effective economy when it drew its leadership at all levels and entrepreneurial capacity from a very small minority of the population.

via www.namnewsnetwork.org

Rob - don't you think it's ironic that you speak of equality and reflective of the demographics of the economy when you devote three pages to black VCs under ownership and you increase the black new entrants level to R50m. Couldn't you disguise your bias towards the connected blacks at the expense of the poor masses a little better.

We're onto you now. Resign, you are useless and opaque.

Now we will really start to empower people - Mazwai. Really

Davies was briefing the audience on changes to the codes of good practice for broad-based black economic empowerment (BBBEE). The first person wanted to know why there were no tax incentives for business to implement the policy. The second warned that BEE would discourage investment in South Africa. Thankfully, the rest of the questions were on process, suggesting that people understand the necessity of the policy.

We must laud the Department of Trade and Industry for changing the codes, as they were becoming an exercise in futility. They now add value, and have a greater chance of getting blacks into the belly of the economy. Hallelujah! The days of getting a contract because you are black are over and the guiding principle is now going to be "you are black and have something to offer".

via www.bdlive.co.za

Mazwai and I don't agree on everything but his analysis here cannot be supported completely. BEE is still voluntary and it should be rewarded. Lauding Rob's goons for the new codes is not on. Yes they are designed to bring blacks into the belly in the economy, but if you are not rewarded by points, or God forbid tax incentives it will fail.

Rob's codes will fail.

Don't forget to remind Rob that he's useless at his job and should vacate the position forthwith.

What about charters then? What would Chris van Wyk or Ebrahiem Mohamed say?

The answer is quite simple. Code series 000, Statement 003 (Guidelines for Developing and Gazetting of Transformation Charters and Sector Codes) which has not been removed from Rob's latest foray into ridiculousness, say in paragraph 4.3 that A Sector Code enjoys equal status with that of any other Code.

In other words, if these codes go through then they will not have an impact on the current codes because they all enjoy equal status. But there may be problems from a reference perspective. Take for instance the Construction Charter which refers to gazette 29617 (the current codes) on occasion. Under enterprise development the construction code has this to say

A new generic code will have a new gazette number and as such the annexures that are referred to in this code would no longer be relevant. This would seriously hamper interpretations when it came to most of the existing charters. If Rob is going to fix this problem he is going to have to re-draft all of the codes that were gazetted under section 9(1) and put them out for comment. If he doesn't do this then the charters carry on banging away as they are but in a half-baked way.

I wonder of Rob considered the amount of work that he has set for himself. Everything has to be redrafted including the bizarre BEE verification guide. Every verification agency will need to be re-accredited for the new codes et cetera.

Don't forget that we have about a month in which to submit our comments to the DTI. Comments can be sent to [email protected] or [email protected] and they should get there before the 26^th of November, 2012.

And so spake those who dictate our future

If anyone does not view the New Age as a mouthpiece of the government then you obviously are a huge supporter of the government.  Sibonelo Radebe is actually a good journalist but his stances are too pro DTI and Rob and other morons.  By using old (may an eagle land on your moustache) Ajay Lalu as an expert he entrenches this perception.  

Sibonelo interviewed Nomonde Mesatywa, director of the empowerment unit in the Department of Trade and Industry in the New Age yesterday (udge was not present in this one).   Here are few of the gems that exited her mouth

The proposed new empowerment codes of good practice have been designed to sting but companies that have taken broad-based black economic empowerment (BBBEE) to heart should have no reason to worry.

And then

"Our proposals were designed to close this gap between points earned and real BBBEE impact. Companies that run with a positive attitude towards BBBEE have no reason to worry.

Followed by

"Companies must not be fixated on levels. BBBEE implementation must be pillared by a positive attitude. They must focus on doing the right thing first and points will follow."

How are you supposed to engender a positive attitude when the department who determines the BEE codes arrives with a big stick to force you in a certain direction? You cannot look at a current BEE implementation and then transplant it into the new codes, they just don't talk to each other.

This is not clever, if doing the right thing was the right thing to do then our esteemed president would hand over the spy tapes, decline the cash injection for Inkandla, not marry so many wives which we pay for, accept responsibility for his government's ineptitude. As it stands the private sector has made the BEE success that it is and this has never been recognised by the race obsessed commentators who advise the government on such issues. I'm thinking of the BBC, the BEE Council. You can't win with this crowd because if you do well as a black person you are coconut, if your score is high as a white company you are fronting, if your score is high and you have no ownership then you are a racist.

Don't fool yourselves public, there is no right thing because the DTI themselves have no idea what they are doing and frankly they don't need to because the transformation of the economy is not their concern – their concern is pandering to the likes of the BBC and other loud sounding nothings. And when it fails because the BEE Act and the new codes are designed to fail they'll blame colonialism, apartheid and the on-going racism in the economy. And I quote Zoomer

"people fail to understand the history of this country", and that its "massive" inequalities were a legacy of both colonial oppression and apartheid. "It is not a failure of African National Congress leadership, it is a failure of the past,"

He only has a standard 3. If you think about it he never learned beyond the letter D so Apartheid and Colonialism are words he understands; Leadership on the other hand begins with L so it's impossible for him to say anything else.

Don't forget, we've got about 25 days in which to tell Nomomde and Rob and the BBC that their proposals lack foresight, coherence and sustainability. If we don't complain then we are to blame and we will continue to be blamed for the ANC's failure to provide for the people of South Africa.

By the way – that's a lovely picture of you Nomonde, super model stuff.

Oliver takes the fifth

Ollie and Oliver at Oliver's fifth birthday party.  My Oliver is on the right.

 What can you say about a four year old that he won't tell you himself?  A steady increase in his vocabulary allows him to not only express himself but to convince you that he in fact is right in his assessment!  If the adage that you learn a lot about yourself through your kids is true then I have a learned a lifetime of lessons in the last year.  We are now dealing with a little boy who is bright, a loving and attentive older brother, a headstrong adversary (I have no idea where he gets that from), a determined learner and the perfect son.  

He does things on his own terms, he'll learn to play soccer at his pace, he'll drop the stabiliser wheels on his bicycle because he wants to and he'll set out to be the best swimmer in his class.  In the past he wanted to be the best by osmosis, now he understands the concept of practice and application and uses it at will.  

If one thing stands out it's his fantastic memory and attention to detail.  He understands the logic behind the way things work.  A certain incident is not far from my mind.  We were on our way to school and a taxi behaved as only taxis do.  A stream of expletives left my mouth which visibly distracted the taxi driver from his task of attempting to cause an 18 car pile-up.  Oliver questioned me as to whether I knew that taxi driver, when I responded in the negative he asked me if I would like to be spoken to like that.  Food for thought but not enough to satiate my eternal disdain of taxi drivers.

He's now five and approaching a whole new series of challenges at school which he is determined to face head on.  He's a beautiful boy, a wonderful son, a stunning older brother and our getting bigger little boy.  Happy birthday Oliver and thank you for the last five years.

By now we all know that Oliver was born on Peter Green's birthday - Chris Daffy played a special dedication to Oliver on his Sunday morning show on LM Radio.  He had me beaming from ear to ear and Oliver was mesmerised by Chris' dedication (is he on the radio for real life?).  Chris played Oh Well but that's too obvious for me.

I have long sung this song to babies to get them to sleep, Oliver has heard it a thousand times and James is knocking on that number.  I prefer the Boston live versions.  I could only find this one

 06 - Various Artists - Fleetwood Mac - Jumping at the Shadows

And not forgetting an Ollie Halsall song.  Ollie had a wicked sense of humour and it is no more apparant than on this song, that's Ollie on vocals too.

 Patto - Peter Abraham

 And because this is the last year that Oliver will be able to count his age on one hand here is the original version of Jumping at Shadows.  Duster Bennett is worthy of checking out.  What you are hearing is a live take and he's playing all the instruments at the same time - some people call this a multi-instrumentalist, I call it impossible.  Fantastic! (just like Oliver)

 04 - Duster Bennett - Jumping At Shadows

 

 

Thinking of Employment - Fred Wilson Dot VC

0 Comments 24 notes

Thinking About Employment

via fredwilson.vc

Fred took the graphic from Continuations.com.  Albert Wenger, who drafted this post, had this to say about the decline of emloyment in agriculture and manufacturing (in the USA)

What is behind the shrinking of agriculture and manufacturing?  Innovation and globalization. Innovation has allowed us to be vastly more productive in agriculture and manufacturing (meaning fewer people can achieve the same output) and globalization has allowed us to import food and products from other parts of the world.  Innovation is at work everywhere though and so if you assembled similar charts for say China or India you would find the percentage of the population working in agriculture there declining as well.  I am not sure whether manufacturing is already declining there, but the announcement that Foxconn is planning to deploy 1 million robots suggests the eventually inevitable direction.

I don't think that innovation is beyond South Africa, of course it depends entirely on the government getting its act together with our education system - something they have systematically destroyed in the last 18 years.  Not a big ask and it is a basic right.

 

 

BEE and the constitution

This is not a subject that I am expert on at all, the person to speak to about this would have to be Pierre de Vos. However my job is to sow the necessary seeds for your submission to the DTI. On that subject I think that the deadline is before the 5^th of December, 2012 but it might be safer to have comments submitted by the 26^th of November because it seems that Rob signed the gazette on the 27^th of September.

I believe that there is generally a relatively strong Constitutional Court case against almost all the currently gazetted codes. It won't happen because we've been getting on with them. However the new draft codes pose certain violations of the constitution that we should be aware of.

The DTI bases the new codes on section 9(2) of the constitution as read with section 9(5)

To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken.

Discrimination on one or more of the grounds listed in subsection (3 – see below) is unfair unless it is established that the discrimination is fair.

This is fair enough, there are a number of statutes that derive their legitimacy on this section. The Employment Equity Act is but one. However section 9(3) states

The state may not unfairly discriminate directly or indirectly against anyone on one or more grounds

Suddenly the new codes start taking on a sinister and anti-constitutional vibe when section 9(3) is taken into account. Even with section 9(5) the discrimination proposed cannot be seen to be as fair. Also consider the bill of rights, chapter two of the constitution. The two rights that could be relevant are

18. Everyone has the right to freedom of association.

22. Every citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated by law.

BEE encroaches on these two rights. But there is a limitation of rights in section 36(1) which justifies the encroachment.

36. (1) The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable

The new codes on the other hand are a blatant and unreasonable violation (as opposed to an encroachment) of a variety of rights. Consider the EAP in both employment equity and skills development and then think about section 10 - Human dignity

Everyone has inherent dignity and the right to have their dignity respected and protected.

It was one thing to be Indian, Coloured and African and regarded as black, it's a whole different level of indignity to have yourself measured on a degree of blackness basis in allocating skills development spend. By plumbing these depths you are perpetuating the notion of race and the degrees of race which is contrary to the founding principles of the constitution

The Republic of South Africa is one, sovereign, democratic state founded on the following values:

(a) Human dignity, the achievement of equality and the advancement of human rights and freedoms.

(b) Non-racialism and non-sexism.

Not to mention indignity.

Now onto section 18 – right to freedom and association. To do this we need to look at paragraph 3 of statement 000 of the new codes

3.4     Discounting of the scorecard due to non-compliance with the priority elements

3.4.1     For Measured Entities using the generic scorecard

3.4.1.1     Non-compliance with the threshold requirements for any of the following elements will result in the discounting of a Measured Entity's BEE status level:

3.4.1.1.1     Ownership;

3.4.1.1.2     Skills Development; and

3.4.1.1.3     Enterprise and Supplier Development.

3.4.1.2     The Measured Entity's B-BBEE status level will be discounted by two levels.

3.4.2     For Measured Entities using the Qualifying Small Entities scorecard

3.4.2.1     Non-compliance with the threshold requirements for the Ownership element and any of the following elements will result in the discounting of a Measured Entity's B-BBEE status level:

3.4.2.1.1     Skills Development; or

3.4.2.1.2     Enterprise and Supplier development.

3.4.2.2     The Measured Entity's B-BBEE status will be discounted by one level.

Ownership is the linchpin here, it is compulsory for QSEs and is extremely important for generics, without it you're going to drop one or two levels. This could never be regarded as a reasonable limitation of section 18. In Rob's mind (and his crew of useless advisors) it's perfectly justifiable. But again, can it be viewed as being reasonable? I'd say not and section 18 teeters.

What about promoting black owned EMEs to level 1 or two contributors.

The table below shows the PPPFA points' allocation system. I have highlighted the points' advantage in a PPPFA bid for a level one and two bidder in comparison to a level four bidder (all would be EMEs). It's 5 point advantage under 90/10 and 8 point advantage under the 80/20. For clarity's sake a level two EME has a 4 and 6 point advantage respectively.

Contributor Level (current codes)	Draft codes	90/10	80/20
Level 1 Contributor (≥100)	≥100	10	20
Level 2 Contributor (≥85 - <99)	≥95 but <100	9	18
Level 3 Contributor (≥75 - <85)	≥90 but <95	8	16
Level 4 Contributor (≥65 - <75)	≥80 but <90	5	12
Level 5 Contributor (≥55 - <65)	≥75 but <80	4	8
Level 6 Contributor (≥45 - <55)	≥70 but <75	3	6
Level 7 Contributor (≥40 - <45)	≥55 but <70	2	4
Level 8 Contributor (≥30- <40)	≥40 but <55	1	2
Non-Compliant Contributor	<40	0	0

The PPPFA comes from section 217 of the constitution, specifically section 217 (3)

National legislation must prescribe a framework within which the (the allocation of preference points) may be implemented.

But – section 217(1) says this

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.

It identifies five principles of procurement that every company should implement; namely fair, equitable, transparent, competitive and cost-effective. Promoting a business to such a high level on the basis of race is certainly not fair, I doubt it's equitable and the competitiveness and cost-effectiveness of the process could be debated for many years to come. I can't see Treasury allowing this to happen. Do you think Rob even knows that we have a Treasury?

And finally socio-economic development

This debacle has been covered adequately in a previous post, this is postscript to that post. I can't see that there is a constitutional issue about the new SED code – it doesn't discriminate against white people or those who don't fit into the prescribed definition (there is nothing stopping anyone from donating to any cause, you just won't get points for the wrong donation). It is a moral and ethical issue and morality and ethics sell more papers than constitutionality. The new codes in their entirety pose a major threat to the NPO sector who might derive a some or all of their support under ED and SED. The current codes allow a company to get to a level 8 by spending 4% of NPAT on ED and SED and making up the remaining points under the rest of the elements – normally this is done under procurement. Rob's draft makes this impossible for a few reasons.

1. The new entry level is 40 points. You can buy a maximum of 20 if you have a supplier development programme and perform all the other tricks that the supplier development code requires. You are now 20 points short of the 40. However if you don't comply with ownership or the other two priority elements you'll drop two levels. Let's say you manage to scrape another 20 points from somewhere (and that's not easy), you get to a level 8. But because you haven't reached the 40% subminimum on the three elements you drop down two levels – which is a level 10.
2. I haven't done the calculations for ownership because there are too many permutations but if you meet the subminimum under skills and procurement you'll get 22 points. Throw in maybe 4 for employment equity and the SED points you still come short at 31 points and miss the ownership targets, you then get demoted by two levels – a level 11.
3. In both of the examples there is no point in buying points (and thereby benefiting a wide variety of causes) because they're not going to get you onto the scorecard. I submit that more than 70% of the companies that would consider complying with BEE fall into the above two categories.

I had a long chat to a pastor yesterday who has been tasked with submitting something to the DTI on codes and he is very worried about the codes for the reasons above.

Whilst I'm calculating points and sub-minimums, look at this scenario below

Say you managed to reach the subminimum under ownership with 10 - 25% shareholding.  In the case of the 25% the shares of would need to be argely paid for, in the case od 10% they'd need to be paid up completely (allow me a little poetic licence).  Under those circumstances you'd get between 12 and 21 points. Add on the sub minimums for the other two, which is 22 points and the remaining EE and SED points postulated above (sorry this getting really complicated) you get between 41 and 52 points, you'd still be a level 8. Bloody ludicrous.

Mining industry needs transformation: Shabangu

"The mining industry is facing challenges, it is visibly clear that urgent interventions need to be put in place to enhance workers' skills," she said at a black business awards ceremony in Boksburg.

"The mining industry needs to transform to make sure that we are able to be competitive, but are also able to contribute positively and become a sector... that's a sunshine industry.

"The future is bright, we've got to do the right things."

For the transformation to take place various groups needed to become part of the skills development needed in the sector.

Shabangu said the mining industry could create many opportunities for the country.

"As we all know it is the backbone of the South African economy."

Broad-based black economic empowerment had to spread benefits beyond entrepreneurs and include communities, she said.

via www.timeslive.co.za

Is it just me or is there something positive that has been uttered by our Sue.

• Firstly she's not flogging that ownership dead horse notion. She's talking about something that we all can agree on - a skilled workforce.
• Secondly she refers to "broad-based black economic empowerment" which is substantially different to the "Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry."

It's long been argued that the Mining Charter in its current form poses problems and challenges.  It is my opinion that a closer migration toward the CURRENT AND UNALTERED BEE codes would be better for the industry.

The mining charter has two absolutes - ownership and reporting.  Reporting does require measuring compliance against the elements. As the CEO of Kumba Iron Ore writes in a letter to his suppliers (dated 25 September, 2012) 

Anglo American Kumba Iron Ore must procure from BEE entities. A BEE entity is defined as an entity of which a minimum of 25% + 1 vote of share capital is directly black owned as measured in accordance with the flow through principle.  B-BBEE ratings do not currently form part of the Mining Charter criteria for BEE procurement.

Norman Mbazima's hands are tied here.  The letter does seem to be linked to rapid mining charter compliance due to the Marikana Massacre, but this is conjecture.  The charter clearly states that they need to buy certain types of goods from BEE companies with the following consequences

You should be note that Kumba Iron Ore will, henceforth, be placing greater emphasis on the use of BEE companies in its procurement of consumables, services and capital requirements.  BEE ownership will be used as one of the key evaluation criteria in the awarding of contracts. Where you do not meet these transformation requirements, it is in your interest and ours that you embark on a process to do so. 

This is not about black business creation, this is about taking wealth from one sector of society and moving it to another.  An economy cannot grow under these circumstances.  Perhaps Sue's new found interest in skills development might be a softening of those ridiculous requirements that are contained in charters and daft codes of good practice.  It might be that the, so far useless, Black Business Council has whispered something in her ear.

What the DTI has to say - and a presentation offered

Someone went to the ABVA/DTI presentation on the new codes yesterday.  My sources inform that the level of understanding from the DTI itself is ......well............. alarming.  But this is what the DTI told ABVA

• The draft codes are nowhere near the final version.  This still has to be discussed and comments will be received.
• The first batch of comments will be collated into another draft that will be presented to the public after the 5th of December this year.   They were saying that the final draft will be gazetted in February, 2013
• The QSE codes and an explanation guide are coming out
• The final codes will come into effect a year after they are gazetted

Now we have got to voice our concern about these codes before the end of November this year.  Mostly because we have a responsibility to save the DTI from themselves - regard it as your civil duty to protect Rob from his own folly.

I've been asked by numerous people to present on the new codes and in some cases I have been roped in to assist in the submission.  I'm available for both if you need some assistance.

 

 

Don’t volunteer for anything

Anyone who has ever done any military service would be very familiar with this old adage. However this is not a military post, and so any references to cadres, cadre deployment or Zumorons are purely non-military. Complying with BEE under the BEE Act has always been voluntary. The current codes (gazette number 29617) have this to say about the application of the Codes

3.1 The following entities are measurable under the Codes;

3.1.1 all public entities listed in schedule 2 or schedule 3 (Parts A and C) of the Public Finance Management Act;

3.1.2 any public entity listed in schedule 3 (Parts B and D) which are trading entities which undertake any business with any organ of state, public entity or any other Enterprise;

3.1.3 any enterprise that undertakes any business with any organ of state or public entity:

3.1.4 any other enterprise that undertakes any business, whether director indirect, with any entity that is subject to measurement under paragraph 3.1.1 to 3.1.3 and which is seeking to establish its own B-BBEE compliance.

If you don't want to do business with any public entity or don't wish to seek to establish your own B-BBEE compliance the BEE codes are not for you.

Rob's new daft (sic) – gazette number 35754. Has amended this section with

3.1 The following entities are measurable under the Codes;

3.1.1 all organs of state and public entities

3.1.3 all measured entities that undertake any economic activity with all organs of state or public entity:

3.1.4 any other enterprise that undertakes any business, whether director indirect, with any entity that is subject to measurement under paragraph 3.1.1 to 3.1.3 and which is seeking to establish its own B-BBEE compliance.

The voluntariness under 3.1.4 remains although I do not know what the difference between "economic activity" and "business" is. Could it mean that if you buy services from an organ of state etc like electricity then you have to produce a BEE scorecard? It's a Rob mystery.

Returning to the voluntary nature of BEE compliance. What Rob's new codes have not considered is that BEE's success is purely as a result of private sector adoption which was always voluntary. It's only very recently that the state has accepted BEE scorecards in their procurement (about 10 months by my reckoning) and the parastatals have been very inconsistent in their application of empowerment. And they are still inconsistent. With all the corruption cases coming out of the woodwork (love the pun) it's now very clear that empowerment credentials have very little bearing on winning tenders or the allocation of preference points.

BEE's success therefore hinges on the private sector's continuing adoption. And this is where Rob has missed the boat completely. What he has done is make compliance so ridiculously hard that within a short space of time (I would hazard a guess two years or so) the scores will be so pathetic that a level nine or lower score will become the norm. This is exacerbated by the fact that Rob, in his wisdom, has decided that only value-adding suppliers can qualify as suppliers under preferential procurement. Soon it will be a handful of EMEs complying with BEE who will put off soon enough because their BEE scorecard provides no advantage because nobody else can comply. And don't think that commerce will come to a crashing halt because BEE scorecards are not forthcoming. Government cannot legally deny you the right to supply them because you don't comply with their empowerment criteria. The private sector will behave the same way – if they need something and none of their suppliers are able to provide BEE scorecards they'll buy it anyway. And as the number of BEE compliant companies dwindle so will the preferential procurement score of large corporates diminish. And BEE will die a natural death.

How then do you resuscitate a policy that has died due to lack of interest? You don't. At that point you've lost the buy-in of the private sector and there is no way that you'll win them over ever again.

It's quite likely that neither Rob nor his useless advisors considered this eventuality. Perhaps those companies who have complied with BEE up until now regret volunteering to implement it – Rob's gazette is effectively the thanks they got for doing so.