Paul Janisch

The sad demise of the needy and vulnerable (code content with a hint of genocide)

By now we've probably all read through the codes. If you're like me then you might concentrate on some codes whilst cursorily reading the others. I'm not much of a fan of ownership so I've not really read through that code, although I do find it extremely humorous that three pages have been devoted to black VCs and private equity companies and nothing new is devoted to the broad-based element, which is what Rob was driving in the beginning of this process. I got stuck with the ridiculousness of the skills development and ED codes and didn't read the SED code properly. It was therefore with much shock that someone pointed out to me that the socio-economic development code is limited to "facilitating income generating activities". This is a change from the current definition that states that a contribution must be with the aim of "facilitating sustainable access to the economy".

Five years ago we would not have worried about this narrow requirement because it's easy to argue that donating to a crèche is providing an opportunity for those children to gain sustainable access to the economy. Verification agencies allocated points under SED and were not too concerned about 75% beneficiary rule either. These days any verification agency undergoing their annual SANAS accreditation process knows that SANAS will give them non-conformances if a SED contribution does not fulfil the 75% beneficiary rule and as a result a disgusting practice has arisen where unscrupulous verification agencies are charging NPOs to conduct a beneficiary audit. (I will say that some don't charge for this service but we do know that EVS does). This brings up two points of concern.

1. SANAS (I don't know about IRBA) has become the de-facto race enforcer. Anecdotal evidence tells us that unskilled SANAS agents (whatever they call them) will make pronouncements on business and empowerment issues that are not supported by the codes, Udge's Bible (the verification manual) or any of the other official supporting documentation. In fact it seems that these people behave in a decidedly arbitrary fashion in the allocation of non-conformances. It's this lack of uniformity that strikes fear in verification agencies who do their best to follow the established norms only to be greeted with a subjective and unsubstantiated non-conformance pronouncement.
2. Genocide

Genocide you say. I'll explain.

Genocide defn ( gen·o·cide [jen-uh-sahyd]; noun - the deliberate and systematic extermination of a national, racial, political, or cultural group)

Anyone in the NPO, NGO, charitable etc. sector will tell you that government funding for the most vulnerable has all but dried up and that that is available is erratic and prone to corruption and theft. The Lottery is no better – it too appears to be sitting on mountains of cash that it won't distribute because of some ideological reason or other. When I questioned a very senior ANC person as to why the Department of Social Development was not forthcoming with money to NPOs his response was "are these white NPOs!". Trust me, this is one of the more level-headed ANC people.

The main source of funding comes from either overseas donors or socio-economic development contributions, with the former donating less or setting up local branches that will compete with the local ones for funds. We are now talking about NPOs that assist the MOST VULNERABLE PEOPLE in our society. These range from orphans to child-headed homes to AIDS sufferers, rape victims and the plain destitute (and this is just a small number of them). Almost every single one of these charities live from hand to mouth and are happy to provide a meal for their dependents on a day-to-day basis.  Because funding is so erratic they cannot guarantee that they'll be able to support their dependents on a weekly basis let alone channel money into "income generating activities."

Now we return to the SANAS accreditor (to flog this horse a little more). This person will issue non-conformances to verification agencies that award SED points to a company that contributed to anything other than "income generating activities". Logic dictates that any SANAS-accredited agency will not award the points for this because they might be closed down (just like EMEX was). It's long been known that BEE points were a wonderful by-product of a charitable donation. Most of these charities will not be able to attract donations under SED because corporates won't risk the BEE points. And times are tough, a 1% of NPAT contribution is pretty much all a corporate can afford these days. Similarly the 100% black beneficiaries requirement excludes large numbers of white people or anybody who does not fulfil the definition of black. Some charities look after white people who form less than 25% of their beneficiaries and conform to the current definition. Even if they do facilitate "income generating" activities" under the proposed codes they will not be able to provide any BEE points because the 100% black beneficiaries requirement is all or nothing. Do these types of causes then dump their white beneficiaries, to ensure their on-going funding?

Herein lies the potential genocide - to do this let's return to the definition. It could argued that AIDS orphans, rape victims etc. are a national group. White people are certainly a race group. The proposed SED code, if gazetted in its current form, would then be "deliberate and systemic". By ignoring this large group of destitute and vulnerable people (and it is HUGE – in excess of 50% of our population) and proposing such heartless and racist legislation, Rob Davies is advocating a form of genocide. In Rob's defence (and this is the first time that I have ever defended anything Rob has done or said as minister) I have my gravest doubts that this is his intention – it's just an unfortunate potential consequence of being advised by the wrong people.

And let's not forget that the five points that SED offers under the new scorecard won't make a dent in the remaining 35 points you need to get onto the scorecard – and even if you thought you got those points there is the negative marking which will take you in negative points territory. Hardly an incentive to contribute anything under SED really.

This is perhaps the most drastic consequence of a document that lacks logic, business-sense, constitutionality and basic empathy. The proposed codes must be prevented at all costs. Please submit your comments to the DTI and don't be nice either. I know that I will ask for Rob, the BEE Council and the BEE division of the DTI to resign immediately.

Comments can be sent to [email protected] or [email protected]

And we wonder why the BEE codes are so bad

Zuma’s first term as president has been a disaster.

Watching the decline of our brave new SA during his three-and-a-half years at the helm has been heartbreaking. He has shown himself to be a flawed personality and an inept leader.

On his watch, the ANC has sunk from being an iconic liberation movement admired the world over to a faction-riven shadow of its former self, while his government has declined into an incompetent, ideologically confused and morally corrupt kleptocracy.

Zuma has presided over a widening wealth gap, a dysfunctional education system, a chronic shortage of skills, a potentially explosive level of unemployment, a disintegrating public health system, service delivery failures across the board, a confused foreign policy, and a declining national economy that has been crippled by a negative attitude towards the private sector to the point where a major rating agency has now downgraded it together with some of our most crucial parastatals.

Worst of all, Zuma has revealed an alarming misconception of the meaning of democracy, as well as an inadequate understanding of, or even respect for, the constitution he is sworn to uphold. He has said on several occasions that the constitution should not be able to frustrate the will of the majority in Parliament, which of course is precisely what a democratic constitution must do if the government violates the founding law of the country.

via www.bdlive.co.za

When the man on top is useless and has a deep desire to drain the economy of its life - it comes as no surprise that the ministers in his cabinet are going to follow suit.

BEE agony column – issue number 1

Welcome dear readers to your black economic empowerment (BEE) agony column. I will endeavour to answer your questions and queries to the best of my objective and non-cynical ability.

Confused from Lohatla writes:

Dear BEE Agony Gogo

Have you tried comparing the amendments with the original codes? The errors are many, for example the index has not been adjusted, the EME threshold has not been increased although the QSE threshold has been… effectively companies falling between 5 and 10 mill are not accounted for… the assumption is probably that they would now fall into QSE's. I have not even finished with statement 000 and there are already discrepancies in the paragraph numbering etc…

Dear Confused

Thank you so much for pointing out these discrepancies to me. Please note that it is not for the esteemed minister or his staff to be any clearer than the limited codes he, in his infinite wisdom (he is a doctor you know and they are very respected in my book) has deigned to publish. It took the last codes five years to be acceptably understood and this was purely as a result of consultants, practitioners and verification agencies interpreting the mathematical and grammatical genius that the minister's predecessor published.

Pissed off from Pofadder writes:

Dear BEE Agony Gogo

I have not had the opportunity to study in depth yet. It is really not a well drafted document and it is difficult to follow the line of the drafting.

What worries me is that he clearly states in his formal signed notice that he is also publishing the B-BBEE Technical Assistance Guidelines (TAG) as well. There is however no sign of this in the document. I think that it was left out and should be read with the proposed changes.

Dear Pissed off

Well observed. I would not worry about this, it is not for the esteemed minister to read what he signs. In fact I am not sure that literacy is a requirement to be a minister in the ANC government's cabinet – after all we can't have ministers with an education level greater than a standard three – this would upstage the president. Oh there I go again I am so old school – I mean grade 5. What we can surmise from the minister's omission is that the finer detail will also be sorely missing and it will not be for us to query this with the ministry because they have not helped us in the last five years and if there is one thing that is consistent about the DTI it's their incompetence.

Highly Fucked off NPO from Frankfort writes: (please note this letter has been abridged and edited for maximum effect)

Dear BEE Agony Gogo

I now have a bloody company wanting proof that our beneficiaries are 100% black. Why is this?

Dear Highly Fucked off NPO

Wow, it's only been four days (including a weekend) since the draft codes were published and already companies are implementing its more draconian requirements. The reason behind this is that minister, in his most infinite wisdom (he is a doctor you know) has decided that the 800,000-odd white people as well as destitute foreign nationals (of which there are a lot in this country) are to be ignored under BEE. He is essentially advocating that corporate benevolence ignores them completely, possibly resulting in their ultimate demise (wasn't this a priority of apartheid – just with other races?). You see in the past (actually the present – the new codes are still in draft format) 75% of the benefits had to go to black people directly, which allowed the balance to take care of those who are unfortunately not black.

It is too early for this kind of activity, please ask your donor to catch a fucking wake up otherwise I shall have to lump them with somewhat asleep people at the DTI.

Thank you gentle readers for your correspondence and I encourage more people to send me their comments, as usual anonymity is ensured.

Use this blog to air your views anonymously

This blog is not a fan of the DTI, Rob Davies, the president, Nkandla, the ANC and the government. I get to say things on the blog that many people feel they can't say. Please send me your comments and I'll post them in the Agony Column forum with my respectful and calculated responses. I assure you that they will be published anonymously.  

As a disclaimer, whilst I firmly believe that the ANC is a disgustingly racist organisation I won't publish offensive right wing or left wing rants.  Please don't be disappointed if I don't subsrcribe to certain views and hence don't publish them.

Did the minister?

1. Talk to multinationals and white-owned businesses and ask them about the challenges that they faced in implementing the current version of the codes.
2. Consider the 800,000 plus white people who live below the poverty line when he decided that 100% of SED contributions must go to black people
3. Try and figure out how many companies are value-added suppliers (I took a sample of three clients and out of 148 suppliers 56% were NOT value-adding suppliers, by the way none of the major retailers are value-adding suppliers either)
4. Speak to the SETAs and find out whether they are able to provide sufficient learnership to the economy. I have a large client whose score dropped by 15 points because the SETA would not allocate learnerships to them
5. Find out how complicated it is to register for VAT when you are below the VAT threshold.
6. Establish the ramifications for a small business that does need to register for VAT, in registering for VAT. Think admin overhead etc
7. Consider that 100% black-owned EME's can now happily charge and extra 5.5% on 90/10 tender or 10% on an 80/20 tender and still win the business (fleecing the taxpayer in the process) (I think he did think about this)
8. Ask himself whether fronting practices will increase exponentially because black companies who turnover less than R10m can bid for work on behalf of white companies who won't even get on the BEE scorecard
9. Ask whether doubling the target for skills development will impact on productivity (surely if a company like FirstRand has to spend R19k on skills development for each black person they'll never see them in the workplace – they'll be on courses all the time)
10. Think that using what appears to be national EAP targets under EE and Skills Development will be worth anybody's time
11. Think that using punitive measures, doubling targets in certain places and raising the entry level to 40 points where the only guaranteed points are those under SED (5%) would encourage people to transform.
12. Conduct a proper survey within all verticals to see the actual failure (or God forbid success) of BEE at the moment
13. Take into consideration his own government's responsibility in the lack of skills and literacy in the economy which is holding it back completely.

The answer to these questions is likely to be no. Minister Davies (love the name Rob – it's another word for steal) in all likelihood surrounded himself with mostly black (and disgruntled) advisors on the BEE Council and the BBC (throw in a Ralph Lauren-like character who swears that neither she nor Confucius were involved in the drafting of the new codes – contrary to the reports of many people closely associated with these codes). His stats are open to question – I would suggest that the EmpowerDex figures are based on JSE-listed companies. The state of inequality graph is an indictment on the ANC-led government not the private sector.

Over the next week or so I'm going to put down these ideas on the blog and then combine them into a submission to the DTI to let them know that these codes are not going to work. And I encourage all those who read this blog to do something similar – hell I don't mind if you submit my submission. Part of what we have to be careful of here is that Rob removes the most extreme parts of these codes as a compromise – this is not acceptable. Not even Mugabe has gone to these lengths to fuck up the economy. But then Rob is………………….

PS: I had an interesting conversation with a reader who made an incredible observation – every time there is an ANC conference they pass legislation to appeal to their voters. If we take these codes into account then you'll notice that they are VERY black business friendly. If you consider that there is growing dissatisfaction with the ANC from the black business class then these codes are method for the ANC to buy more votes. It doesn't matter that they aren't going to work – that's a problem for another time. Why didn't I pick up on this!!!

Codes are out and they are worse than you can imagine

Download and distribute at will

ANC hand caught in the cookie jar | Columnists | BDlive

Just to add to investor uncertainty is the Private Security Industry Regulation Amendment Bill, one clause of which seeks to ensure that "at least 51% of the ownership and control (of private security companies) is exercised by South African citizens," although another subsection allows the police minister to prescribe different percentages of ownership for different categories in the security sector (even locksmiths may be affected). Companies have five years to comply with the new requirements.

via www.bdlive.co.za

The article is about Rob and his responsibility for the ultimate collapse of foreign investment (read the economy). It's this paragraph that I find most interesting.  Has a certain indiginisation ring to it.  However the bill doesn't talk about EAP and black - just South African citizens.  We'll see how long that lasts.

Can't we just get rid of Rob, he really takes his role as the worst cabinet minister so seriously.  He's so competitive!!!!

Comments are most unwelcome and will be ignored (Davies alludes in October)

A NEW scorecard to calculate black economic empowerment (BEE) ratings will come into effect for all companies on December 1, following the publication of revised codes of good practice by Trade and Industry Minister Rob Davies yesterday.

Like the amendment of the Black Empowerment Act, which is expected to come to Parliament this month, the new codes are aimed at ensuring more meaningful black empowerment and the creation of genuine black-owned supplier companies. They will however require companies to recalculate their scores and will significantly affect existing empowerment ratings.

The codes have been published for 60 days of public comment, after which they will become binding.

via www.bdlive.co.za

Thanks Thinus. This could be poor reporting but Carol Paton is not that kind of journalist. Are we then to assume that the public comments are a mere formality and that this will all be published in time for Christmas irrespective of the comments and objection that will be made.

Probably - I can't allow corporate apathy on this issue. I make a living out of this and if these codes go through as they are then we will have no BEE in 24 months.

Between a Davies and a hard place – the hard place is easier to reason with. We are in limb0

That's right you read right. We are now in limbo – how do you advise companies on what to do for the next year when new codes are coming out?  I met a company today that would be interested in doing some ED stuff to get them to 30 points – it'll be an expensive exercise so my compliance face (I don't have a transformation face) told them that whatever advice I give them might not be applicable in eight months' time. How can companies now plan on anything when there are three possibilities

1. The codes will change
2. We voice our discontent and the codes remain the same
3. A compromise is published which is different to everything

Yet Rob is so confident – and I can't see where he gets this from. His utterances are devoid of any form of reality. As per this quote from Business Report

The revised codes were introduced to "plug the gaps" in the Broad-Based Black Economic Empowerment Act and related legislation. These gaps included fronting, "tick-box" compliance, and the exorbitant amounts of money that small enterprises had to pay to consultants to prove they were BEE compliant. The codes' scorecard had been revised, with five elements instead of seven.

Does our honourable minister of trade and industry not realise that he's made more work for consultants. It's taken the industry 5 years to create standard interpretations of the 2007 codes – they were an embarrassment when they were published with grammatical and mathematical errors that had to be interpreted. The slew of charters that have come out since have emulated their older sibling by competing rabidly for the greatest number of nonsensical errors. We therefore can expect Rob's new codes to be as bad if not worse. Who's going to interpret this – the consultants.

Then there's the fact that Rob still hasn't published the codes – apparently the government printer let him down on the day. It's not his problem though, he's guaranteed a pension when he retires. I suppose we have to ask how he's going to be paid his pension when his BEE plans have destroyed whatever's left of the economy.

Our job is to send in constructive and non-vitriolic comments that goad Rob to see the error of his ways. I'll make this my job and I'll lead us in this quest. My first draft will inevitably attack Rob, the cabinet and the DTI at their core – but will be tempered in the final draft. We've shown that we can object to things like eTolling and the secrecy bill. We're going to have to exactly the same thing here.

And my thanks to Mr O'Neil who kindly sent me a legible version of the Tuesday's presentation. Most of the new scorecard is in here (and yes skills development spend is now 6% of payroll).

The DTI has a breakfast – more like a teddy bears’ picnic (codes were launched this morning)

The cellular networks were working overtime to inform the cynical blogger about the launch of the codes. Apparently there was a launch this morning but alas I was not invited – in fact I wasn't even aware of it. I was given a running commentary.

(Reader) Why do they insist on using Teddy as the MC, he is awful as usual.

(Paul) What, worse than anything else that the DTI has to offer?

(Reader) Can we talk about Teddy's TWANG!. Which would be bloody impressive if he could combine that with appropriate English language and grammar

(Paul) Which Teddy is that

(Reader) Teddy Daka

Is this not the same person who has just resigned from the SAA board? But I digress.

A presentation was delivered which I have attached but it's a bit grainy and not easy to read properly. Nevertheless I'll go over a few of the things they might have discussed (I wasn't there to be sure about this).

• Five elements with points raised to 105
• QSEs and generics to look at all 5 elements
• Priority elements introduced – ownership, skills development, enterprise and supplier development
  • QSEs have to consider ownership and one priority element
  • Generics have to consider all priority elements
• Those not meeting the THRESHOLDS of the priority elements drop a level
  • QSEs go down one level
  • Generics (or large entities as they call them) go down two levels
• Looks like you need 40 points to get on the scorecard (it might even be possible to get negative points)

Hmm – Rob is using a stick here. It will as sure as hell beat him first. Back to the presentation

• 100% black owned EMEs are a level 1
• 50% black owned EMEs are a level 2

And now for the only positive thing in the new codes.

• Adjusted thresholds
  • EMEs – less than R10m
  • QSEs – between R10m and R50m
  • Makhulus above R50m

And here are the elements

Element	Code Series	Revised Weighting
Ownership	100	25
Management Control	200	15
Skills development	300	20
Enterprise and supplier development	400	40
Socio-economic development	500	5
TOTAL		105

Ownership

I've never paid much attention to ownership because I think it's a crock – however the admirable BEE council don't and they've made it a priority element. Target is still 25 points.

Management Control

Incorporates top, senior and middle management (junior has been removed)

Skills development

They must be so proud of themselves because they've included internships and apprenticeships. But here's the bugger, they've narrowed the skills set to targeted skills, set a 40% threshold minimum and brought in the old EAP. And you can bring in black unemployed people.

Enterprise and supplier development

Another priority element with a 40% threshold but wait there's more (in fact there's so much bullshit here that I will limit myself to the extraordinarily idiotic). If you are not a value adding supplier then your BEE score won't count under procurement. One doesn't know whether the value-adding supplier definition is going to be changed but under the current definition a value adding supplier must be registered for VAT and their NPBT and total labour costs (when added together must be more than 25% of turnover). This is a bizarre form of mild economic engineering – most micro enterprises turnover less than R1m (which is the VAT threshold) so what now – do they go and register for VAT which adds to their admin overheads? Hold on – this might actually be brilliant and could lead to a little smile from Pravin. Get Rob's goons to force more companies to register for VAT and he might collect more money (VAT generates 25% of all tax revenue you know). Back to this – some businesses cannot be value-adding suppliers it's not in their nature. Retailers would have a high turnover but with very low margins and as such their labour costs will always be substantially less than say a law firm.

SED

Targets aren't in the presentation. There was a rumour that SED contributions would be limited to education. But this doesn't seem to be the case.

And what I think

The overriding sentiment in this presentation is that the government (a caring one you know) has done all it can to assist in the transformation of South Africa and it is the private sector that has let them down. And when you consider the quality of personage sitting on the BEE Council you can imagine that they pushed this deluded message home to Rob, who wouldn't know any better. It's almost victim-like. And I think we need to view these daft (sic) codes within the context of this clouded delusion. I can't see that these codes are going to be any more successful than the current ones – in fact with all the negative deductions and higher thresholds it's very likely that BEE will have run its course within three years.

We've now got an opportunity to raise our voices about this. The chances are that Rob has already made up his mind about these and they are going to be gazetted – but let's give this useless individual a piece of our mind and some bedtime reading.

The final word comes from a person at the presentation who summed the whole thing up perfectly.

Let's consider, the lack of appropriate sound, the lamp in the projector, the late start, the lack of food, the sub-standard cold coffee, Teddy, his twang, his grammar and his politically incorrect comments which he thinks are jokes and then his fall literally off the stage?! REALLY

A great metaphor for DTI (read Rob Davies) mediocrity.