Who advised Rob on the codes, I suspect horseplay – a plausible theory

The new codes could be the product of a small minority of well-heeled individuals who might just be a little pissed off with the current codes but not because of the lack of transformation.  Nay it is because their track record with corporate South Africa has been forever tarnished. Why would such a small group be concerned with things like broad based ownership schemes and ESOPs (those are but a fairy tale) which offered a single bonus point for 10%?  Their game is to change the principles and the scorecard to suit their nefarious needs. Read on if you have an appetite.

After a small minority had milked and abused the system, the private sector started kicking back against them.  Five years ago if you were black and could spin a line you'd get shares or huge amounts of ED money.  In the last three years the shares and ED money have dried up, with corporates taking a greater interest in where they toss money and after consulting consultants like myself they've realised that they can still earn points without handing out cash (or shares).  This connected minority went to the BEE council and alleged a variety of things which were interpreted as fronting.  They told Commie Rob that there needs to be a change to force corporates to transform and not front.  What they really meant was that they wanted an easier way in to get to those lucrative BEE deals that were now going broad-based.  So they did the following:

1. Made ownership compulsory – and then made a couple of elements compulsory just in case we saw through them
2. Set a 40% subminimum on net value points which makes a corporate do two things
   1. Do a 25% deal and ensure that the black owners get the shares either for free or they are removed from the responsibility to meet their commitments when it comes to paying for the shares.  Because if they don't pay then the corporate will not meet the 40% subminimum and will drop two levels.  This is now the corporate's responsibility.
   2. Get a minimum of 10% of the shares for free because if they owe any money on these shares then they won't meet the subminimum.
3. Up the new entrant rate from R20m to R50m and drop the percentage of new entrant ownership from 10% to 2%.  Now there are more people who can pick up 2% of a variety of companies and offer 2 whole points in exchange.  This could be regarded as a diversified portfolio.
4. Devote three pages to black venture capitalists that says nothing at all but allows black VCs to invest in companies. 

You'll notice that there isn't very much broad-based stuff involved in this programme. This is where the really clever stuff is – they've duped Rob, who doesn't understand that there no is broad-based stuff in the new codes but is now firmly convinced that these naughty white companies will never front under his watch. And I quote the Mail and Guardian, who got this from Rob.

Despite the very sophisticated rating regime and industry of verification agents established under the existing laws, broad-based BEE in its current form has been subject to myriad criticisms. The more prominent of these have been that broad-based BEE has benefited only a ­limited pool of beneficiaries and it has not achieved real transformation of corporate South Africa and, ultimately, the economy. 

The next clever move is to up the EME rate to R10m from R5m and provide those 100% black-owned businesses with a massive points' advantage so that they could encourage all the white businesses to use them as an intermediary (polite word for front).  It would have to be a complex front because if you outsource more than 25% of a tender bid to another service provider, they have to be an equal contributor level to yours.  Now you're not going to get a level 1 company that's white owned, so you hatch a code-endorsed fronting scheme.  Set up one black company that takes a kickback from a white company. This company then supplies that service or product to the bidding black company – both are level 1 contributors. There is nothing in the PPPFA that says you have to look at your immediate downstream supplier to make sure they aren't fronting.  Hell you could set up a whole chain of level 1s to get around this.  Now get this, if the bid amount is more than R10m then you get a bunch of black-owned companies to come in as level 1 JV partners.  White and multinational businesses will be so desperate for government business that they will bend over backwards to offer kickbacks and other incentives.  If the whole thing unravels then the white business is at fault because it's only white companies that front.

You'll also see that it's only 50% owned EME's or QSEs that can be ED beneficiaries.  All you need for a certificate is something that states that you turnover less than R50m and that your black ownership is more than R50m and you can make use of grants and all sorts of things under ED – which are risk and conscience free. Now throw in the fact the corporates need to buy 40% of their stuff from 50% black-owned businesses who don't need a scorecard and they'll get 9 points.  You can front like there's no tomorrow.

Ah but there is a catch – the person running the DTI (into the ground) is a commie so they had to compromise on the value-adding supplier concept – but that's OK, if you can front with the best of them then you'll get around this stupid requirement.

The rest of the codes are probably irrelevant to this group. They can assist any company in getting to the subminimum for at least two of the priority elements.  In fact there are about 24 points that a 50% black-owned value-adding enterprise could offer to a corporate under supplier development and at least another 8 under ownership, including the net value points. This makes 32 points, now all the irritating white company needs to do is spend 6% of payroll on training and bring in a few learnerships and we get another 8 points (which is the subminimum for skills) and we're on the scorecard.

The question is who are these people? It might be that they are close to people who sit on the BEE Council and perhaps, someone into equestrian pursuits and her friend John.