Projects aiming to reach financial close in the third round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) in November 2014 will be affected by the amended Broad-Based Black Economic Empowerment Codes of Good Practice (Amended B-BBEE Codes) following amendments to the Implementation Agreement.
Some of the most significant changes to the Implementation Agreement have been made in response to the promulgation of the Amended B-BBEE Codes, which come into force on 1 May 2015. The Amended B-BBEE Codes will have a direct impact on the ability of Round 3 projects to achieve the economic development commitments made regarding preferential procurement of goods and services from suppliers with B-BBEE recognition levels.
The Amended B-BBEE Codes could result in a 2 to 3 level drop in the B-BBEE recognition levels of most suppliers.
All Round 3 projects that chose to make preferential procurement commitments made such commitments in August 2013 under the then current B-BBEE Codes. Bidders could not have been aware of the impact of the Amended B-BBEE Codes on preferential procurement commitments at the time of bidding, as the Amended B-BBEE Codes were only gazetted in October 2013. Generally, the Amended B-BBEE Codes could result in a 2 to 3 level drop in the B-BBEE recognition levels of most suppliers. Thus, Round 3 projects will not be able to meet the commitments they made in respect of preferential procurement at bid submission when the Amended B-BBEE Codes become applicable on 1 May 2015. As a result projects may incur either financial penalties or termination points for breach of the Implementation Agreement.
Hmmmm. I do find it interesting that the Implementation Agreements will be modified to incorporate the new codes. This is immensely problematic because it's very clear that the DTI themselves haven't conducted any research to determine whether these targets are vaguely achievable. To then incur contractual penalties because of the DTI's ineptitude is patently unfair. Call me if you need help with this round.
This post is about HDSAs and procurement under the Mining Charter. I wouldn't recommend that you start getting all the white mommies that make up the cake and candy committee at St Stithians to form a HDSA company and take a shareholding in a mine. What am I saying – that's actually a very good idea.
The preamble of the "broad-based socio-economic empowerment charter for the South African Mining and Minerals Industry", more commonly known as the Mining Charter starts with
The systematic marginalisation of the majority of South Africans, facilitated by the exclusionary policies of the apartheid regime, prevented Historically Disadvantaged South Africans (HDSAs) from owning the means of product ion and from meaningful participation in the mainstream economy. To redress these histone inequalities. And thus give effect to section 9 [equality clause) of the Constitution of the Republic of South Africa Act 108 of 1996 (Constitution), the democratic government has enacted, inter alia, the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA
This paragraph tells us a lot about the intentions of the Mining Charter. My reading tells me that there are two classes of people that may be regarded as HDSA. The first are those who were "prevented from owning the means of product ion" AND those who were prevented "from meaningful participation in the mainstream economy". Both of whom were marginalised by "the exclusionary policies of the apartheid regime".
The premise of this post is that the HDSA definition includes all women and disabled people as per the 2001 PPPFA regulations. The regulations defined HDI as
(h) "Historically Disadvantaged Individual (HDI)" means a South African citizen –
(1) who, due to the apartheid policy that had been in place, had no franchise in national elections prior to the introduction of the Constitution of the Republic of South Africa,1983 (Act No 110 of 1983) or the Constitution of the Republic of South Africa,1993 (Act No 200 of 1993) ("the Interim Constitution"); and / or
(2) who is a female; and / or
(3) who has a disability:
Provided that a person who obtained South African citizenship on or after the coming to effect of the Interim Constitution, is deemed not to be an HDI;
I don't think that it's a disputed fact that the HDSA referred to in the Mining Charter (which came out in 2010) and the 2001 PPPFA regulations are effectively the same people. The Mining Charter quite probably realised that white women would make a killing on mining deals, as one does these days. They attempted to limit white women involvement with this definition.
Historically Disadvantaged South African (HDSA) refers to South African citizens, category of persons or community, disadvantaged by unfair discrimination before the Constitution of the Republic of South Africa, 1993 (Act No. 200 of 1993) came into operation which SHOULD be representative of the demographics of the country
I wrote a year ago that the underlined sentence referred to the Economically Active Population (Manyi's scourge). I don't think this is correct. The EAP refers to those between the ages of 16-65 (give or take a year or two), who make up 66% of the total population according to the 2011 census. The EAP therefore cannot be solely viewed as reflective of the demographics of the population. This is the breakdown of the population as per the census.
Race Group
Black African % of population
Coloured % of population
White % of population
Indian or Asian % of population
"Other" % of population
TOTAL %
79.20%
8.92%
8.86%
2.49%
0.54%
Those with an eye for detail might have noticed that the Black African section must include naturalised non-South African born Africans. This is because the Other number is only 280,000, and there must be a lot more than that number of naturalised Africans. That in itself is marginally problematic for Mining Charter and BEE purposes. What the census document doesn't appear to do is breakdown the number of men and women in each racial category. But it does give us a male to female ratio which is 48.65%:51.35%. Therefore the beneficiaries of the Mining Charter would need to follow these statistics.
Race Group
Black African % of population
Coloured % of population
White women % of population
Indian or Asian % of population
TOTAL %
79.20%
8.92%
4.55%
2.49%
The huge difficulty we face here is that Indian/Asians would never get a look in because they make up an even smaller number than white women. And then there's the practical application of the "representative of the demographics of the country". You're not going to get a company that will be made up like this – although Davies would love this. I asked an Anglo representative about this and he said that Anglo ask for BEE certificates and measure BEE ownership as per the BEE certificates. This must be new because there is an Anglo American letter sent to suppliers stating that
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.
A BEE certificate will only mention black ownership, not the breakdown of the ownership in terms of the demographics. Perhaps a solution is to calculate all procurement and measure it according to the ratios above to see if you get to meet the charter. The definition uses the word "should" which might allow for an average. If you were to favour African suppliers as a legislated requirement you are going to have trouble. I have seen a verification certificate that measures HDSA status in terms of the MPRDA. I suspect we'll see more of these in future and if the company turns out to be white women owned then I suggest that it is still in keeping with the spirit of the Mining Charter.
This email was sent to me today. There are three kids who appear to be white based on the picture that need support. I’ll make a contribution and I’m hoping that regular readers of this blog will dig into their pockets to help as well. A funny thing happens to a person when they become a parent, the welfare of children becomes a greater priority. My children want for nothing and my heart breaks when I come across destitute children. I’ve figured out that I have a responsibility to help where I can and I donate large amounts of my time to assist a wide variety of charities and causes. I talk about this below but I will help any corporate that donates to this cause with justifying their SED contribution for BEE points at no charge.
I suppose the question here is, how do we get BEE points for this. The SED code says
3.2 Socio- Economic Development Contributions:
3,2.1 Socio-Economic Development Contributions consist of monetary or non-monetary contributions actually initiated and implemented in favour of beneficiaries by a Measured Entity with the specific objective of facilitating sustainable access to the economy for those beneficiaries.
3.2 2 The full value of Socio-Economic Development Contributions made to beneficiaries is recognisable if at least 75% of the value directly benefits black people.
3.2.3 If less than 75% of the full value of Socio-Economic Development Contributions directly benefits black people, the value of the contribution made multiplied by the percentage that benefits black people, is recognisable.
What 3.2.2 says that if you donate R100 then R75 must directly benefit black people. You can dig out 25% of your SED budget and use it on people that aren’t black and still receive the full recognition for the points. Again I’m basing the assumption that they are white on the picture. But the fact remains that there are a lot of needy children of all races that we can help.
I’m not going to contribute in the name of BEE, but I’m hoping that there is a corporate out there that will make a contribution in exchange for BEE points.. For my part I’ll donate my time to that corporate in justifying the points for SED (and throw in a free presentation on the new revised BEE codes).
Good day ,
The reason for my mail, these are three kids in our care that has unfortunately lost their sponsorship due to the steel strikes that are currently still underway. We urgently need to find these kids the needed sponsorship due to the fact that their basic necessities have run out! I need to know if there is any possible way that you guys are able to assist. The amount per child is R2100 and that covers one child for three months. Please can you consider, even helping with one of the three. Thanking you in advance and hoping for your favourable response. In the same time I would like to thank the companies that has been standing with Compass after all that has happened. May your business and personal lives be richly blessed with prosperity and peace!
For further info please visit our website (www.compass.org.za) or Contact me on the details provided below :
All contributions followed with proof of payment will be much appreciated,
Boards are important. They might not do the day to day work of company building but they set the tone at the top. The group that the CEO reports to has a big impact on the CEO’s mindset which trickles down.
If you raise capital for your business you are likely to get investors on your board. If you choose well you might get some good board members that way. But you might also get indifferent or worse.
The biggest piece of advice I give to entrepreneurs on the topic of boards is to get some independent directors on their board. Ideally these would be peer CEOs who have a lot of experience building and managing companies.
Recruiting board members takes time. Most entrepreneurs prefer to recruit people who work for them and can impact the day to day effectiveness of their organizations. And so they prioritize that.
What they miss by putting off the work of adding independent directors is that they should be also investing their time in improving the effectiveness of the group the work for.
If your board is you and your cofounder(s) and some investors you have a suboptimal board structure. Do yourself a big favor and recruit a few strong and experienced independents. It is well worth the time and energy you will spend on it.
The Army Gymnasium in Heidelberg was graced with two special people in 1986, MC Snyman and an Adrian Molalike known as Fourie. MC Snyman is an institution but little is known about Fourie so I'll talk about him. Fourie was an avid fan of Eugene Terreblanche and the AWB. The wonderful contradiction was that he was a short little guy, with a fair complexion and glasses, the antithesis of Terreblanche. But he had views which ranged from Holocaust denial to dramatic racial segregation. One morning we were in a classroom, there must have been about 25 of us (white males) and Fourie. I seem to recall that all of us could not understand nor agree with Fourie's views and I think we were in the process of persuading him that his views were deluded. Just when we thought we were convincing him that he was wrong, he retorted with " 'n……………….. is mos 'n……………….." Fourie was not to be persuaded.
Last night I was on Classic Business. Hosted by Michael Avery, the panel included me, Sam Gumede – Partner, Mergers and Acquisitions, Black Economic Empowerment at Webber Wentzel and Takalani Tambani, BEE Director at the DTI. This was always going to be a problematic conversation, I cannot hide my contempt for the revised codes. I also harbour a fair amount of animosity toward the dti as well for publishing the codes and then not bothering to explain the garbage that they have gazetted. One of the issues that I raised with Takalani was that of Constitutionality. Once again Tak threw section 9(2) back at me, saying that it was perfectly Constitutional. He couldn't explain why the codes are in breach of the BEE Strategy – specifically the inclusivity principle contained in paragraph 3.4.2. His stock response was that it was Constitutional.
And herein lies the ultimate problem with the state of legislating in South Africa. Many pieces of legislation or supporting legislation are most certainly unconstitutional. The government take the stance that it is constitutional and that is that. Not too dissimilar to Fourie. What they really are saying is that they will legislate in any arbitrary way and if you don't like it then take them to court. They also know that few people or interested parties will challenge the legislation in the Constitutional Court and they'll get away with it.
It's not too much to ask that the government test their laws against the constitution before they foisted them on us. Section 9(2) gives the government a free reign to do whatever they like. This freedom has to be curtailed.
Would Takalani say "these codes go to 11"? Rob definitely would (not Rob Reiner)
Yesterday's post looked at the total cost of skills development for 9 companies. This table shows how much less money Nene (and SARS) is going to receive. For those MPs who are numerically challenged, the total amount is 2.29 Nkandlas. The going rate for a Nkandla is R246m.
Company
Target spend (6%)
Additional spend required over and above current spend of 3%
The dti'S BROADEDING PARTICIPATION DIVISION have issued the attached notice. It's not very clear when the first certificates will be issued under the new codes because they write English as well as Hlaudi spokes it.
My friends at BEE Matrix reckon business will just get on with it and try and improve their score over time. I don't agree, the ridiculousness of the targets and the sheer cost of implementation will put companies off and then they just won't bother. Yes it'll take a few years but not that many years.
This table is an analysis of thumb sucked JSE listed companies (including the JSE) and the figures could be a bit out. It shows how much many SHOULD have been spent during the period that the Annual Report discusses. Some are 2013 others are earlier. At least we know that the figures will be higher when the new codes kick in. They make for fascinating reading. The larger corporates need to spend a huge amount of money on skills development. Mind you the JSE's target of 24m is not a shabby amount either. What must be borne in mind is that the target spend is DOUBLE (or as the DTI might write DUBBLE) what we're used to. To see this in perspective we need to look at Standard Bank's 2013 annual report. On page 40 it says the company spent R424m, which was 2.9% of payroll (which suggests that my figure of R887m is fairly accurate). Page 131 shows the complete income statement. The Net Profit Before Tax figure for that year was R13.124bn. If we now add on the tax deductible amount of R463.76m off that amount it comes to R12.660bn. That's a fair drop in profitability. This means less money is spent on tax, enterprise development and most importantly SED.
Target Race Group
Company
Salary bill
Target spend (6%)
AM
AF
CM
CF
IM
IF
Standard Bank
14 796 000 000
887 760 000
407 348 726
342 293 033
58 049 696
50 042 841
19 016 280
11 009 425
MTN
6 709 000 000
402 540 000
184 705 502
155 207 080
26 321 669
22 691 094
8 622 616
4 992 041
NASPERS
8 738 000 000
524 280 000
240 565 908
202 146 291
34 282 120
29 553 551
11 230 349
6 501 781
AECI
2 976 000 000
178 560 000
81 932 266
68 847 260
11 675 851
10 065 389
3 824 848
2 214 386
FirstRand
10 620 000 000
637 200 000
292 379 256
245 684 780
41 665 840
35 918 828
13 649 154
7 902 142
Telkom
9 861 000 000
591 660 000
271 483 224
228 125 953
38 688 027
33 351 747
12 673 664
7 337 384
Nampak
3 535 000 000
212 100 000
97 322 097
81 779 256
13 868 997
11 956 032
4 543 292
2 630 327
JSE
405 000 000
24 300 000
11 150 056
9 369 335
1 588 952
1 369 786
520 519
301 353
Nedbank
9 349 000 000
560 940 000
257 387 351
216 281 263
36 679 278
31 620 068
12 015 626
6 956 415
Oh yes you can take the money you don't spend and distribute it EAP-fashion amongst the poor for education purposes. I'm not aware of many investors that would go for this. Are you in the business of banking or handing large amounts of money out on bursaries?
And then there is the issue of productivity vs training. The skills development code appears (you can't say anything more than that with the revised codes, everything "appears"" and nothing is clear) to require companies to spend money on SAQA-aligned programmes. As a multinational you can't send your employees on training back at your parent unless you can show that it "meets SAQA's requirement for recognition". Using Nedbank as an example. Their annual report (page 21) gives a total staff complement of 28,748. Average annual spend per person needs to be R19,512.32. I don't know what the percentage of EAP staff there are but that trainng figure per person is going to be much higher. When are these people going to work?
Who stands to benefit here?
You can't spend R19.5 k on the training of a lowly messenger. You'll never see them at work. It was Anglo who pointed out in their comments of the codes that it just makes sense to throw huge and ugly amounts of skills spend on the educated and higher-up-the-hierarchy Africans. I wouldn't be surprised to see a number of connected people informing Nampak that if they pay for their kids' Michaelhouse school fees they'll get BEE points. Broad-based my foot!
And these codes are broad-based? Not likely and the South African public wants them, champing at the bit they are. At some stage something is going to give and I hope to hell that this realisation doesn't come too late. Every day more of our rights are eroded by poor legislating and we just take it.
As a postscript - we know the codes are truly trying to remove white people from the workplace - or only those white people that fit in with the EAP statistics may work in each organisation (white male 6.4% and white women 6.9%). You still have an obligation as an employer to train your white staff as well. This is over and above the 6%.
Thank goodness for Keith Levenstein. Those in the industry know that he knows not what he speaks of, and so he is a blogger's dream. In fact I reckon Hlaudi has already issued him with the very first journalist's licence. His latest press release, which was published by Engineering News , has certainly got tongues wagging. As sensational as the heading may be, it's the only accurate piece of information that is contained in the whole article "Half the economy could become BEE noncompliant by May 2015". It's only half accurate – I would suggest that more than 90% of all companies operating in SA would be BEE non-compliant.
Let's move on to what ol' Keefie is attempting to get through to an unsuspecting public. Wait a minute, I need to go back a bit. Levenstop peddles advice and courses to those who don't know that he doesn't know what he's talking about. Obviously the more sensational the press release the more likely it is that companies are going to flock to him for "high quality advice" (with a strong emphasis on high).
Back to Levenstoy. "If the sector codes are not released in time, businesses will need to follow the amended codes released last October," he said.
Really, is that the truth? And if it is the truth then out of which source did it permeate? Even the DTI would question this version of the truth. It would be wrong for me as a concerned blogger and see-througher-of-Levenstick to leave it at that.
The issue that Levenstranded conveniently ignored is the status of transformation codes. We need to go back to the 2007 codes here (gazette number 29617), specifically statement 003, paragraph 4.3 "A sector code enjoys equal status with that of any other CODE". A Code is issued under section 9 of the BEE Act – see paragraph 3.6 of statement 003 "After considering public comment, the minister may gazette the transformation charter as a sector CODE under section 9 of the Act".
At this point Levenstrangle would be jumping up and down and saying "fuck him – he's wrong! Hasn't the idiot looked at paragraph 10.3 of the revised codes (36928), which says "….(t)he generic scorecard in Code series 000, Statement 000 issued on 9 February 2007, notwithstanding the REPEAL of that statement." ? I'll answer for the idiot. Yes he has read that section – he also knows that the specific paragraph is without legal substance and even if it was it says that Statement 000 is repealed, not Statement 003.
Returning to 36928. Paragraph 3.2.3 of Statement 000 has the following to say about sector codes "A measured entity in a sector in respect of which a sector code has been issued in terms of section 9 of the BBBEE Act as amended, may only be measured for compliance in accordance with that code." Even the new codes recognise that you need sectoral codes (Levenstrungout is an expert on fronting and sectoral codes you know). This is the juncture at which the DTI have got themselves firmly stuck up a pole. The sectoral codes issued under section 9 of the BEE Act are still in force and if they are not amended, replaced or repealed then they will not only not talk to the revised codes, but they'll still be applicable. (The word repeal has been added to the amended bill/act – I don't know what the legal status of the amended act is.). I've spoken to a few people at charter councils and they are galloping away at re-alignment. However this takes time. The Act says that any amendment must go out for comment for 60 days. Then the dti has to ignore consider the comments and then ignore them some more and then publish the final code. The sectoral codes are desperate to meet the dti's April 30 deadline so that all can be harmonious.
Back to Levenstigmatised's aversion that if the sectoral charters aren't aligned or repealed then you default to the revised BEE codes. This is such embarrassing bullshit, I'm sure the DTI are turning their heads in shame. In short, ignore this press release as rubbish and steer clear of poor BEE advice.
"Dr Joseph Goebbels, minister of public enlightenment and propaganda… was now systematically dismantling what remained of a free press in Germany. (H)e had assembled three hundred Berlin journalists to instruct them on the provision of the Nazis' new National Press Law. First and foremost, he had announced, to practice journalism in Germany one would henceforth have to do so as a licensed member of his press organization, the Reichsverband der Deutschen Presse, and no one would be licensed who had, or was married to someone who had, so much as one Jewish grandparent. As for editorial content, no one was to publish anything that was not consecrated by the party. Specifically, nothing was to be published that was 'calculated to weaken the power of the Reich at home or abroad, the community will of the German people, its military spirit, or its culture and economy.'
'I don't know why this should be a problem,' Goebbels stated, 'it is possible that the Government may sometimes be mistaken as to individual measures, but it is absurd to suggest that anything superior to the Government might take its place. What is the use of editorial scepticism? It can only make people uneasy.' Later that week the Nazis enacted a separate measure imposing the death penalty on those who published 'treasonable articles'."
This quote is set in 1933. Now let's come back to the present.
On Thursday, acting SABC chief operations officer Hlaudi Motsoeneng proposed that journalists have a licence to practice like those in the medical and law professions. He said journalists who acted unprofessionally should be stripped of their licences. "You know when you are a journalist, you are a professional journalist. If you don't have ethics and principles and you mislead on your reporting, like lawyers... if you commit any mistake they take your licence," he was quoted as saying by the SABC. "We should do the same thing with journalists, that is what we need to do if we want to build South Africa." He was speaking at the annual Joburg Radio Days at Wits University in Johannesburg.
The similarities between Goebbels and Hlaudi are alarming. The Nats weren't that different and the ANC has learned from the Nats. Brown describes Goebbels as "just over five feet tall with a deformed and shortened right leg, a club foot, and an oddly shaped head that seemed too large for his small body". I've not seen Hlaudi in real life so I can't draw any physical comparisons. You could argue that Hlaudi doesn't have a matric and that he doesn't fully understand the implication of his words. But as we've learned with Zoomer who has a lot less than a matric, an ill-educated man is very dangerous indeed.
Now – would I need a licence as a blogger? Probably.
The country's construction sector needs massive transformation, Public Works Minister Thulas Nxesi said on Thursday.
"The industry has to transform and include black professionals. Engineers, surveyors and all sorts of artisans in the sector are male and white," he told delegates at the National Union of Mineworkers' (NUM) central executive committee meeting in Johannesburg.
He's not wrong. But what he's not doing is accepting responsibility for the fact that the education system that his government has destroyed developed is not producing the black skills that it needs to create those engineers, artisans etc. A skilled artisan takes years of training - the shortage of these artisans cannot simply be reduced to anti-transformation sentiments.
This cry of lack of transformation/racism is really an acknowledgement by the ANC government that it has failed. If you can't accept responsibility for your mistakes then blame it on apartheid and white racism. The problem is that the country has seen through all this and the ANC is going to have to start accepting responsibility for its own fuck ups.
Strangely enough I am sensing that they are starting to do this.