THE Department of Trade and Industry will provide grants and cheap loans to the tune of R1bn as part of the government’s plan to create large and competitive black industrialists.
The funding was expected to attract an estimated R10bn to R20bn from other funders, such as the Industrial Development Corporation; the National Empowerment Fund; the Public Investment Corporation and banks, department director-general Lionel October said on Wednesday.
"There are discussions to offer loans with interest of between 1% and 3%," Mr October said on the sidelines of the Black Industrialists Indaba, a forum to discuss support for the sector.
The department would look at ways to direct a portion of the R6bn in annual incentives that it gives to companies to black manufacturers, Mr October said. He said that when SA’s new broad-based black economic empowerment codes come into effect in May, only companies with a minimum level of four would qualify for the incentives.
This is in all likelihood another empty promise from our Lionel and the iDioTIc. On a practical level Eskom can barely provide enough power to power the pump on the Nkandla firepool - how is it going to support ANY emerging industrial activity.
THE government’s black economic empowerment policy has contributed to the country’s deindustrialisation as it has fostered the creation of middlemen in the supply chain, says former African National Congress MP Professor Ben Turok.
Prof Turok, who is also the director for the Institute for African Alternatives (IFAA), said the policy incentivised mining companies to source their supplies from black-owned suppliers which were not themselves involved in the productive sector of the economy but merely involved in the import/export business.
These middlemen had replaced the manufacturing firms that previously supplied their products directly to the mining companies.
The middlemen had tended to import the supplies at the expense of the local industry, particularly the capital goods industry, Prof Turok said.
THERE has been much bluster recently about just how much of the JSE’s market capitalisation is owned by black people. The JSE put out some of its own numbers saying it is 23% of the top 100 companies. That number has been disputed, with some arguing it is less than 3%.
You may think such range of disagreement is surprising, but at the heart of the dispute is a profound philosophical problem. The fact is very little of the JSE is owned by people at all.
More than 90% is owned by institutions like pension funds and life insurance companies. The problem is that there are big differences between the characteristics of natural persons and legal persons. It is a lively area of philosophical debate, for instance, about what sort of legal rights and responsibilities one can demand of legal persons compared to natural persons.
At last an unemotional argument about JSE black ownership. Contrast this with Duma Gqubule's article in (or is it on?) BDLive last week. His article follows the now very boring pro-Zuma/ANC propaganda line of
(T)he statistics have become a political tool used by fringe groups on the right to support an antitransformation agenda
Duma's wrong here - well at least I believe he's wrong. There are certain rules that have been established when measuring ownership. They are the same rules that have been extended to the revised codes. You can't then suddenly decide that you will use a different measurement system - as the government has on many occasions. I think Duma's article is sensationalist and incorrect and it firmly nails his colours to the mast - one wonders whether he will ever be hired by the JSE to measure black ownership.
Back to Theobald's analysis. He concludes with this paragraph
We need ways of measuring black economic empowerment. To my mind we should focus on natural persons and only two things matter: what is their income, and what is their wealth. There is only one institution that knows the answers (or at least tries to) and that is the South African Revenue Service. If we want a proper tracking of transformation, that is where we should go for answers.
The issue that neither Theobald nor Duma actually address is that of determining race. SARS is not the answer, they know what my name is, how I am married, how much money I earn and where I live. They can judge from my ID number that I am male and born in SA, but they have no idea that I am white (sometimes I can't be sure myself). Until such a time that the ANC government comes up with solution to determine race, something that the Nats never could get right, this question will never be answered. If I asked you what race Mildred Oliphant was and you had never heard of her, how many say she is African, similarly with N Balfour - those of you who were well familiar with Robert Louis Stevenson's might suggest that he's Scottish and hence most likely white. How about Marius Fransman?
This is probably the question we are asked the most often. Will these Amended Codes and all Sector Codes really become effective on 1 May 2015. A well known BEE Consultancy recently advised that there would be a delay and this was refuted in the strongest of terms the following day by the Dti. We believe that the Dti will continue to pursue the 1 May 2015 implementation date. One of the solutions that have (sic) been suggested is that all current Sector Codes will be repealed before 1 May 2015 and that on this date everyone will use the Amended Codes of Good Practice until their particular sector code has been amended and gazetted.
The underlined section poses a wide number of issues.
Can the DTI summarily repeal current codes?
Is there a process that needs to be followed?
What are the ramifications of such an action?
I can't answer question one in any informed way. I would imagine they can't but will anyway. Which brings me onto the second question. I cannot see that a piece of legislation or secondary legislation can be arbitrarily repealed, there must be a standard procedure contained within our law. I don't know what that procedure is and I don't know how to ask DuckDuckGo how I go about this. Chris van Wyk suggested to me that the action of repealing a code must follow the standard process as prescribed in section 9 (5) of the act which is to put it out for comment for 60 days. 9(5) talks about "issuing, replacing or amending" a code. Chris posits that repealing is either an amendment or replacement.
Time has now run out for the sector codes to meet the 1 May deadline. If they published them all for comment tomorrow then the 60 day comment period would end in early May. They have to consider comments and hence cannot logically publish the final code the day after. The consideration period for the revised shambles was about a year. Let's say it takes them two months to consider the comments, we are looking at about July before the first code comes into effect. We know from the QSE codes et al that were published last year for comment that a sector code has no lead in period (which I certainly believe is unreasonable). July at the earliest.
There are two possible options that could happen.
The DTI summarily repeals all the codes and tells everyone (as per AQRate's email) that those companies must now follow the revised BEE codes
This would be procedurally wrong and legislatively unfair. We know that all codes issued under section 9(1) enjoy the same legal status. This means that those companies subject to an industry code have no reason to even consider or anticipate implementing the revised codes. They could persuasively argue (unfortunately only in a court of law) that they can't be expected to consider the revised codes in such a short period of time. Also I would encourage some form of litigation from charter councils or their constituents to query as to whether the DTI may do this.
2) The DTI follows the prescribed process
As I wrote earlier I don't know what the prescribed process is but I'm willing to bet that you cannot summarily repeal a piece of legislation without at least putting it to some sort of public vote or similar.
My money is on the fact that there will be a 60 day comment period whether they publish codes for comment or repeal them. If this does happen then this what I recommend you do
RECOMMENDED ACTION IF YOU ARE SUBJECT TO A SECTOR CODE
Avoid the mad rush to get your old certificate issued before the revised codes come into effect on the 1st of May. If your certificate expires during the comment period then you are OK – get a new one issued under the old code. However if you are somewhere in between then wait until the 60 comment period has passed and immediately renew your certificate under the old code. You might be able to drag it out by about a month but I wouldn't wait any longer, don't forget that when the new code comes into effect that's it – there's no lead in period.
A rhetorical question I think. The short answer is the African elite, the longer answer is African people as undefined. As an aside, I looked over the EE Commission's report to see if a definition of African, Coloured or Indian exists and could find nothing, the best I could find was here, which asked the question "how do you describe yourself?".
Back to the African elite. I think this is deceptive and mischievous on my part. This description is based on the dubious behaviour of our higher politicians and their various business advisors. However this elite is actually a lot bigger than mere politicians and their cronies. A larger number of employed people form part of this elite because they contribute a large number of points to a company's BEE score. If you add the total number of points under management (less board, top management and bonus points) with skills development (also excluding bonus points) you get 25 points (9 from EE and 16 from skills). These are all subject to the loosely defined economically active population (EAP) targets. This is the breakdown of how each race contributes to those 25 points.
African
18.58
Coloured
2.68
Indian
0.74
AF
2.55
CF
0.37
IF
0.08
Poor Indians – they really aren't worth much within the context of EE and skills, less than a single point in total.
Perhaps you might be asking why would the African elite contribute so much to skills development. It's actually quite simple – with the target being doubled to 6% of payroll and the measurement of skills development tightened up, companies will have to spend more money on training African people. I estimated in a post last year that Nedbank would need to spend an average of R19,5k on the training of each black employee. You cannot spend this amount of money on lowly employees because they will not benefit from an expensive courses. To meet this target they will have to focus on the more skilled employees, the higher they are up the food chain the more expensive the courses.
And then there is the ownership issue. 53% of the points available on the revised scorecard are directly concerned with ownership. This ownership is not simple encumbered ownership. It's paid off ownership. The definition contained in the codes for 5130 contains this requirement "has earners all the points for Net Value". By the way, my 5130 post should really read 51/30.1 (thanks to the reader who pointed this out to me). There are two implications here
If you are looking to create this type of company you need to donate the shares, forget about finding a willing investor – history has shown that they are few and far between
You need to create another vehicle that fronts for you
But then you've got those established black owned businesses who could generate huge numbers of points to a corporate. Those are owned by the black elite (not specifically African but characters like Zungrabber are in for one hell of a ride), and when it comes down to the wire they will simply refuse to implement any form of a BEE scorecard because they don't need to. Now we can see why the PPPFA has to be either amended or repealed.
Having dumped all this cynicism into the ether I can see why the codes have been drafted in this way. If they were equitable, clear and agreed to then we'd probably make massive strides in building the economy. The desire to right the wrongs of the past makes up this thin veneer at the top of the codes, the substance plumbs grotesque depths with those who have already feathered their nests looking to milk this run-off-the-rails train for the next four years.