"The argument was littered with elaborate theatrics which insulted the intelligence of the South African people," said Mr Naidoo. Ultimately a court would decide whether the reasons were cogent or not.
BBBEE is not a choice or "nice to have". It is an essential tool to democratise SA’s economy in an orderly, constitutional way. It is also an investment by firms in growing their businesses and the economy.
Written by one ONKGOPOTSE JJ TABANE who styles himself as some sort of a BEE consultant what helps make sense of BEE deals ek se.
OK Potsie I'll tell you a thing or two. There are very companies in South African who would refute the first sentence. In fact most have actually embraced and are getting on with what they have to do. However your second sentence is problematic, in the case of black owned business it's only the first part of the sentence that applies. When you exempt any large business from contributing to the economic welfare of a country then all you are is setting yourself up for failure, at least you've built in a failsafe excuse when it fails - you'll point your fingers at everyone who made an effort and tell them they were anti-transformation. Hitler did the same with the Jews.
October is adamant that no mischief was intended — "it was put into the notice but the effect of it was not understood". Innocent intervention or not, it is one for which his boss, Mr Davies, has had to grovel.
We all know what happened here. A certain lobbyist or lobby group might have mentioned that the broad-based clause would prevent the Zungurisation (Zungurization in the USA) of the economy. The lobbyists must have suggested that this economy can only benefit from the Zungurisation process.
A synonym could be oligarchism, it's still not clear
Or something along those lines. I love how so many of our politicians including Mmusi are pastors. Even Manyi preaches his brand of racism at some church somewhere. But that's not the point of this post. Rob Davies really pushed the boat out when he tried to justify his little paragraph about limiting the shape of ownership in South Africa. Initially he attempted to smooth the waters (another biblical reference) by saying that it was not retrospective. Alas his calming words did nothing to feed the 5000 frenzy (oops, another biblical reference) of putting BEE deals on hold. He has withdrawn that little paragraph and so we wait. We know that the influential and very government-focussed Black Business Council is pushing for narrow-based ownership because their members are best prepared for it. It doesn't take the wisdom of Solomon (is that another!!!) to figure out why this works. You can sell 51% of your company to a black investor for 30 pieces of silver (my recollection of Judas' commission for Jesus' betrayal is a little foggy) but there are very few black investors with the cash or desire to pay for shares. You could do some sort of vendor financing deal but then you won't be recognised as being 51% black owned because the shares need to be paid off. So it's free shares all round - and a controlling interest too!
What happens in a state procurement scenario? I've written already that these codes are not about private sector procurement (courtesy of Loane Sharp). These codes are designed to give black owned businesses a 10 to 20 point advantage over anyone else when it comes to state tenders. It's as really simple concept. You create a scorecard that is both too expensive and operationally impossible to implement, you add in negative marking, raise the entry level to 40 points and throw in a lot of corporate apathy which means that these codes will never be challenged. Even those companies with the best intentions will never get to any competitive score. You waltz in there with your level one and you can charge 11-25% more. Take a look at the table below.
BEE level
80/20
90/10
1
20
10
2
18
9
3
16
8
4
12
5
5
8
4
6
6
3
7
4
2
8
2
1
Non-compliant
0
0
- See more at: http://bbbee.typepad.com/paul_janisch/2011/06/the-pppfa-regulations.html#sthash.Z1pKyU23.dpuf
But wait there is a failsafe system built into this. If you are 51-100% black owned then you HAVE TO IMPLEMENT BEE when you go over R50m. Like hell. Do you really think that any black business worth its salt is going to bother responding to tenders with companies that turn over more than R50m. I wouldn't.
The ultimate message here is that black owned companies are never going to bother with BEE scorecards and other nation-building mundane activities.
This is where section 217 of the constitution comes into play. Id est section 217 (1)
"(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.
The highlighted words are my emphasis. Promoting people on the basis of race whist forcing those that need to compete with them to take responsibility for all empowerment activities, knowing full well that they cannot compete is not fair. When black owned businesses clean up in state tendering unfairly and inequitably there will be a court challenge. All we have to do is wait for the challenge because it will come.
The African National Congress (ANC) thinks Eskom should sell some equity to pension funds to improve its cash flow, said Enoch Godongwana, who heads the ANC’s Economic Transformation Committee.
“In order to address Eskom’s cash-flow situation, we need to mobilise funding from the Public Investment Corporation (PIC) and the retirement in return for equity,” Godongwana said by phone on Friday. The proposal is not yet public policy.
Trade and Industry Minister Rob Davies on Friday somewhat backed down, announcing a task team to spend 30 days reconsidering. It is clear what decisions they should arrive at.
Rob didn't back down. He's made up his mind. The task team is a farce, it's not going to check that data. Just look at the revised codes, no sane business would agree to those. I'm willing to bet that a large number of the 550 comments that Rob received rejected his codes. He went ahead and published what he wanted.
Also note paragraph 3.1.11 of statement 003 (Sector Charters). This says that a charter is immediately binding on the date it is published - no lead-in period. In other words, the draft is the final document and comments do not apply
Sandile Zungu, a vice-president of the Black Business Council and an economic adviser to President Jacob Zuma, described this as a "most welcome" move that would help create new black industrialists.
"Whoever hates this clarification notice is trying to vulgarise it, [by] saying it is now going to create 'black oligarchs'. It is an insult, it is wrong." The aim of these rules was to "banish fronting to the dustbins of history", he said.
"Most [employee share schemes], especially in the retail sector, have become synonymous with fronting, where there are claims of people being empowered, but when you look deeper into it, there has been no such empowerment."
The reference here is to a clarification note that the DTI published on Friday, the gist of which was carried by BDLive yesterday
The first clarification notice, published on Tuesday in the government gazette, gave rise to furious behind-the-scenes lobbying by stakeholders — ranging from business to trade unions — who would have been adversely affected. The new interpretation of the codes would have the effect of slashing the black economic empowerment ratings of hundreds, if not thousands, of firms and removing the incentive for companies to involve employees and communities in ownership beneficiary schemes. The department said on Friday that "the notice will not have a retrospective effect. This means that all B-BBEE (broad-based black economic empowerment) deals concluded prior to May 1 2015 will not be affected. These deals will have a full recognition under Code Series 100". Secondly, Mr Davies "will appoint a technical task team which will explore the appropriate balance between active (direct) and passive (broad-based schemes) ownership. The technical task team will report to the minister of trade and industry its recommendations within thirty days", said Friday's statement.
I think we've seen through Zungu, the irony of his quote does not escape me, he used the BEE equivalent of the race card "FRONTING!!!!" as a smokescreen.
What then is the agenda behind Rob's decision to start talking about active and passive shareholding all of a sudden? I think there are two aspects to this.
There are few potential black investors who have the cash or desire to pay for shares. So few in fact that companies have very few choices here. They could either vendor finance them as they have in the past which the new codes don't particularly like or they could just hand them over to the very few connected people (like Zungu).
As Loane Sharp wrote a few weeks ago "it is probable that the DTI is forcing through the new BEE codes to prejudice "white" businesses and advantage "black" businesses (the DTI's terms) ahead of the R1-trillion rollout of government infrastructure projects." If the codes are so draconian and so biased towards ownership then it is impossible for white owned etc type businesses to compete on points under the PPPFA so the connected blacks and rent boys walk away with the loot. Why not make it almost impossible for white companies to create shareholder wealth for their employees. When they fail they will be branded racists and anti-transformation and the ANC can then hide their incompetence behind a sordid veneer of racism.
The second option is more attractive. It plays perfectly into the hands of connected black business, the political elite and the ANC.
Interestingly Sharp warned us two weeks ago that this Rob notice was coming
The DTI's ultimate goals are becoming clear. The patron of the Black Business Council (BBC) is President Jacob Zuma's economic adviser, Sandile Zungu. The BBC is "the cohesive voice of black business" and aims to "accelerate the participation of black South Africans (in) the intended infrastructure rollout by the state (of) projects offered by state-owned enterprises". The DTI aims to create 100 black South African industrialists in Mr Zuma's present term. Evidently, 18 such applications have been processed since last August. Mr Zungu has dismissed employee share ownership plans as "shams", despite their growing popularity as a means of empowering the greatest number of historically disadvantaged people. He advocates the advancement of a limited number of black tycoons — a goal shared by the DTI.
Back to Zungu's fronting dustbin (which is extreme bullshit). This policy is a nest feathering exercise and once again the poor can get fucked. What the ANC needs is financial support, the poor might vote for them but their propensity to protest against the ANC's lack of desire to actually deliver any services, schooling etc to the poor doesn't create a warm fuzzy feeling. On top of this the poor are not going to finance the ANC, create these black industrialists who have the potential to become oligarchs and the ANC is in the money. Problem is that the tax payer is less willing to finance all this. That's why it's incongruent that the ANC government persistently attacks its only loyal constituency – the white tax payer. Suddenly you see that poor incompetent commie Rob is just a pawn. I don't think that there is any financial gain for him in this, and I'm not sure that he wants the gain.
But I sense that this arbitrariness is going to be questioned in court. Something Safiya Patel said in the RDM article rang very true
Webber Wentzel partner Safiyya Patel said the notice violated several legal requirements and was done without consulting stakeholders. "By referring to this notice as a 'clarification', the DTI has sought to avoid the provisions of the BBBEE Act, which requires that any amendments to the [codes] must first be published in draft form and be open for public comment for 60 days."
Our court case is imminent. There has not been a better time to stop this railroading by asking the Constitutional Court whether Rob and his backers are allowed to do this.
The only consolation is that Mr Davies’ intervention may not even be legal, with some commenting that it has ultra vires written all over it. Expect high-profile court action if the matter is not resolved soon. The ownership definition in the Mining Charter is already on its way to court for a declaratory order.
The courts should not have to make broad policy on BEE too, but if that’s the only way to find a sensible solution, so be it.
The circumstantial evidence is that Rob was involved in this fuck-up. My sources tell me that ministers were caught by surprise by this event. But what it has unleashed is a greater desire to approach the Constitutional Court and find out whether the arrogant and deluded communist can behave in this fashion. He's a fucking liability
Chief director of the Department of Trade and Industry Takalani Tambani said the idea behind the change was to ensure that ownership by black individuals was given greater priority by the business community.
"The message is government views the ownership as important to transform the economy. For us to effectively do that, we want to see black people participating meaningfully in the core of the economy.
"Passive shareholding will not be able to transform this economy. Passive shareholders are not the real drivers of the business," he said.
Mr Tambani also downplayed the effect the new measure would have on the scorecards of businesses, saying it was not a major change from the way broad-based ownership was measured in the past.
But Mr Balshaw said it had never been the interpretation of law firms advising on multibillion-rand empowerment deals that broad-based ownership was not real ownership.
The question is, can you just change an established empowerment practice with a casual paragraph. If Takalani is correct here then this is a serious amendment and must be clarified. He says it's going to make no difference - how is it going to make no difference. My money's on the fact that he himself doesn't know. Rather reflective of the standard of skill at the dti.