Paul Janisch

NCCI Comments on the Draft NEEEF Bill - Namibian Content

NCCI Comments on the Draft NEEEF Bill

NCCI Comments on the Draft NEEEF Bill

The Chamber provided comments on the draft NEEEF Bill. The table below summarizes our understanding of the core empowerment pillars and our perceptions of both their costs and benefits. We recommended the exclusion of pillars one and pillar two of the Namibia Equitable Economic Empowerment Framework.

Indicator	Beneficiary	Description	Assumptions	Perceived Costs	Perceived Benefits	Net Cost Benefit
Economic Ownership	Upper Class Well-connected	Selling of Equity stakes to FDPs	FDPs raises capital to pay for the stake in the company	Disruptive and intrusive law Lost FDI Capital flight Balance of payment pressures as foreigners sell out Over-exposures banks and diversion of funding from pressing challenges of housing and SME financing.	Improved corporate activity	Negative
Management control and employment equity	Upper Class and Middle Class	Racially representation on boards and top management and general employment	Company follow their normal appointment process to appoint directors and executives Employees are appointed on merit, companies remove ceilings in career advancement for previously disadvantaged persons	Requires formal racial classification and promotes racial polarization; blames white racism, brushes over complex causes of inter-racial inequality; erodes social trust and keeps focus on the past Pushes some citizens in the cold Brain drain divisive than cohesive racial quotas add to inefficiency	Diversified and expanded network of opportunities. Gained experiences provides formerly disadvantaged wider opportunities More diversified workforce	Negative
Human Resources and Skills Development	Middle Class	Skills development of racially disadvantaged employees	Requires companies to invest in the training of formerly disadvantaged persons which includes core skills	Increased labor costs	An improved skillset, improved productivity	Positive
Entrepreneurial development and marketing	Middle Class	Investing and supporting FDPs /entrepreneurs	Enterprise development becomes an effective tool to create or improve a company’s upstream and downstream partners	Sharing proprietary information Need to invest in program, monitoring and control systems	Reduced Costs Streamlined operations Improved quality products or reduced defective products More established businesses Significant business partners, suppliers or clients	Positive
Corporate Social Responsibility	Poor, Needy, Community	Investing in the community	Requires a company and its employees to be involved in the community	Increase in cost of doing business and reduced cash-flow to owners	Improved company positioning due to community involvement	Positive

Read the NCCI Comments on NEEEF here.

via www.ncci.org.na

I haven't paid much attention to NEEEF and Namibia for a while. But for those who are interested here is the Namibian Chamber of Commerce's view.

I don't see procurement. Procurement is the glue. Without it, it cannot work

Looking a gift horse in the mouth

Yes, there is a pun in the title. Enough of the horsing around, saddle up and prepare for the steeplechase. I have (not alone I stress) spent many hours deliberating as to how we can create sustainable NPOs. The best example that I know of is the ATKV which is a large organisation (NPO but this status is changing) in terms of turnover that declares a not insignificant surplus each year. They derive very little income from their members and are most certainly not dependent on the government for handouts (as that cultural icon Zwelithini is). This is an organisation that exists to promote the Afrikaans language and culture and spends a huge amount on supporting this and still comes out with cash. The answer to this is simple – they have a number of very lucrative investments and these investments are managed by business people, not bureaucrats. It is fascinating listening to their commercial CEO telling you the story of their success.

The solution for long term NPO stability has to lie in investments. Not an easy solution because most NPOs tend to live from hand to mouth. However, this concept of broad-based black economic empowerment has opened up a number of lucrative opportunities. The adaptability to these opportunities will separate the nags from the stallions. I am very involved in a certain charity/cause and have been for many years. I have learned so much from them. They were the ones who figured out that they in effect create independent businesses and could easily attract enterprise development (ED) donations. The ED donations worked for this NPO because the donors don't insist that all the money goes to the beneficiaries directly, which is the case with socio-economic development donations (SED). To run a successful NPO you need infrastructure in the shape of people,  offices and social workers etc. The ED beneficiaries were also the SED beneficiaries so the infrastructure supported them as well. But this is still a handout situation, the more money they bring in the more they would spend on their cause.

After much brainstorming with my connection we decided to develop a trust that is designed to benefit black women only. This trust is now able to look at equity investments in companies. But there is a caveat. The trust cannot pay for these equity investments. Our model would be joint ventures of sorts, more specifically involvement in new companies with great promise. We concluded one deal last year and were making great headway for the next. Perhaps before I go any further I should give the reader a little bit of background. The NPO in question has been around for a long time – one of the trustees I met yesterday has sat on the board for 15 odd years. It has some very prominent black people on its board, some of whom are VERY connected in ANC circles (I stress VERY – but not to Zuma, his cronies and family are very interested in themselves only). This connection is very attractive to potential partners but it is pointed out very quickly that this connection will not be to the potential partner's benefit.

Now onto yesterday's horse trial. There've been a number of meeting where the parties have met with each other and the structure has been finalised, the value proposition is clear but it needed a bit of rubber stamping. We all met at the stables of one of the trustees. Let's call her unstable. Unstable is the gatekeeper here, she's saddled herself with the responsibility of ensuring that the deals are not viewed as fronting, which is the correct approach. However unstable is also in the business of BEE investments. Her line of questioning confused me because I couldn't always figure out whether she was representing the NPO or her business. It is very clear that the deal has to be completely above board because if the word gets out the connected ANC person gets a deal and it's a front that could have dire consequences. We had no problem with that and absolutely respected it. The connected ANC person has no slight against their name (see gender unspecific) and we would do nothing to impact on them or their spouse (or racing horse, if they have one). Unstable on the other hand was offering a line of questioning about why the local company didn't want to take an equity stake and we don't consider the NewCo. This is not a desired route and if it was pursued then the NPO would not be a contender because they do not have any money to pay for this stake.

I don't know how to summarise this, but here goes.

• The NewCo is to be 51% back-women owned. It arose because of the pressure that larger corporates are putting on their suppliers to get 51% black ownership
• The other 49% is owned by an international company who are putting up all the money to create the company
• The NewCo will offer a wide variety of services and will in time become a specialist in certain activities that it will resell back to its international parent
• The international parent has no interest in selling any stake to any local anything. This is irrelevant to the deal. No company is under any obligation to do this – unstable's line of questioning now becomes peculiar because it appears that she is attempting to swing the deal to her other business.
• Unstable suggested that this be run past the DTI – why would anyone want to do that? They are useless and would scupper any deal that had any chance of success. The rule here is that you DON'T NEED DTI ENDORSEMENT FOR DEALS. What you do need to do is ensure that you stick to the rules. Those rules, for their sins are contained in the codes.

All right NPOs. The ball's in your court. Many companies need you, you just need to make sure that you are not too political and you work with your potential partner to create a business that will ultimately benefit your NPO. I would recommend that you choose trustees who are a little less stably (sic). Hay?

What did you just say Mr Anderson?

Related articles

The black middle entrepreneurial class, SONA and the deep blue (AN) Sea

All about fronting

The BBBEE Commission says fronting remains a big problem in the country, and that the majority of cases reported to them involve fronting.

“Out of the 33 complaints we received, 22 of them were purely on fronting,” acting commissioner Zodwa Ntuli told reporters on Tuesday.

via feedly.com

What did I write about in yesterday's post?