Two Rob mentions in a title. This pic is taken from the DTI's website, it shows Rob taking delivery of his new Toyota, which was locally manufactured. I'm not going to bother with a link, suffice to say that Rob's Bolshieness is fading somewhat. But once again I digress.
Today we heard the Zuma patsy (it's Shaun O brow, I know you were confused because all the patsies are impossibly incompetent) announce that he was perfectly justified in laying charges against Pravin but new evidence has come to light and now he has applied his mind to dropping the charges. That the charges were non-existent at the time of instituting them escaped our woolly sheep.
And so it has come to pass - actually two months ago and counting, that our esteemed commie zealot of a minister of trade and industry (when we get a competent one I will use uppercase) realised that the requirements for an empowering supplier were either onerous or not applicable to a large number of companies operating within our porous borders. And I quote without actually quoting (thanks for sending this to me Thinus).
any entity measured on or after 1 May 2016 will automatically be recognised as an empowering supplier until further notice is issued
This is so similar to Shaun of the Dead. Surely if the DTI had been so hell-bent on forcing their idiotic ideology on us they would first have checked that all companies operating within our wonderful land could actually be empowering suppliers. Just like Shaun should have actually bothered to check to see whether Pravin et al actually committed a crime. I wonder what pushed Rob over the edge here (he should have jumped off a cliff years ago and retired to the Urals). I suspect that he must have realised that some companies would try not to become empowering suppliers and hence would not bother with a scorecard. Perhaps he realised that verification agencies were going to issue empowering supplier certificates anyway because if they didn't they couldn't continue with the verification - which is where the money is.
Where to now our most fearless red leader? Perhaps you'll remove the negative marking from the scorecard. Maybe you'll realise that the legacy you leave will be personified by ineptitude and that your communist buddies would regard you as a failure too. But in true ANC-style this won't bother you, I for one cannot wait to see the back of you.
I wonder if you get Fortunas in the Urals, I suspect you might in the near future.
One of the things that I am particularly bad at concealing is my disdain for the ANC government, specifically Rob Davies' little kolkhoz, formally known as the DTI. It is staffed by incompetents. I really shouldn't moan because they give me something to write about. As I might have mentioned before the BEE Commissioner is going to focus on fronting. Forget about everything else – the money is in fronting. BEE needs fronting because it gives legitimacy to the arbitrary laws and policies that the government foists on us. What is this fronting then?
Fronting defined
The Department of Trade and Industry regard the practice of fronting as a "scourge" and have gone to great lengths to stamp out the practice. Fronting has now been incorporated into the Broad-Based Black Economic Empowerment Amendment Act and is recognised as an offence with prescribed maximum penalties. The maximum penalty is either 10 years in prison or 10% of the company's annual turnover.
Definition
A fronting practice means a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act or the implementation of any of the provisions of this Act, including but not limited to practices in connection with a B-BBEE initiative
in terms of which black persons who are appointed to an enterprise are discouraged or inhibited from substantially participating in the core activities of that enterprise;
in terms of which the economic benefits received as a result of the broad-based black economic empowerment status of an enterprise do not flow to black people in the ratio specified in the relevant legal documentation;
involving the conclusion of a legal relationship with a black person for the purpose of that enterprise achieving a certain level of broad-based black economic empowerment compliance without granting that black person the economic benefits that would reasonably be expected to be associated with the status or position held by that black person; or
involving the conclusion of an agreement with another enterprise in order to achieve or enhance broad-based black economic empowerment status in circumstances in which—
there are significant limitations, whether implicit or explicit, on the identity of suppliers, service providers, clients or customers;
the maintenance of business operations is reasonably considered to be improbable, having regard to the resources available;
the terms and conditions were not negotiated at arm's length and on a fair and reasonable basis;
Frustrates the objectives of the BEE Act
This has to be the starting point of any measure of fronting. The objectives are contained in section 2. There are eight objectives, these are the most significant:
promoting economic transformation in order to enable meaningful participation of black people in the economy;
achieving a substantial change in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises;
increasing effective economic participation and black owned and managed enterprises, including small, medium and micro enterprises and co-operatives and enhancing their access to financial and non-financial support.
It is relatively easy to show compliance with these three objectives via a series of documents, whether legal or otherwise. However, all codes of good practice make it very clear that the intention of these documents can be interrogated.
Proving fronting
Whilst fronting has been specifically created as a crime by the BEE Act, it is suggested that it is very similar to the common law crime of fraud. There are numerous definitions of the term fraud but this one appears to be the most comprehensive.
"Fraud is the unlawful, intentional making of misrepresentation which causes actual prejudice to another or holds potential prejudice to another"
Five elements must be proved simultaneously for a conviction under fraud, these are
prejudice,
misrepresentation,
unlawfulness,
causality and
criminal intent.
Each must be proven by the state beyond a reasonable doubt.
Function of the BEE Commission
The BEE Commission, under commissioner Zodwa Ntuli, performs a variety of functions. These are, inter alia,
to oversee, supervise and promote adherence with this Act in the interest of the public;
to receive complaints relating to broad-based black economic empowerment in accordance with the provisions of this Act;
to investigate, either of its own initiative or in response to complaints received, any matter concerning broad-based black economic empowerment;
Regarding paragraphs (c) and (d) above, section 13F(2) protects against arbitrary allegations of fronting or offences.
(2) A complaint contemplated in subsection (1)(c) and (d) must be—
(a) in the prescribed form; and
(b) substantiated by evidence justifying an investigation by the Commission.
Upon receiving a complaint in accordance with 13F(2) the Commission may
If (it is) of the view that any matter it has investigated may involve the commission of a criminal offence in terms of this Act or any other law, it must refer the matter to the National Prosecuting Authority or an appropriate division of the South African Police Service.
Mitigating against the possible occurrence of fronting
As has been discussed above the mere allegation of fronting will hold no water with the commission. The alleger would need to provide suitable evidence that there is a possibility that fronting may have occurred. The crime of fronting has yet to be tested in a court of law. Until this happens it is suggested guidelines contained in both the BEE Act and Strategy Document are used as a yardstick to measure what you are about to do.
BEE Act
Section 3 of the further requires that
(1) Any person applying this Act must interpret its provisions so as—
(a) to give effect to its objectives and purposes;
The BEE Act in its preamble states that the intention of the Act is (inter alia) to promote the achievement of the constitutional right to equality, increase broad-based and effective participation of black people in the economy and promote a higher growth rate, increased employment and more equitable income distribution;
Amended BEE Code Series 000, Statement 000.
2.1 The fundamental principle for measuring B-BBEE compliance is that substance takes precedence over legal form.
This paragraph permits an interested party to look beyond the legal framework of the deal or structure and look for the intention. Typical fronting activities under these circumstances are black shareholders who have no knowledge of the business or their shareholding.
2.2 In interpreting the provisions of the Codes any reasonable interpretation consistent with the objectives of the Act and the B-BBEE Strategy must take precedence.
The BEE strategy document
This lists the following key principles that underpin the national BEE strategy.
Black Economic Empowerment is broad-based.
Black Economic Empowerment is an inclusive process.
Black Economic Empowerment is associated with good governance.
Black Economic Empowerment is part of our growth strategy.
And so we are coming to the end of single figures. This is Oliver's tenth year on this planet and what an incredible ten years it's been. I'm not sure if I have told this story before but Oliver was born on Peter Green's birthday because of some ridiculous desire of mine. We knew he was going to make his appearance on this planet at about that time. Kath was adamant that Oliver was NOT going to be born on Peter Green's birthday. She maintained that his birthday would be all about Green and not Oliver. We went for the three-week-prior scan and the gynae told us that he could deliver him on either the 29th of October or the 1st of November. I was big on the 29th. Fortunately for me Kath knew someone who had a birthday on the 1st that she was not very keen on. The 29th it was to be. At the final scan the gynae told us that his game farm was having its AGM on the 29th and he could do the 31st. I was apparently distraught so we got a new gynae and Oliver was born on the 29th of October 2007. That was nine years ago.
Every year in his life brings something different, his interests change, his outlook changes and certain things remain consistent. We've had a hell of a year with renovations. All four of us living in the same bedroom, the garden in turmoil, no swimming pool during the hottest summer I have experienced since I was on the border 29 years ago. We did manage to find a place to put his trampoline. This is perhaps his most consistent pastime. He probably spends a few hours a day jumping and playing these games that only he understands. We now know how significant the trampoline is in his life, he has literally jumped it into oblivion. When he doesn't have it he is at a loose end. He definitely has a body that shows how much time he spends on this thing, very square shoulders, strong arms and legs and a body that I wish I could have had at twenty. Getting around the house after the renovations was easy - he would get out of bed and climb on his J-board and head to the breakfast table. This is the pretty the way he gets around the house - there are all sorts of dings in the floors that might have been caused by a J-board. Sadly it appears that he's lost interest in this activity. I'm hoping he gets it back.
The last few years have been Star Wars years. I'd never watched it in the past but now I know a lot about it. I loved watching the latest one on the big screen with him, he knew all the characters and was enthralled. All that has changed. Harry Potter is the new cool thing. We're concerned about the films, they scare the bananas out of me. The next best thing, in fact the only best thing are the books. And he reads them voraciously, re-reads them voraciously; the school books he brings home bore him and offer very little stimulation. Take his kindle away and we have problems. When he is reading you lose him completely, I find myself screaming at him just to attract his attention. We were away camping this weekend and he and his friends were casting Potter-approved spells at each other, including his younger brother. They were using their glowing marshmallow sticks as wands. Understand here that Oliver is the only person who's read the books - this is a game of his making and his mates are gung-ho.
I've mentioned this before that he is a very bright child, he loves reading. His comprehension is extraordinary and he and his brother enjoy their trips to the library. I get the impression that he tends to warm to kids that are on his intellectual level. He likes a bit of rough and tumble but relishes discussions with his friends. I was so proud of him when he put together a project on an obscure dinosaur called a Rhamphorhynchus. He got stuck in, learned how to use PowerPoint, took presentation lessons from his mother (a seasoned pro) and delivered a unique experience to his class mates. I encourage both kids to look for unique angles to things. A number of his class mates presented on the predictable dinosaurs like T Rex, Oliver's was different. I like the different.
Last year was soccer, this year was rock climbing, winter cricket and the JUMA. The picture above shows Oliver going down a ramp on the JUMA. It was a 22km race that he rode on a heavy bike. He just got stuck in and we had a stunning ride. I think this is a feature of Oliver, he's a lot tougher than meets the eye. He can be a determined little boy - we had this dragging incident with Leia chasing a dog and Oliver being dragged behind him. He had a pretty decent roastie but he continued on the walk.
Next year is his last year in junior primary and then it's primary school proper. School finishes later next year, this is going to impact on his reading and jumping time, although I suspect he'll make a plan.
Another year Oliver, a year that has seen us learn a lot about each other. There are so many similarities between us except I think you'll be a much better cricketer than I ever was. There'll be more challenges facing you and I think that you are on the right path to deal with them. Your mother, brother and I love you very much and wish you all the best for your tenth year on this planet.
And now for the music.
Green's significant years were between 1966 and 1970, the same period that Hendrix turned rock on its head. I am still enthralled by his music. I've chosen a song that I have asked my friend Chris Daffy to play on his show on LM Radio this weekend. Oliver's school has cancelled homework for the younger classes, perhaps this song will remind Oliver that homework is a very old institution. This is a Fleetwood Mac cover of the Otis Rush standard.
History might forget Denny Laine as the McCartney star fades. That would be wrong, Denny was a very prominent member of McCartney's Wings. The first guitar tutorial book I got was the Denny Laine Guitar Book, he's been very significant in my life. This track is taken off his Japanese Tears album. It's not a bad album, more of a compilation of a number of Laine compositions over the ten years that he was in Wings.
And then there's Ollie Halsall. The Facebook page that I started with Barry Monks ten years ago is growing from strength to strength. We've got more than 1000 subscribers and the amount of information that has surfaced about this incredible musician is um.... incredible. This track is sung by the only surviving/compos member of Patto, drummer John Halsey. Halsey, or the Admiral as he is known as, played on a number of significant albums - that's him on drums in Lou Reed's "Walk on the Wild Side". There are two Halsey tracks on the Patto's "Roll 'em" album - we won't be posting the other one. Now where is Ollie for God's sake?
There’s an oldish adage which says that anyone at 20 who is not a socialist has no heart, and anyone at 40 who is still a socialist has no head. From this you can safely conclude that Rob Davies, our Minister of Trade and Industry, is in an arrested state of development. In the presence of overwhelming evidence that the policies enforced by his department have made a major contribution to the contraction of our economy, he remains steadfast in his commitment to the principles with which Joe Stalin set back the Soviet Union by 50 years.
His latest sally into the field of taking a working industry and wrecking it is a draft liquor bill published for comment at the end of September with an end-October deadline. It contains almost all of the controversial clauses of the discussion document issued a year ago – which is a clear indication that no one at the DTI ever had any intention of taking cognisance of feedback. This in turn suggests that it would be futile for interested parties to engage now – on this ridiculously short notice deadline.
Many of the issues proposed last year and enshrined in the bill are unlikely to pass muster when the act is brought before the Constitutional Court – which is inevitable. It infringes on the rights of the provinces, it effectively expropriates property rights and it aims to impose vicarious responsibility on producers for the abuse of their products by consumers.
Haven't we seen this movie before. 550 comments were received about the revised codes and they were largely ignored. "The document is constitutional", Sesame boy told me. What he was really saying was "It's constitutional, go to court if you don't agree." There was no appetite to litigate against the DTI then but the stakes are much higher with liquor. Perhaps the court will find that the DTI is patently negligent in its lawmaking - this might ignite a desire to litigate.
The keyboard on my PC has redesignated keys and I can't find the hashtag thing (known as a sharp in music). Back to the hashtag #Standardswillfall. This refers to the incredible likelihood that verification standards that were never particularly high anyway are going to plummet. The BEE commissioner will attempt to prevent this with her well-spelled documents but will not make any difference. Not that I particularly care either way. And here are the Shaun Abrahams-approved theories as to why.
Complexity
We are dealing with a very complex document. The complexity is exacerbated by the lack of clarity. As I have mentioned on these pages before it takes me an afternoon to figure out the employment equity score. I have already decided that for clients based in Gauteng I'm not going to bother with Coloured and Indian employees, their contribution is so negligible. The complexity has two aspects to it, the first is that it is complex for those who have to implement the codes and secondly for those who have to measure the performance
Paperwork
The demise of forests is imminent. Long complex files will need to be compiled with copies of BEE certificates and invoices and ID books and payslips. The proof of empowering supplier status will take multiple lever arch files. Can you imagine how long it would take for a large corporate like Standard Bank to prove that is a) compliant with all regulatory requirements in the country, and b) a good citizen. If you haven't guessed yet, it would take months.
Economics
Quite simple really. These codes are ridiculously hard to interpret, harder to comply with and unviable to implement. If you, as a verification agency (VA) had to conduct a proper audit just to meet the basic requirements to become an empowering supplier it would take a few resources months. No verification agency is going to do this because it will cost them too much money to do so and their clients are not going to pay more. You see the market is used to old codes pricing. Any sane verification agency will know that you cannot devote resources to something and run at a loss. In other words – old codes pricing will prevail.
IRBA says no more, SANAS is the man
Oops, that's a little colonialist. Now back to the crux. There are about 20 times the number of IRBA VAs than SANAS ones. I have little faith in SANAS, I think the people working for them are nowhere near the calibre of the people working at IRBA. Also they get off on ridiculous procedures and mountains of paperwork. The migration from IRBA to SANAS is not going to be seamless. It's going to be painful and long – just like standard six. I have heard that a certain construction company held a day long BEE course for its core suppliers and told all delegates that IRBA certificates issued after September 2016 will no longer be accepted. One this is stupid and two as far as I know there is a further grace period until the end of this year (2016).
The big problem here is bottlenecks. There are in the region of 450 VAs operating in the country, the breakdown is round about 400 IRBA and the balance SANAS. This is good enough to cater for the demands of the economy. If SANAS is going to sit on files for six months then very few BEE certificates are going to be issued after the first of January. I can see the DTI's attitude – a Zuma-endorsed, it's not my fault, or problem. This is the DTI's problem. IRBA wants out, they don't want anything to do with BEE anymore. If fifty odd VAs are left at the beginning of next year they are going to have to move very quickly to get certificates out. Standards will have to drop
The BEE Commissioner is ……
Noble, honourable, keen as mustard and in for a big surprise. Her non-binding, idealistic, well written guidelines will be ignored. They have to be because they are idealistic ambitions that require more effort than is financially viable. She will soon realise that she might as well go back and moan about the levels of fronting. She may try and stamp her authority on the VAs, telling them that they have cut corners etc. They will have to ignore her because there will be no business to be had if they do. It's one thing to play with the taxpayer's money (like the whole government) it's another thing to play with your own.
What I would do. Produce a complicated, long file with samples and ID books and BEE certificates and contracts and you will get your certificate. Most requirements are going to be done by ticking boxes. If a VA cannot find that a company is an empowering supplier then they can't continue with the verification. This means that they will not be able to charge more. Expect every company to be an empowering supplier. Those VAs that actually check your work will soon go out of business.
Two Rob mentions in a title. This pic is taken from the DTI's website, it shows Rob taking delivery of his new Toyota, which was locally manufactured. I'm not going to bother with a link, suffice to say that Rob's Bolshieness is fading somewhat. But once again I digress.