Paul Janisch

They call them QSFIs in FSC speak and use the old codes, awdozn't that sound nice

It's a strange business this BEE business, we all keep our little schlenters to ourselves and leave the rest of the world in the dark.  I can assure you dear reader that there are a number of schlenters that I have devised and still use - in spite of SANAS' best intentions to close them off.  However, like Makhosi Khoza (note the uppercase and you really should watch her interview on SABC this morning, it's at the end of this post) I cannot keep silent when it comes to qualifying small enterprises under the FSC - more accurately Qualifying Small Financial Institutions (QSFIs).  A debate has been raging since bolshie bob published his revised codes as to what scorecard you use.  

Perhaps we should see the Financial Sector Code in historical context before I launch forth.  The current FSC (gazette number 35914) was gazetted in November 2012.  This was during the period that bolshie (the terrible) put his revised codes out for comment.  I believe that bolshie's intention was to distract the financial institutions from commenting on the revised codes (not that he would have read them anyway) by giving them their own code.  That has to be the reason because why would you gazette a code that is so similar to the codes that you are going to replace?  It's a distraction.  They were obviously in a hurry because they forgot to gazette a QSE code.  bob sent out a notice a year later that QSFI's should 

 in the interim utilize the Qualifying Small Enterprise scorecard of the Generic Codes of Good Practice for the purpose of measurement of their B-BBEE status.

This notice was a month after the gazetting of the revised codes, but we were still in the interim phase of their application.  In addition bob had still not bothered to publish the revised QSE codes (those were published about 18 months later).  This notice therefore has to apply to 29617.

The FSC is now almost five years old and for some reason there is still doubt as to what code you should use for QSFIs.  This was in spite of the fact that 

1. The FSC code refers to the old codes for clarity in certain places
2. The criteria for being a QSFI are based on turnover between R5m and R35m and designated investments less than R50m
3. When the QSFI code was ultimately gazetted then QSFI's could select 5 out of the 8 elements for compliance - a strong feature of the old QSE codes.
4. The EME threshold is below R5m
5. The score was measured on the old levels - with an 8 being between 30 and 40 points

There is just a complete disconnect between the FSC and the revised QSE codes.  Firstly the turnover threshold is between R10m and R50m.  Does a QSFI have a choice when they go over R35m to go QSE or FSC generic (I know what I would choose).  What about EMEs (exempt micro enterprises) do they make use of the R10m threshold even though their code says that R5m is the threshold.  There's a schlenter for you, a lot of FSC EMEs use that threshold, in fact even black-owned QSEs make use of the R50m break. If I am evaluating a client I tend to let those certificates go through - as I'm sure most people do.

Still the debate raged on.  This morning my good friends up the road got hold of SANAS who told them to speak to the FSC Council who apparently told them that the revised codes were the ones to use. I got on the phone and spoke to my old friend Busi (who runs that joint).  She said that a policy decision was made a while ago - you must use the old (29617) codes for the QSE scorecard.  It's up on their website,   more specifically here. The relevant paragraph is number 4

The FSC Council has noted that the gazetted Code did not include the details of the QSFI scorecard. As the DTI Codes are being revised, which will mean that the FSC will need to be re-aligned to the revised DTI Codes, it has been agreed that the QSFI scorecard will not be issued at this stage.
All QSFI’s will be measured against the DTI QSE Codes (Code 800 – Code 807) until such time as the FSC has been revised.

For those who have forgotten - code 800 was the QSE code under the old codes.

That's put that to bed then, let's see how long it take awdoz to issue an explanatory note requiring all QSFIs to use the revised QSE code because her opinion is neither legal nor binding.

 A little bit on this interview below.  This is Makhosi telling the SABC viewing public how corrupt zuma and the anc are.  This is a mere six months after hlaudi was booted out.  That's progress I tell you

Is there any ANC left to organise a piss-up in a brewery?

This is an updated version of an earlier post

Recently (actually 2011 but the sentiment remains and the language is much stronger) my friend  Kevin announced that the ANC couldn't organise a piss-up in a brewery. This is an appreciation of the anc government's ability to organise a piss-up in a brewery, or organise anything for that matter.

We know that many senior anc members enjoy the finer things in life, like Maybachs, Range Rovers, Glen whiskies, Hansa Pilsener and nice watches, the value of which could feed a small family for a lifetime. It therefore stands to reason that the taxpayer's money is plentiful - hence wastage is really not a concern.  This piss-up would have to cost in the millions. Under these circumstances the organisation of such a piss-up would need to go to tender.  We can safely assume that Eskom (Eskom can barely organise us power so they would be perfectly suited to manage this process) would  be the company putting this little event out to tender.  Unsurprisingly the tender is likely to be awarded to some gupta front via McKinsey who outsource Trillian, who know fuck-all about piss-ups but know an incredible amount about being paid for knowing fuck-all.  Trillian takes their 50% and finds some anc crony to outsource another firm to source service providers for this event (who will never be paid).

Now the fun really starts

• The members of the very fractured  anc start fighting with each other about the guest-list, the venue, the date, the fact that the workers (who haven't been invited) weren't consulted.  Court action is threatened.
• The youth league has a practice run at a prominent nightclub, drop their trousers and threaten to boycott the event because the beverage of choice doesn't include Oros, which is a great mixer for cane.  They also object to the fact that more of the president's wives have been invited than youth league members.
• The women's league insists that zuma is entitled to take another 50 wives before the event and that the weddings should be paid for by SAA.
• A court case ensues.  It's not clear who is suing who but an appeal is successfully applied for.  Four years are lost

Five years later piss-up organisation is revitalised, however there are few mishaps

• The road to the venue is littered with patches of what once was road and potholes are now the norm.  The patches of road compromise the hard suspension on the Maybachs and Range Rovers and other publicly funded personal modes of transport.  Helicopters are not considered as there are no more helicopter pilots left in South Africa as they all work in Autstralia.
• The guptas stage a strike from Dubai because there is no military airport nearby to land their entourage.  SAA offers to build an airport but realise they have dudu in charge and have no money. A press conference is called in the name of transformation.
• The licence to sell liquor at the venue has been irregularly awarded to dududoos, one of zuma's 800 children. He sees fit (because he is such a likable guy) to charge the taxpayer a premium for  the privilege of using his liquor licence.  Nothing like stealing from your own.
• The brewery itself (which once was profitable) has been sold to the saxonwold consortium which is made up of  recent mining charter beneficiaries. This has resulted in the brewing accouterments being shipped off to Dubai for saltwater purification purposes.

This story then gets out to the press who report on the corruption that occurred within the tender process and so the piss-up in the brewery is cancelled.  sahara computers tells ann7 that they have successfully installed all the desktop computers at the venue.  Computers weren't spec'ed in the tender document but that's mere detail.  ann7 gets its experts on TV who blame white monopoly capital for not tarring the road to the brewery and hence have forced the piss-up to be cancelled. 

In short – it is highly unlikely that the ANC government is capable of organising a piss-up in a brewery.

 

POPI and the SANAS pencil test

The pencil test here refers to the OTHER test (I get sniggers every time I mention the pencil test - I think I know why, I can't be sure that I would pass the former test)

What is POPI: The Protection of Personal Information (POPI) Act explained

In simple terms, the purpose of the PoPI Act is to ensure that all South African institutions conduct themselves in a responsible manner when collecting, processing, storing and sharing another entity's personal information by holding them accountable should they abuse or compromise your personal information in any way. The PoPI legislation basically considers your personal information to be "precious goods" and therefore aims to bestow upon you, as the owner of your personal information, certain rights of protection and the ability to exercise control over:

• when and how you choose to share your information (requires your consent)
• the type and extent of information you choose to share (must be collected for valid reasons)
• transparency and accountability on how your data will be used (limited to the purpose) and notification if/when the data is compromised
• providing you with access to your own information as well as the right to have your data removed and/or destroyed should you so wish
• who has access to your information, i.e. there must be adequate measures and controls in place to track access and prevent unauthorised people, even within the same company, from accessing your information
• how and where your information is stored (there must be adequate measures and controls in place to safeguard your information to protect it from theft, or being compromised)
• the integrity and continued accuracy of your information (i.e. your information must be captured correctly and once collected, the institution is responsible to maintain it)

Examples of "personal information" for an individual could include:

• Identity and/or passport number

• Date of birth and age

• Phone number/s (including mobile phone number)

• Email address/es

• Online/Instant messaging identifiers

• Physical address

• Gender, Race and Ethnic origin

• Photos, voice recordings, video footage (also CCTV), biometric data

• Marital/Relationship status and Family relations

• Criminal record

• Private correspondence

• Religious or philosophical beliefs including personal and political opinions

• Employment history and salary information

• Financial information

• Education information

• Physical and mental health information including medical history, blood type, details on your sex life

• Membership to organisations/unions

From here

This act doesn't bother SANAS at all.  Oh no, in order to ensure that correct levels of transformation are empirically verified they want certified ID books, payslips and employment contracts and interviews etc - some cat at SANAS apparently wants the ID books in colour too.

The issue here is that this is a violation of an employee's rights, rights that are protected under POPI.  Do employees know and actively give their consent to have their personal information shared with a third party.  Do those employees who declare that they have a disability expecting that their confidence will not be broken, know that this trust is not honoured?  What would that person think when they are interviewed by a third party about this disability?

An issue has now arisen where one of my clients has made a large donation to a school under SED (which I am now going to re-appropriate for skills).  The head told me that she cannot send out ID books to some third party.  The verification agency is now going to have to go to that school to check the documents.  They will not be allowed to take copies with them.  This will have to go into the file along with a copy of POPI.

I think that we need to rethink the verification process.  It needs to be harmonised with a number of Acts that it flagrantly disregards.

Watch gigaba go big - FSC content

Tougher implementation of transformation in the financial-services sector is on the cards if the recommendations of a draft report by Parliament’s finance and trade and industry committees are adopted.

The draft report emerged from public hearings during which a lot of anger and frustration was expressed about the slow pace of transformation in the sector.

It proposes that the targets in the Financial Sector Charter be made compulsory and possibly incorporated into regulations.

The final conclusions will feed into the financial sector summit planned by the National Economic Development and Labour Council for 2018.

So the Business Day tells us today (one of the few articles you can read for free).  Has the brigadier come back to haunt us again?  At face value this reeks of zwane, id est

“Corporates must achieve the targets in the financial sector charter and must be penalised if they fail to do so. Achieving the targets could be made a condition for the licensing of financial institutions,” the draft report says.

Let's look at this report rationally.  

1. It's a draft report.  Whilst it purports to have Treasury's support it has a long way to go.  It would require amendments to certain pieces of legislation that allocate banking licences.  I think it would take a long time to push this through, any amendment to banking legislation will cause a wide variety of people to start shivering in their threadbare takkies.
2. There is a court case pending that argues that the mining charter is  "vague, contradictory and "irrational provisions" are contrary to what the constitution requires for the principles of the rule of law." My understanding of the court case is that this charter should not be a condition for licence.  If this goes to the Constitutional Court, as it is likely to do, and is successful then it sets a precedent that you can't make empowerment requirements a condition of licence.

Is gigaba (still lower case because he has yet to show that he's not a gupta pony) playing a zwane game then?  I don't know - I read this morning in some article that he is politically ambitious and a fast learner which suggests that he isn't doing it.  I am quite sure that his smug grin knows that this type of gerrymandering will cause a lot of international and local discontent. If he wants to run the country at some stage, which I sincerely hope never happens, then he does need a banking system that isn't compromised.  Not that empowerment is compromising, but relaxing laws to bring in unqualified new entrants could result in the banking system collapsing.

At the very least gigaba has got the banks' ear

Banking Association SA MD Cas Coovadia said in an address to the Cape Town Press Club that the banking industry had decided to take a far more “robust” approach. Banks would be proactively seeking to achieve equity representation in senior and executive management as well as to ensure that they procured from small-and medium-owned enterprises.

One thing is absolutely clear though - the revised FSC is a long way away from gazetting.

Related articles

Has Treasury been captured by the black business lobby?

Delinquent, or absent shareholders and ownership - repost

This post was originally published in April 2013.  Please excuse the indulgence of the repost.  What is interesting is that certain links in the original post are now dead. I've had to look for new ones.

 The BEE world is really for the good times. Empowerment likes the idea that companies make money and black shareholders get rich. It doesn't do the bad times very well, for instance if a black shareholder is unable to meet the payments for the shares then the company is penalised under the ownership scorecard. What happens if you have a black shareholder who actively does not wish to exercise his shareholder rights. In other words, what do you do with a delinquent shareholder.

Ownership is measured by both voting rights and economic interest. Lesley Fodor has in a comprehensive article on voting rights and shareholders' meetings, writes (on the issue of voting rights) - the original link has broken, sorry Lesley.

The primary rights of shareholders relate to their entitlement to vote at meetings of the shareholders. While this does not confer a direct role in management of the company (this function falling within the purview of the directors), the directors are required to implement those decisions of the shareholders, which are reserved to them.

It follows then that voting rights must be EXERCISABLE. If restrictions are found it's likely that the voting rights' points won't be awarded. If you are interested in a summary of shareholder rights have a look at this post.

That's voting rights sorted. Economic interest is simply (to quote Kyle and Vuyo, page 192) "the basic monetary right of ownership. It refers to an ENTITLEMENT of black people to dividends, capital gains and other economic rights of shareholders." The operative word is ENTITLEMENT. The word does not mean that the person needs to receive cash directly through dividends, there may be an agreement that dividends will be used to settle a debt first and only then will the shareholder get that cash. Any restriction on this entitlement would be considered in determining whether the economic interest points will be allocated. An unreasonable restriction will in all probability not make it through a verification (I really do give verification agencies a lot of credit when it comes to understanding company law).

Say now you have shareholder that is entitled to vote at a shareholders' meeting but chooses not to. I am aware of a specific case where a shareholder has a majority stake in a company and doesn't seem to get on with the other shareholders and as such doesn't vote or pitch to shareholders' meetings. There's no legal reason why he can't; it just seems that he doesn't want to. This example has an interesting issue when it comes to dividends. Dividends can only be declared when a profit is made, the company in question has yet to make a profit and as such hasn't declared a dividend. The shareholders' agreement has this to say on distribution of dividends.

The shareholders shall procure that the Company shall….. declare and pay dividends equal to a percentage, to be determined and recommended by the board of directors, of the distributable profits of the Company.

This was a problematic paragraph for me but I spoke to two lawyers who both confirmed that the directors cannot distribute dividends on a whim contrary to the percentage shareholding of each shareholder. In other words if you own 25% then you will get 25%.

In this case we have a shareholder who doesn't want to vote and who has never received a dividend because the company hasn't made any money yet. This same shareholder would be described as black and therefore is very beneficial to the company's BEE credentials. That's where the simplicity stops. The company's BEE scorecard considers four other elements and ignores the ownership element – even though the company is in fact (and in law) 51% black owned. It would seem that the verification agency refused to consider this element because they could not interview the shareholder – a requirement that comes from the Udge-approved verification manual; viz paragraph 7.1.6 which states that a verification agency must

Interview a sample of the black shareholders to determine whether they understand their voting rights and whether they have exercised such voting rights independently

This cannot be regarded as fair on the company. There are no restrictions on the ownership in any shape or form, it is only the personality of the shareholder that gets in the way of the allocation of ownership points. Unfortunately there is nothing in any of the BEE information including Vuyo's Book (he does like Black with an uppercase B) that anticipates this situation even though I would suggest it is very common.

We need a solution; what I recommend is that the company follows the procedural guidelines listed by BDO and Fodor and if the shareholder chooses not to attend then that shareholder has not been denied their rights. This is the same argument that I have put forward for this case.

What the brigadier taught me (and what bolshie bob has yet to learn)

Church hasn't been my thing for years.  I went to a church school and when I left I thought that I'd pretty much done my church time.  Alas the army was ridiculously insistent that you have a religion and that you go to church - thinking about it, we've come a long way as a country, there's no way any institution would insist that you head off to some place of worship when you don't want to.  I had go through more church in my first year of the army, and a lot of that was at the NG Kerk too.  

I arrived on the border in mid-December of 1986, pretty much the height of summer.  Those who are familiar with Oshakati will know how hot it gets up there.  For some reason I chose to go to the church service in the hall at Oshakati on Christmas Day.  And here is where the story begins.

Sector 10 (as it was known then) was under the command of Brigadier Jakes Swart.  I remember him as a big man with the obligatory mustache and cauliflower ears.  He was also quite intimidating, I had met him a few times before because I was the only other officer at a specialist signals unit (513 Troop) and would sit in the intelligence briefings.  

There we all were in the hall (my notes tell me it was  known as the Askari Hall) in Oshakati on Christmas Day (a Thursday).  The Askari Hall was just a tin roof - I don't seem to remember it having a ceiling - so it was hot inside there.  There was some politician in the hall who had come to rev us up with Nationalist fervour , as well as the Brigadier.  There was probably some sermon and a lot of bible reading and prayers - and there was definitely an out-of-tune piano and some poor bastard playing it whilst we went through the motions of a Christmas service.  After the Nat had spoken to us the Brigadier got up on the stage and said 

I have noticed that there is a distinct lack of Christmas spirit in this room.  You will continue singing carols and hymns until you get it.

I remember him saying this in English with those r's being rolled - as only a PF could at the time.  And so we sang hymns to an out-of-tune piano for another 45 minutes.  I can't be sure whether the Christmas spirit was captured in the hall after that - but I am sure that I am still looking for it.

This is where bolshie bob comes into the picture.  He's playing brigadier with South Africa's businesses - forcing us to adapt to his unreasonable transformation agenda.  We are singing to an out-of-tune piano conducted by an out-of-touch commie.  And the result is that whilst the desire to sing might still lurk, the complexity of the tunes is making the singing unpleasant and almost impossible.  Perhaps if our tone-deaf choir master requested simpler songs and then allowed us to migrate to more complex ones in time then we'd see results.  But he won't.

I have a client that is extraordinarily proud of their non-compliant BEE certificate, they haven't even bothered to submit a file to put any points on the scorecard because the result will be exactly the same.