Ain't that the truth. The more I think about our esteemed minister of trade and industry the more I realise that he is worse than zuma when it comes to destroying an economy. His first world mind resides in the second world and operates in the third world. It is most happy when he creates rules and red tape. That's his thing. And now it is our thing. Last weekend I spent an afternoon calculating the skills score under the construction code. It took a whole afternoon. Why ?I asked myself. Is transformation going to happen because there is one idiot in Pretoria who thinks that the harder we make it the more transformed we will become as a country? It must be because bolshie bob has a phd in something.
I come back to my play in one act in which I spoofed a series of phonecalls that davies receives from a variety of black businesses complaining about the complexity of compliance and why they should have to implement and measure those programmes. A recent article by Deon Oberholzer adds more clarity.
The dti proposes a number of clarifying restrictions that seek to ensure that “real black-owned business” would be exempt... It’s not rocket science to understand why this happened. The voice of black business is getting stronger and the argument is that they are supposed to be the beneficiaries of BEE, even if they are successful and large. It is common cause that the cost of BEE is high and often a serious financial burden on business. If it wasn’t, black business would not have bothered to lobby government for exemption.
Oberholzer postulates that this ultimate exemption will allow large black businesses to conduct their business with SOEs and government and those corporates that insist on high levels of black ownership and that white businesses will just supply to them. Ultimately the means of production remain in the current hands and black business is only known for its ability to act as an agent.
Very special is our bolshie bob. Cyril remove this moron before he destroys the country completely. He is the one standing in your way, forget the eff. It's this man who is killing the Youth Employment Service, making a mockery of thuma mina and forever pigeonholing black businesses into part time players.
We now wait to see how long it takes bolshie to publish the final amendment where he places scant regard for those who politely tell him how wrong he is.
As I've said before, the dti will push through anything it wants because it knows that no one will ever raise a stink about their legislating by decree. If they ignored 550 comments when pushing through their last attempt at transformation then they will ignore comments again. But if there are enough comments then we can all group together and force them to explain what they have done.
There was an interesting article written by Andile Khumalo in the Sunday Times yesterday. I can't post a link that works because you have to be an online subscriber to read it. It's called "Is this the end of broad-based BEE?" Khumalo, like me, is somewhat nonplussed by the instant promotion to a level 2 if you are 51% black owned. He writes (edited a bit)
If a large company is 51% black owned it becomes a level 2 without measuring its contribution to management control etc. How can this possibly make sense? Surely this is taking us back to the days when ownership was the only relevant measure of whether or not, and to what extent, South African corporates were contributing to economic participation by black people..... We are essentially back to pre-2007 when BEE was all about giving shares to a few high-profile black individuals and doing nothing about the inequalities that permeate every aspect of South African society....... It seems to me this change spells the end of broad-based BEE and implies the reversal of all the difficult progress that has been made against tremendous resistance.
Again I apologise to Andile Khumalo for not putting up a link to this article. But you can read more about him here. And I apologise to anyone who takes exception to me reading the Sunday Times, I actually don't want to but I've got to know my local newspaper seller who told us that he makes R4 (four rand) a paper and sells about 20 papers a week. I pay him R50/paper which is double the cover price and feed him every week - he also gets a Christmas bonus. He's the only reason why I and others in my neighbourhood support him - Iqbal can get knotted I refuse to read any of his publications.
Back to Andile - he's spot on here. You're not going to solve South Africa's woes by changing the ownership structure of businesses. bolshie bob could argue that by changing the ownership structures where companies are majority black owned that you will be able to influence societal change. We all know that bob is just a deluded commie - this will not happen in the short term and we need short term gains. People like Andile will become "investors" in these massive businesses and will be paid a lot of money to tell the verification agencies exactly what they need to hear. And those businesses will continue as they have.
14 days people - 14 days to submit your comments. And I've already written them for you. Please submit the comments. Our business future depends on it - and if davies gets away with this then he will make other amendments that will further erode the economy. Everything you need to know is in this blog post.
Here are my comments. It took about a day to draft them. The word document is here - please download these comments and make all the changes you want, but most importantly send the comments to Jacques Manus. The dti claims that they received 550 comments on the the revised codes and they probably ignored all of those that suggested their amendments were ridiculous. I would like to get a factor of 10 out to the dti. If they publish a document that we know ignores these comments then I will embark on a campaign to get this administrative active reviewed under PAJA.
Thank you for affording us the opportunity to comment on the proposed amendments to the current generic B-BBEE codes of good practice. The 2013 codes have been given four years to make their mark within the business community. In some cases they have been successful and in many cases not – in fact they have resulted in large numbers of companies falling off the BEE radar altogether due to their complexity and the priority elements. I welcome the Department of Trade and Industry’s willingness to amend the codes to reflect current economic and political challenges but will take the opportunity to provide the department with an overview of the challenges facing many companies in the implementation of the revised codes and their allied industry charters. It is hoped that the DTI will consider these comments as being constructive as they are intended as such.
This response has been divided into three sections.
Specific comments on statement 000
Specific comments on statement 300
General comments. These are based on the experience that many companies have gone through in attempting to comply with the revised codes
Statement 000
Use of the flow through principle for enhanced recognition
This is a fair amendment – no comments are submitted under this
Paragraph 6.3 under statement 000, specifically promotion of 51% black owned companies (using the flow through principle) to a level 2 and 100% black owned companies to a level 1
I speculate that black-owned companies alerted the department of trade and industry to the complexity and expense of compliance under the revised codes. This is perhaps the reason why the minister has decided to exempt those companies from adhering to each element. I would like to draw the following to the minister’s attention
As the number of 51% black owned companies increases – as they will, so will the requirement to comply under the codes disappear. This means that procurement (which is the cornerstone of empowerment in South Africa) becomes obsolete. If these large black companies are no longer concerned about empowerment performance then they will make use of service providers who themselves do not need to comply with any scorecard. These same majority or totally black owned companies will not make any contributions to supplier and enterprise development as well as socio-economic development. In short there will be a greater drive to get 51% black owned using schemes that the Commissioner will not be able to keep up with. The empowerment process eventually disappears, and the social and economic ills of the current South Africa remain
I refer you to paragraph 3.4 of ”South Africa’s Economic Transformation: A Strategy for Broad-Based Black Economic Empowerment”. Specifically paragraphs 3.4.1 and 3.4.2
3.4 Key principles
3.4.1 Black Economic Empowerment is broad-based.
Societies that are characterised by racial or ethnically defined wealth disparities are not likely to be socially and politically stable. The process of BEE seeks to accelerate the deracialisation of the South African economy and fast track the re-entry of historically marginalised communities into the mainstream of the economy.
3.4.2 Black Economic Empowerment is an inclusive process.
A more equitable economy will benefit all South Africans, individuals and enterprises. The process of BEE is an inclusive one, and all enterprises operating within South Africa can, and indeed should, participate in this process. This strategy will be implemented throughout all sectors of the economy and is not limited only to those enterprises that derive income from government procurement or those where the sector is regulated by government.
The revised BEE codes (in paragraph 2.2 of statement 000) states ”In interpreting the provisions of the codes any reasonable interpretation consistent with the B-BBEE Act as amended and the B-BBEE Strategy must take precedence”
Promotion of large enterprises to levels that render them immune from any form of BEE performance under the remaining elements appears to deviate from these two principles contained in the strategy. Promotion on the basis of ownership is narrow-based and excluding those companies from scorecard criteria is not inclusive. I submit that this is an unreasonable deviation from paragraph 2.2 of the revised codes and paragraphs 3.2.1 and 2 of the strategy document.
I refer the minister to the conclusion of the president’s state of the nation (delivered on 16 February 2018). Please consult this website for a complete transcription of the speech.
Together we are going to make history. We have done it before and we will do it again – bonded by our common love for our country, resolute in our determination to overcome the challenges that lie ahead and convinced that by working together we will build the fair and just and decent society to which Nelson Mandela dedicated his life.
As I conclude, allow me to recall the words of the late great Bra Hugh Masekela. In his song, ‘Thuma Mina’, he anticipated a day of renewal, of new beginnings. He sang:
“I wanna be there when the people start to turn it around
When they triumph over poverty
I wanna be there when the people win the battle against AIDS
I wanna lend a hand
I wanna be there for the alcoholic
I wanna be there for the drug addict
I wanna be there for the victims of violence and abuse
I wanna lend a hand
Send me.”
We are at a moment in the history of our nation when the people, through their determination, have started to turn the country around. We can envisage the triumph over poverty, we can see the end of the battle against AIDS. Now is the time to lend a hand. Now is the time for each of us to say ‘send me’.
Now is the time for all of us to work together, in honour of Nelson Mandela, to build a new, better South Africa for all.
The minister, by excluding every company with the requisite levels of ownership from attempting to contribute to the welfare of all South Africans is not keeping with the message of hope that the president offered a beaten and battered South Africa.
Suggestion
Perhaps it might be an idea to promote a 51% black owned large entity to a level 8 and 100% owned to a level 7.
Start-up and join venture certificates
The clarity is welcomed.
Youth Employment Service
The inclusion of the YES is welcomed. It is more welcomed if all companies irrespective of ownership are incentivised to make use of the service. There is no doubt that the inclusion of YES in a BEE scorecard environment will result in a number of positive developments for the programme and for black economic empowerment. It is somewhat perplexing that the minister would see fit to set onerous targets for companies to meet in order to comply.
As the minister has learned if you set unreasonable targets then such noble schemes like the YES will fail at the outset. The minister’s withdrawal of full compliance with paragraph 11.2.1.2 is very welcomed. However I beg the minister to consider the feasibility of setting any type of restriction other than the YES targets themselves. Paragraph 11.2.1.2 refers. The minister has already decided that significantly black owned companies need not concern themselves with the YES promotion because they have already achieved an unfair advantage by way of their ownership. It stands that the companies that would benefit the most would be those that have between 0 and 50.9% black ownership. Setting priority element targets in order to gain the advantage is a dampener on the programme at the outset. I return to the likelihood that large black owned entities have already alerted the minister that compliance with the codes is both expensive and onerous. The targets set in 11.2.1.1 are counterproductive and will result in the YES suffering. That the minister has seen fit to set an even larger financial target for black further education bursaries makes the compliance a tall task and not likely under the current Zuma-torn economy. Also consider that the likelihood of meeting the priority level under procurement will become reduced as BEE scores start dropping significantly – demotion under this sub-element is an inevitability.
Suggestion
Drop all priority element targets for a company to gain the benefit of achieving and over achieving the targets under YES.
Amended Code 300
It is not known where the minister got the figure of 6% of payroll for the spend on skills development of black people, it probably comes from the original target of 3% of payroll – which is a more affordable target. The revised target is simply not achievable in terms of Rand spend. When considered in the context of what constitutes skills development of the code it appears that compliance can only be achieved by sending black staff on a number of courses which will take them out of the workplace. Academic qualifications are a small part of a person’s ability to fulfil a function in the workplace. In effect the code does not encourage work excellence which will weigh against any employee’s potential to advance in an organisation.
A positive consequence that has resulted from the revised code is that more black staff members are embarking on learnerships etc because their salaries can contribute a large amount to meeting this 6% target.
By setting a target of 2.5% of payroll on bursaries for 4 points the minister is surely expecting failure. He would do well to assess the cost to the average small, medium and large company and then consider whether companies are able to begin to afford a fraction of that amount. Under the amendment this target only applies to companies with 50.9% black ownership or less. The minister may know that these expenses are direct expenses and have the potential to threaten the profitability of almost every company wishing to comply with this target. The table below are figures derived from a number of annual reports and should be seen as an illustration of the cost.
The cost per point is unlikely to induce companies to support this programme. This could result in not meeting the 50% average across all three priority elements. This has a potential impact on meeting the targets under 11.1.2.1 of statement 000. Thereby threatening the success of the YES.
Company
Salary bill
Target spend (6%)
Target bursary spend (2.5%)
Standard Bank
14 796 000 000
887 760 000
369,900,000
MTN
6 709 000 000
402 540 000
167,725,000
NASPERS
8 738 000 000
524 280 000
218,450,000
AECI
2 976 000 000
178 560 000
74,400,000
FirstRand
10 620 000 000
637 200 000
265,500,000
Telkom
9 861 000 000
591 660 000
246,525,000
Nampak
3 535 000 000
212 100 000
88,375,000
JSE
405 000 000
24 300 000
10,125,000
Nedbank
9 349 000 000
560 940 000
233,725,000
Suggestion:
Drop the target to no more than 0.5% of the leviable amount. You would have a far greater uptake and it would generate much better goodwill with the government’s potential voters.
Paragraph 2.1.1.3.
Changing the word disabled employees to people could have a very positive impact on skills development of black disabled people. Other BEE codes have used the work people in place of employees. Skilled disabled people have a better chance of gaining meaningful employment.
Paragraph 3.4
The clarification is welcomed.
Paragraph 5.8
Please remove this paragraph. It negates all training that a black person may receive in a foreign branch or country. If the object is to skill up black people I cannot assume that only South Africa is able to skill up its own people in a bubble. People could go on training overseas and gain vital skills that might meet the minister’s industrialist programme as an example. If the intention of black economic empowerment is to provide skills to black people then surely best practices developed in a foreign country must contribute to the achievement of this goal.
General comments
Removal of priority elements
The BEE Commissioner has in all probability got her finger on the pulse on the uptake of these BEE codes. Many companies who have not opted to extend ownership to black people are unlikely to get to a better level than a 7 or 8. It does not serve the future of black empowerment to continuously punish these companies to the extent that they will either never improve their score or it will decrease. If empowerment as a programme is designed to improve the lives of black people across the board then any genuine programme must be considered and rewarded. The priority elements are a deterrent to the programme’s success. A cynic would observe that they have been put in place as a punishment for not meeting high levels of black ownership. It would be in the minister’s favour to conduct a poll on employees to establish whether they are happy to be employees and not specifically shareholders. The poll should also consider the value of the shares in the average company and whether these shares are actually worth the black person’s investment to own them.
Suggestion:
If empowerment is to succeed then the priority elements must be scrapped.
SANAS
There are, at last count, 70-odd verification agencies (please see SANAS’ webpage for the total number of active BEE verification agencies. It’s estimated that these 70 agencies are servicing in the region of twenty thousand companies (Editor note - there are 69 active agencies, here's the latest list). There is a ridiculous bottleneck. SANAS is solely to blame here as they have the set the requirements to become a verification agency at such a high level that there is no incentive to increase this number. In fact it appears that the number of verification agencies is steadily decreasing. The loss of IRBA has had a detrimental effect on the issuing of BEE certificates. Some other method or issuing authority needs to be created to meet this demand.
The Minister should become more available to those companies that are compelled to comply with the BEE codes – not only those who are exempt.
There is a perception that the minister has a closed-door policy when it comes to discussing challenges faced by businesses in the country. This policy become very entrenched under the last president resulting in an atmosphere of resigned hopelessness. The Ramaphosa administration has ushered in a certain positivity where it is felt that all people in the country can contribute to its future, not a select few. I would encourage the minister to open dialogue with the business community and start taking business into his confidence and hearing their concerns as this programme’s success relies on them. We have seen in Namibia that their NEEEF scorecard is being modified to meet business’s concerns. It is possible to achieve empowerment’s goals by considering all perspectives.
I thank you for the opportunity to submit these comments and hope they are received in a positive light, as this is the intention.