Paul Janisch

The Daily Maverick has published a story - thank you Ruan

The Daily Maverick is THE publication to write for in South Africa.  It is very aspirational for any writer to get your story into that publication.  I've submitted a few in the past and had no luck.  This time Ruan Jooste picked up on one of my submissions, cleaned it up and published it.   I put in a few hyperlinks to my posts about SANAS and the awesome awdoz (the bee commissioner) and I see that some of them have been clicked on.  On the subject of the commissioner you would do will to read Pieter Steyn's article about her MTN report.  Pieter is a seasoned attorney at Werksmans - please read it.  I was a bit sensational, Pieter far more rational.  The truth is we need policy certainty, something that bolshie bob's dti wasn't interested in.

The gist of my article is that it's time for corporate South Africa, which includes SOEs to say NO.  We won't go with your half baked delusions of throwing money out of the window to solve the government's financial ineptitude.  BEE is not the solution to solve zuma's promises to free tertiary education.  This is an anc problem and they must get the money from ace and the fucking guptas.

It was never adequately communicated as to why the former minister of trade and industry Dr Rob Davies changed the BEE codes in 2013 to the ones that now deter foreign investment and discourage economic growth. The Department of Trade and Industry (dti) suggested that small black businesses were being charged exorbitant amounts for BEE certificates as a justification. 

The most likely reality was that compliance levels were so high that black businesses were no longer able to compete for state contracts with their competitors whose ownership levels did not match theirs. Davies’ solution was to launch a new phase of empowerment with exemptions for significant black ownership and a stick for those companies who chose to either have no black ownership or not meet the desired level of black ownership. 

There was some method to this madness. Davies knew that corporate South Africa would never rock the empowerment boat. No large company was willing to speak out against these patently biased codes for fear of government and other political party lambasting. I did attempt to extract the reasoning behind these Draconian codes from the dti through the Promotion of Access to Justice Act. 

The dti’s response was simple – these codes are constitutional. In other words – if you don’t think they are constitutional then you take it to court. My attempts to raise money for a court challenge raised just enough money for an hour of a silk’s time.

There is little doubt in my mind that these BEE codes are unconstitutional. But I think this is a moot point, a constitutional challenge might not be successful because the underlying sentiment is one of redress. But this does not detract from the fact that it is very likely that the process in the gazetting of many of these codes, specifically the dti’s generic codes, was not consistent with the prescripts contained in both the Constitution and the BEE Act. 

My specific bugbear was the skills development that requires companies to spend 6% of payroll on the training of black people (in exchange for eight points). For those who don’t understand the magnitude of this amount, it is in the region of R1-billion for a large financial institution based on its 2012 financials. This is ludicrous, or perhaps more pertinently – nonsensical.

How can you spend such a large amount on the training of your black staff and still expect them to come to work?  It’s not possible. How is it that any company which had to implement these codes agreed to this?  I don’t think that many companies who are subject to the codes did agree to these – my suspicion is that Davies ignored those comments and went ahead and gazetted the draft codes, with minor changes to demonstrate that he did read some of the comments.

To a certain extent that is now water under the bridge. The codes have been accepted and companies are making plans to get to the scores that their clients are insisting on. This is despite the dti’s two militant lapdogs, the SA National Accreditation System (Sanas) and the BEE commissioner, still sowing doubt and uncertainty in the marketplace. Sanas is the authority that provides the accreditation for BEE verification agencies, its arbitrariness is a legend among the BEE verification agencies who live in fear of losing their licence to operate because of the mood of the Sanas inspector on the day.

The BEE commissioner could fill up a chapter in the history of empowerment with her poorly thought out analyses and a complete lack of understanding of the legislation that governs her conduct. You would not be wasting your time by reading this very measured opinion on the commissioner’s MTN finding by Pieter Steyn, a partner at Werksmans Attorneys.

In the last year or so, Davies decided that not only can the BEE codes redress the legacies of apartheid, but they could also be used to address certain social issues like the Fees Must Fall movement and youth unemployment.  After a little bit of corporate dissent, he managed to incorporate the Youth Employment Service (YES) as a BEE carrot. When he proposed the YES programme he also proposed that companies should pay over 2.5% of their payroll for bursaries for black students at higher education institutions.

This lay in limbo for a year and then was unceremoniously dumped on us just before Davies took his very-overdue retirement package. After considering multiple comments he decided that this 2.5% of payroll was a reasonable amendment and has now incorporated it into the skills development scorecard. In typical Davies fashion he never really made it clear when this amendment will come into effect. 

To get an idea of the financial outlay that this requires, that same large financial institution would need to lay out in the region of R450-million per year on bursaries. This is possibly affordable to said institution but is definitely not affordable to smaller companies and those entities that are legally obliged to adhere to the BEE Act – these include most state departments and SOEs. The most topical SOE is the financially denuded Eskom. Its target spend on those four points is in the region of R720-million and legally it has little choice but to spend the money even though it doesn’t have it.

I see corporate South Africa, which includes the SOEs, having three choices here when it comes to the latest phase of BEE legislation.

The first one is to comply and take the points – but in a declining economy, this doesn’t make any financial sense. The second option is to lobby the Presidency to speak to the new Minister of Trade and Industry, Ebrahim Patel, to withdraw these amendments or offer significant tax breaks for these donations. The third option is not to comply with those elements in the scorecard that are simply unaffordable. 

If option one is chosen then you can expect Minister Patel to be emboldened to add amendments that further erode the viability of every entity operating within South Africa. 

JUST SAY NO!!!!!!!!!!!!!!!!!!!!

 

 

 

New beginnings and new strategies. I'm moving in a different direction

This is repost of a blog post that is seven years old.  It was weird because I had a meeting with my other shareholders on Monday morning and we discussed our future strategy (see you don't need to say - going forward).   Our business model is going to go in the direction of providing compelling BEE solutions across the BEE codes and elements for other BEE consultants.  We don't want to stay in the consulting game for ever and are going to start assisting consultants become consultants.  I think we're going to take it further than that - I have 16 years of experience in this business, that's about 16 years less than Louis McLaren.  I know how this stuff works, I have good relationships with the right kinds of verification agencies - and interestingly enough I know a lot of consultants.  I want to create new consultants.  I'm not interested in shoving my methodology down anyone's throat, but I know a lot of tricks, and I know what works and what doesn't work.

We would like to strike a partnership with a software company to provide the tools to make this process easier.  Out of the blue I got a phone call from Bruce Rowe of Mpowered we're going to look at his software solutions and see how we can plug it into our solutions.  I also got an email from Sheldon Booth from Flipped Human Solutions, who's also a BEE consultant.  Steadily I'm building up a database of people that we talk to.  I'll write a lot more about this in the coming weeks, as we start getting the strategy together.  The products are there and we've had a lot  of success with them - and our consultants and resellers are making very decent money out these solutions.

This post below is somewhat like a service level agreement.  I never found anyone who wanted me to sell their products that would live up to this wishlist.  I'll make sure that we do.

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Chris Daffy came to see me the other day. He's been running a business that is doing very well and I wanted to know more about it. Chris owns a sales channel development company. He will take your product and match up the correct people/companies to sell it for you. 

Chris explained that there needs to be a proper commitment shown from both parties in order for this to succeed. All too often the company that has the product views this "channel" as a cheap way of getting their product/service (grandmother) to the market and they pay little or no attention to the person selling the product. The chances of this succeeding under these circumstances are round about zero (perhaps lower).

He's right – I have been courted by three different software vendors in the last three weeks, and all of them have wonderful products. They see me as a useful conduit to get their products out to the market. But they have no idea as to how to do this. What they do know is that hiring a sales team is an expensive operation. And so I have been sent 80 page reseller contracts that I have not read beyond the third page and have frankly forgotten what it is they are selling. They could of course make use of Chris Daffy but if they don't then they might want to look at the following pointers (which are specifically BEE-related)

1. BEE is a GRUDGE purchase

   If a client negotiates every cent they spend with me then why would they want to spend 10-20 times more than that on a software package? The answer is that they won't. And no amount of BEE sexiness is going to justify that expense. Which brings me onto the next point

2. These products are being used by corporates in South Africa – so there is a market

   Help me sell this product by producing a proper value proposition. What are the cost benefits to the client? For example if your software package can save the company from hiring 4 other people then spell it out. Back it up with the necessary documentation.

3. Don't stop there. Create a proper support structure

   I am a consultant who tries to SAVE my clients money in their BEE programme. If I am going to sell this programme/product I will need proper collateral, preferably with something that I might attach my brand to. The collateral must be up-to-date and must be written in a way that I am able to understand and sell. Yes I come from an IT background but that was a long time ago, I don't want to have to explain whether the SQL orange will frequent often with the VB Glaswegian warehousing. On top of this make sure that there is someone who can come out with me to meet the clients to discuss the finer details – don't leave me floundering, because I won't sell it.

4. The sexiness of the product is not enough to get me to sell it

   The chances are that as excited as I am when I leave your demo this excitement will fade very quickly as I get on with my core business. Don't send me a pdf'd presentation and reseller contract and think that I'll do anything with either. I won't. In fact all that shows is that you don't know what you are doing and that you view me as a cheap conduit to get your product to market.

   What you need to do is invest some time in getting me up to speed. This will require training, on-site visits and anything else that might keep my interest piqued.

5. Understand why I may want to sell it

   I consult, in other words, I sell time. There is a limit to what I can earn. I'm also a specialist in certain things that might not be attractive to other types of companies. I'm interested in broadening the types of companies  that I can consult to. A sexy product might get me into those companies. On top of this it opens up a different type of revenue stream that might work for me for a few years. It also moves my profile out of the "elevator capital" sphere and into a business that someone might want to buy in the future.

   I once met some idiot who thought that I could sell his company's products but part of the deal was that I followed his consulting methodology. He's probably still an idiot but I wouldn't know because I didn't see him again after the first meeting.

6. You are going to have to do some marketing

   Think about those products that use very effective channels, like insurance companies. They spend a fortune on branding and marketing so that when that painful broker calls you up he doesn't need to sell the Liberty brand – he just needs to sell himself. I am not going to expend time and effort getting your brand and name out to my clients unless you are willing to throw an equal amount or more in promoting your own brand.

   Years ago I worked for a software company that sold Microsoft products. They would present products at Microsoft sponsored events for a variety of corporates. Why not arrange a nice breakfast where I get to talk about BEE related stuff and your product. We all win – it's just that you have to pay a little money to organise this thing.

7. The chances are we are going to compete in the marketplace

   That's fair enough, a little ridiculous but fair enough. If this is the case then I want some advantage over you, like a preferential rate that allows me to discount or something. I also want some method of letting you know that I am talking to a certain company so that you don't go in there and destroy my chances.

8. Make it financially worth my while

   I cost a fraction of a full time sales person. I will foot many of the costs that you would subsidise your permanent staff, things like travel, printing, telephone etc. The commission structures must be very attractive and clear. I don't want myself selling something and discovering that actually you don't pay commission on this or that. Also make it clear when and how you pay commission and what is expected from me to earn commission on renewals.

9. Have a lead programme

   Because you are doing the marketing it's likely that companies will phone in and want to know more. An equitable lead referral system would help all of us. If I find out that you are taking all the leads then I believe our relationship will come to a rapid end.

10. Why not set up a mutual referral system

    I'll be talking to my clients about you, so why don't you tell your clients about me. If you pay me a commission to sell your stuff then I'll pay you a commission to sell mine.

I believe that these are the most basic requirements for a channel programme. If you have this in place I believe we can talk, if you don't then call Chris – or I'll help you set it up for a fee.

The unsubtle art of BEE consulting. A checklist you might use to get your career up and running

When I started in this business 16 years ago there were perhaps four consultants around, that I knew of.  My favourite was always Louis McLaren who used to peddle shareholders' agreements and trust deeds and the like, all apparently endorsed by Kevin Lester, who at the time was the cleverest BEE mind in the southern hemisphere. A title that now firmly belongs to Chris van Wyk.

Things have changed, the market is much bigger, and you get specialists for everything.  There aren't enough consultants and verification agencies in places like Bloem, East London, PE and Kimberly, but we're planning to change that.  I'll be posting a few posts on where we are going and why we want BEE consultants to join in this journey. 

Here is a checklist for anyone who wants to see what the consulting world is like.  If you ask for these documents and you are able to interpret the information you receive into a BEE scorecard - I really want to meet you.

GENERAL	Notes
OWNERSHIP
Documents Required
Names and ID numbers of South African shareholders	This confirms whether the shareholder is South African.  ID books state where the person is born, or if you are clever enough to understand ID numbers you’ll know who is foreign or not. Blackness is only determined by the picture
Share Certificates or CK 1 or CK2
ID books of all natural shareholders	The age shows us whether the shareholder is a youth as defined and hence a designated group owner
Confirmation of Voting structure (ie shareholders agreement/articles of association, Memorandum  of Incorporation/Auditor’s Letter)	What you really want to know is that the black shareholder has normal voting rights that aren’t restricted.  The shareholders’ agreement should tell you this
Shareholders Agreement / Members Agreement/Auditors Letter confirming share % and restrictions on voting rights	As above.  If they give you an auditor’s letter confirming that the voting rights are unrestricted then you won’t have to read through the shareholders’ agreement
Auditor's letter confirming the shares are paid for
Confirmation dividends were paid in the prior year	This is for economic interest
MANAGEMENT/CONTROL
Documents Required
CIPC document indicating Directors
ID copies of directors
Confirmation of voting rights of directors	A letter from the client confirming the number of voting rights each director has
Employment Equity Report: - EEA 2.  For accuracy purposes, this list must be updated to the prior month
SKILLS DEVELOPMENT
Confirmation that the Workplace Skills Plan (WSP) was submitted	You cannot claim skills points unless you have submitted this document
EMP201 forms for the immediate 12 months prior to this opinion	We are only interested in the SDL amount. The skills target is 6 x the SDL
Names, race, gender of any interns/learners/apprenticeships within the company during the prior 12 months
Estimated spend on skills development for the prior 12 months. This must be broken down in race and gender along the following lines – African male, African female, Coloured male, Coloured female, Indian male, Indian female
SUPPLIER DEVELOPMENT and PROCUREMENT
Documents Required
PREFERENTIAL PROCURMENT
List of suppliers for the previous six months and the total amounts spent with them over that period.  This must be provided in Excel and must be a summary with the supplier/service providers’ name and the total amount spent with them.  Imports must be specified as imports	This must be in Excel and a summary.  You don’t want to sift through GLs to get to a supplier total amount
We will request BEE certificates from certain suppliers from you where necessary	Many BEE certificates can be found here https://www.beagledatabase.co.za/search/new.  Those that can’t be will have to be requested from the client
SUPPLIER AND ENTERPRISE DEVELOPMENT
Estimated NPAT at the end of the financial year	Tells you what the supplier and enterprise development targets are
Estimated turnover at the end of the financial year	If no profit is made you’ll need to work on the industry norm.  As a rough guide work on 5% of turnover
BEE affidavit of the supplier development beneficiary/ies
BEE affidavit of the enterprise development beneficiary/ies
Description of contributions made to each beneficiary along with a financial value of each contribution
SOCIO-ECONOMIC DEVELOPMENT
Documents Required
Description of initiatives and value of the contribution
Confirmation of racial profile of the beneficiaries

 

 

A 13th birthday and some NEEEF news

Happy birthday BEE blog.  I started this blog 13 years ago.  I needed a web presence and had no html (I still don't) skills.  I was very inspired, and remain inspired, by Fred Wilson.  Fred is incredibly prolific, he posts something new every day, and he does it religiously.  I had been reading his blog for a few years before I started this one.  Fred's blog was on Typepad - so I did what Fred did.  Here we are 13 years later.

My target now is the sheer arbitrariness of the dti and its multitude agencies and resident fascists.  I think the BEE commissioner needs to be reminded that she has a broader job to do than chase unwinnable ownership cases - does her behaviour ring any bells?  Cut from the same cloth those two.

Now onto NEEEF

This came up on my Google alerts this morning 

WINDHOEK – President Hage Geingob yesterday confirmed that the fiercely debated 25 percent equity stake stipulated in the National Equitable Economic Empowerment Policy Framework (NEEEF) has been removed.  Its critics, who say the move would restore investors’ confidence, welcomed the removal of the clause.

This doesn't mean that NEEEF is going away

However, he was quick to point out that all pillars of NEEEF will remain and be taken into account for enterprises doing business with government and applying for natural resource licensing.
For several years now, the private sector has been pressuring government to remove the clause that would have forced white businesses to sell a 25 percent stake to previously disadvantaged Namibians.

I wonder whether NEEEF will ever take off.  I've been visiting Namibia for the last ten years, I've done two conferences on the subject and they are no closer to implementing this policy.

I'm available for consultation and conferences in Namibia.  It's one of my favourite places in the world