There have been three articles about the BEE commissioner who appears to put her status above everything else. It's a true application of empowerment über alles, something the bolshie bob attempted to by placing the BEE Act as being the highest piece of empowerment legislation, almost trumping the Constitution. I have long held the contention that the commissioner is hopelessly incompetent (which is probably a requirement for the position) and way out of her league. She is also immensely frustrated that no one takes her or her office seriously. She threatens litigation in every single document she writes, knowing that she doesn't have a snowball's chance in hell in getting any of her petty allegations to stick. As I have mentioned before, empowerment is very politically sensitive. Where there should be dissent there is none, it's too hot. This sentiment has buoyed all the bollocks that davies dropped on us and continues with Slaptjips (Patel who is edging closer to adopting this name permanently on this blog).
Tim Cohen, in a recent Daily Maverick editorial painted the sombre picture
A year ago, the Kagiso Charitable Trust, the Mineworkers' Investment Trust, HCI, the WDB Trust, Ditikeni Trust and Wiphold Trusts appealed to Trade and Industry Minister Ebrahim Patel to gazette clarifications that certain broad-based ownership schemes are legitimately black-owned.
In one case, a four-year-old deal, long since put to bed, is being challenged by the commission on the basis that, among other things, some of the beneficiaries are under 16. That means, technically, they don't have the power to "exercise the rights of ownership" which is required by the legislation. What the commission appears to require is that beneficiaries have to qualify as personal shareholders and nothing less. That means bursary schemes, housing assistance programmes, community development, preschool projects are out. The commission claims this is not so, but clearly this is a grey area.
In a rather unprecedented move the Mineworkers Investment Company, through their CEO, Mary Bomela issued a press release highlighting their plight
some of the country's pre-eminent broad-based ownership schemes — the pioneers of broad-based BEE — today find themselves having to be more focused on a battle for their own survival than on the war to save the country's economy. The BBBEE status of these trusts – the Kagiso Charitable Trust, the Mineworkers Investment Trust, HCI, the WDB Trust, Ditikeni Trust and Wiphold Trusts, amongst many others – has been put in doubt over the past 18 months because of a difference of opinion with the BBBEE Commission over their BBBEE status, and in particular the recognition of our broad-based ownership schemes (BBOS). A lot is at stake here: all of the above mentioned trusts have impacted a wide range of beneficiaries, and distributed over R1.9-billion to qualifying black beneficiaries.
They then attempted to contact Slaptjips for clarity
But, as we recently explained in one of many letters to Trade, Industry & Competition Minister Ebrahim Patel: "The current lack of policy uncertainty is placing in jeopardy the investments held by the trusts and their continued ability to reduce poverty, improve skills and create black entrepreneurs."
But this has fallen on Slaptjips' chip laden ears
The situation has not arisen without a lack of trying. We have made repeated calls on DTIC to clarify the situation. And the solution – which has been outlined to government in a series of meetings and emails over the past 24 months – is relatively simple and painless, to be honest,:
Business Day correctly observed that the commissioner has gone rogue
The broad-based BEE commissioner is abusing her power and only minister Ebrahim Patel can stop her. Zodwa Ntuli, who was appointed when the commission was set up in 2019, has made a point of questioning the status of broad-based empowerment schemes, arguing that these are not genuine black owners. On an abstract, intellectual level, she makes a coherent argument.
I wouldn't have accorded the commissioner with such a high accolade as the one underlined above, Business Day qualifies this statement
It is also not the case that the discussion about BEE is an abstract, intellectual one. As every business owner knows, BEE has been codified to the nth degree.
What the commissioner does not wish to grasp is that trusts and broad-based schemes are a very entrenched part of empowerment ownership. The quote below should refer to the codes of good practice (everyone of them I need to stress)
The B-BBEE Act of 2003, amended in 2013, deals with definitions and the requirement of broad-based ownership schemes at length, including both trusts and employee-based ownership schemes. It explicitly includes broad-based schemes as a form of black ownership and details what proportion of ownership points these can claim; and states what is required from the scheme to be a qualifying one, which includes, for instance, that individual beneficiaries must be identifiable. It also sets a limit on the fees the trust can make out of the entire exercise.
The act does not insist, as the commissioner has done, that beneficiaries must behave as shareholders, because it is simply not possible.
Back to Cohen, after commenting about the EU seeking recalibration of the BEE rules (as an aside, if you were a foreign company operating in South Africa and submitted this missive to the government, what would you think if you saw that Lamola and Slaptjips have published another code to discuss the transformation of legal practices – this is a genuine fuck you, exacerbated by the fact that it is almost impossible to understand)
Look at the precipitous decline in South African manufacturing over the past decade. You have to ask whether BEE compliance isn't at least partly an issue of concern. The EU survey showed that there needs to be a recalibration of the points accorded to the different elements of compliance. Incredibly, although the commission claims it's not restricting investment, it has done no study to calculate the actual cost of BEE. On top of this, there is a much larger problem: the JSE. Many BEE deals were done willingly by progressive industries, of which there are plenty in South Africa, using an ingenious scheme: rising stock prices and dividend flows would pay for large BEE stakes. This was the era of the special-purpose vehicle. With the JSE essentially flat for the past five years, the utility of this mechanism is fading. And the declining economy is restricting dividend flow. Now BEE companies often demand vendor financing, but that increases a project's debt burden, making the products more expensive.
There is another case where she has rejected a BEE deal proffering the following (I'll keep this one confidential), these two paragraphs highlight how fucking deluded the commissioner is
3.6 We also wish to bring to your attention that the fact that particular provisions may be regarded as commercially viable or standard practice to transactions, when assessing a structure that is recognised for B-BBEE ownership purposes, the B-BBEE Commission applies the requirements of the Codes of Good Practice guided by section 3 (1) (a) and (b) of the B-BBEE Act, which states that any person applying the 8-BBEE Act must interpret its provisions so as to give effect to its objectives and purposes, and to apply the Constitution.
3. 7 Thus the legal and commercial acceptability of terms by the parties cannot be a justifiable ground to maintaining such restrictions, even if it is for a limited period. The B-BBEE Commission would not endorse such terms, especially when the B-BBEE Commission has indicated that the terms and conditions are not consistent with the B-BBEE Act.
In other words, we don't care about standard practice (which predates the codes), we only care that it adheres to requirements of the codes and the Act, and by the way, these are our interpretations, fee free to litigate but we may refer you to the NPA or something like that. When I asked the company whether they would consider the legal route, their response was that they didn't want the attention. The commissioner knows this.
The Awesome Faction
What all the journalists are not saying, and perhaps they don't want to say this, is that the commissioner is part of an ANC faction. She is driving a factional agenda, wreaking chaos where she can. Knowing that there will be polite requests for her to reconsider her stance, she will simply decline to be reasonable. Slaptjips is in the other faction (the one that I would regard as the better one). If he takes her to task then he may threaten his own political career.
The only solution is litigation. And wholesale litigation. The way the commissioner is behaving is ultra vires, not that she would understand she suffers from delusions of competence. She also doesn't have a budget for litigation, she's said so. She's boxing in a weight class that is way above hers, boxing unfairly and with impunity.
There is too much history of dialogue and it getting nowhere, ask the mining sector. The average disgruntled person makes their dissatisfaction known through very robust (sometimes extremely violent) protests. Corporate South Africa thinks that the government is reasonable and will respond to a steady flow of communication. Chamberlain thought the same of Hitler, it took Churchill to turn this around.