Paul Janisch

SANRAL's tired argument. They lost a court case and clutch

From Moneyweb

The High Court in Gqeberha granted H&I Construction an interdict stopping Sanral from proceeding with the adjudication and award of two specific tenders in accordance with the amended tender scoring system as advertised by Sanral on 19 May 2023 in an addendum to its tender document.

Judge Nyameko Gqamana said in the High Court in Gqeberha accepted that Sanral is empowered in terms of the Preferential Procurement Policy Framework Act (PPPFA) to determine its own preferential policies and has a discretion to make its own policy choices regarding the specific goals it wishes to pursue.

The judge said the transformation agenda by Sanral to ensure broader black participation is commendable, a step in the right direction, and long overdue – but the policy has to be fair, lawful and rational.

“What troubles me more is that the changes to the scoring system [were] introduced without consultation,” said Judge Gqamana.

SMEC SA said the new scoring system renders the Broad-based Black Economic Empowerment Act (B-BBEE) a nullity and compliance with the PPPFA is undermined because compliance now only amounts to a fraction of the points.

H&I Construction along with nine other construction companies argued that their BEE programme (which cost more than a little bit of money) amounted to nothing.

I love the response from Themba Mhambi the chairman of SANRAL (clueless I would say)

That the court action by the construction companies will not deter Sanral from pursuing real transformation of the sector.

Followed by

Mhambi stressed that it is time for black South Africans – Africans, Indians and Coloureds – who had previously been excluded from benefitting from massive infrastructure projects to benefit alongside the well-established industry players.

“Therefore, don’t believe all the lies that are told that we want to kill these construction companies.

“We don’t want to do that. We want to support them. We want to strengthen them to get more business but there is one condition. That condition is that they must understand that South Africa belongs to all who live in it, black and white,” he said.

Mhambi stressed that those people who have in the past been excluded from benefitting from road construction, bridge building, pavements, manufacturing of guard rails, the production of asphalt must now benefit as well.

He said that is the condition – and that the condition does not come from anywhere other than the Constitution of South Africa.

“When these millionaire and billionaire companies say to us ‘we are going to take you to court Sanral because you are depriving us of the millions and billions that we are making alone’ I understand what they are saying, because you can’t be a millionaire or billionaire by sharing” he said.

This is noise, I use that term a lot.  They tried to pull a move that wasn’t supported by the constitution and legislation.  And when they get kicked down then they argue transformation. It’s a tired move.

It’s time to update the number of Verification Agencies - 85

Interestingly this is quite a popular post on this blog.  There are 85 VAs operating in the country – excluding suspended and withdrawn ones.

 

 

 

 

 

 

 

 

 

And here’s the breakdown per city

 

 

 

 

 

 

 

 

 

The data used here is based on how the VAs describe the city/suburb where they operate from.  I did bundle Durba and Durban North together.  I don’t know KZN very well, but there are three VAs in Durban North.

 

 

 

 

 

 

Once Empowered 1 hour course - 27 September

I have been posting more business on this blog.  We are going to host a series of 1 hour courses on a variety of subjects.  This one is unique because it took me two days to figure out how it works.  I've summarised it into one hour.

What constitutes ownership for ICASA licences - option work

This is interesting.  There are draft regulations that state that individual licensees need to be a level 4 and have 30% ownership. I was contacted by Sakeliga who have told me that they are preparing litigation against these regulations.  This works for me.  We've seen the issue with Starlink in South Africa.  ICASA (read the government) would rather prevent people in the farflung  reaches of South Africa from accessing a fast and reliable network because they insist on a ridiculous ownership requirement.  It's the undoing of this government.  If you want to support the litigation then make contact Tian Alberts at Sakeliga.

However litigation takes a while and compliance may be the interim solution. 

The draft regulations were published in March 2021.  The regulations remain in draft format but in our experience the final gazetted regulations often look very similar to the draft.

There are two absolute requirements for individual licenses that need to be achieved between 36 and 48 months depending on the license or size of the applicant.  The licensee needs to be a level 4 with 30% equity held by black people.  The truth is that no company can achieve a level 4 unless they have a portion of black ownership.   If this requirement needs to take effect in the future then it’s best to comply with the 30% at the outset and work on the BEE levels over time.

What is black equity?
The definition states that each Individual Licensee must have a minimum of 30% of its ownership equity held by Black People.  Equity is further defined as the instrument by which a person holds rights of ownership in an entity.   Regulation 4(1) states that this equity must be derived through the Flow-Through Principle

The regulations are clear that any instrument of ownership will constitute ownership if verified by an accredited verification agency.  The ICT BEE codes consider a wide range of instruments - trusts, private equity, non-profit companies. warrants and options.  Most equity instruments will trigger a tax event and are quite dependent on the black shareholder meeting their repayment plans if they are indebted. 

Options are a compelling method of ownership compliance because if the option holder behaves as a shareholder whilst holding the option then the ownership is deemed to exist.  There is no Capital Gains Tax (CGT) until the option matures and most importantly the option holder is able to amass the necessary capital to purchase the shares through dividends that flow at the outset.
 
If you are looking at an ownership structure to comply with the ICASA regulations and would like to look at options please contact us and we’d happily set up a consultation with you at no charge.

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