Paul Janisch

SANLAM BEE report. And they are surprised by their conclusions

And the headline reads

'Transformation not as advanced as BEE scorecards suggest' – Sanlam report

The report says that

After analysing all the data and interviewing people working in these companies, the researchers concluded that "transformation is not as advanced as the scorecards suggest".

Why is this not a surprise?  The article concludes with

Masilela said it's time South Africans questioned why transformation promised by the Broad-based Black Economic Empowerment (BBBEE) remains elusive 20 years after the law was introduced to address inequalities in SA. He, however, doesn't blame BBBEE policy but rather corruption, racism, and the psyche and attitude of decision-makers.

The failure has everything to do with BEE policy.  There was never a transformation agenda in the policy.  It is a punitive model.  It goes beyond a tax.  Business cannot fix what the government has broken.  If the education system is broken then you can't hire people.  If you don't make it easy to fire people then you won't hire them.  I've noticed with some of the YES projects that we've run that certain people would rather do nothing and get paid R350 to do it than work for R4500.  This is not a slight on the people in this country - this is the environment that they have grown up in.  If everyone around you is unemployed going back a few generations then how will you know what work is?

BEE has failed and will continue failing because government (anc government I need to stress) has not been an equal partner in the process.  Of course it's about compliance.  An additional thing to consider is the fact that BEE was only designed for a booming economy, now that the anc has dragged us into the shit BEE cannot function.  We have that awful bolshie bod to thank for this.

 

 

 

 

 

SANAS – oh SANAS, where is thoust legitimacy?

Unfortunately my tirade against SANAS brutality has not ended. I'm amused by this but not by the unchecked power that SANAS wields over the economy through their verification agencies. I am going to write to the dtic about this, my concern is that SANAS is amending codes in fact. It doesn't matter that it's not supported by law, that will be resolved by a court case. I've tried that before, had no luck – but if there bodies of people who would like to help me brief attorneys and get counsel and pay me for the privilege of managing this then I'm in.

I need to start with SANAS. I have not found the authority that provided them with right to manage BEE certification. This predated the bolsh (I wonder how he's doing now that mother Russia is marauding a former Soviet but now sovereign state, my money's on that he wishes that communism will return to Russia and they will be great again, as if they ever really were, he'll be disappointed). I can't blame our resident commie for creating this mess. I don't think he did much to prevent It from happening, neither has Slaptjips. Be that as it may they are now responsible for issuing licences to determine blackness disguised as transformation.

What is SANAS

SANAS is a statutory organisation created by the Accreditation for Conformity Assessment, Calibration and Good Laboratory Practice Act, 2006. Already we are seeing that they are well placed to handle BEE. The Act's preamble says

To provide for an internationally recognised and effective accreditation and monitoring system for the Republic by establishing SANAS as a juristic person; to recognise SANAS as the only accreditation body in the Republic for the accreditation of conformity assessment and calibration and monitoring of good laboratory practice; and to provide for matters connected therewith.

This is quite limiting. In the first place SANAS does not have the legislative support to do BEE stuff. Perhaps there is something here

In the interests of balancing verification practices and ensuring consistent technical competence, the BEE Verification Agencies are required to undergo accreditation. the dti collaborates with the South African National Accreditation System (SANAS) in this regard, to harmonise accreditation and verification practices, thereby enhancing South Africa's economic performance and transformation.

Does SANAS appear in gazetted BEE codes?

It appears not. It doesn't even appear in the BEE Act. There's no mention of it in the gazetted verification manual (2008). I checked the 2019 amendments and there's no reference there. In fairness I have not checked other BEE codes, other than the FSC and there's no mention there. This does make sense, why would you want to allow SANAS to fuck it all up when you can ask some other organisation to do it as well (and I was wrong about IRBA – I miss them terribly).

What is SANAS job then?

Perhaps this is where it sort of gets its BEE responsibilities. Section 5(1) of the Act must speak

5. (1) The objects of SANAS are to-

(a) accredit or monitor for GLP (Good Laboratory Practice) compliance purposes, organisations falling with its scope of activity;

(b) promote accreditation as a means of facilitating international trade and enhancing the Republic's economic performance and transformation;

(c) promote the competence and equivalence of accredited bodies; and

(d) promote the competence and equivalence of GLP compliant facilities.

This is iffy. Accreditation is defined in the Act, it doesn't quite refer to accreditation but

"accreditation body" means a body responsible for third party attestation related to conformity assessment and calibration facilities conveying formal demonstration of their competence to carry out tasks against specified criteria, including criteria in International Guides and Standards;

This definition is interesting because it refers to carry out tasks against specified criteria. This is a significant word because it must mean that specified criteria appear elsewhere, not criteria that SANAS whips out on a whim. Not being the lawyer I should have been, I would suggest that this definition precludes SANAS from opining on established criteria.

What is R47-03?

This is the standard that SANAS uses to accredit VAs. What needs to be noted is that it is a SANAS document with Yuneal's name on it – there's another Google search for you Yuneal. It's not a gazette. At best it's a contractual document between SANAS and the VAs. It's a process document which is what it's supposed to be.

NOW THEN – WHERE DOES SANAS GET THE AUTHORITY TO ISSUE NOTICES ABOUT INTERPRETATION OF THE VARIOUS CODES?

I can't find it. And this where I need help. I don't think it exists and as I wrote before, their interpretations are amendments in fact. Even the dtic can't amend a code without following due process. It's worthwhile noting that the last two Yuneal decrees, or at least the last two that I know about, were issued by SANAS. He maintains in the one that he did it in conjunction with the dtic. Yet they are silent.

I have enough now. I'm not finished with SANAS yet but I now have enough background to write to the BEE department. Oh yes dear readers, not only will I keep you abreast of what happens I will post the letter on this blog just after I send it.

Puerile writes and Davies responds.

The reader might be unaware that this blog's curator took the Duncan McLeod article to the Daily Maverick with his (not Duncan's) typical anti- bolshie twist. It was a more sanitised version of my normal blog posts, no bolshie bob references – just Rob Davies, I think that my bolshie point has been made. I stand by my assertion that Davies' legislating processes need to be critically examined.

Well blow me down if the ex-minister himself doesn't respond to the article the next day. In the article the largely discredited ex-minister rambles on about the work that he did with the BEE Act. Mentions the black industrialist policy and the quality of industrialists that they have appointed, even though this policy is destined to fail because industrialists need power and Davies' last political master (the even more discredited jacob zuma) killed Eskom.

What Davies doesn't do is get to the gist of my Maverick article, that he lied to the public. He vaguely attempts to justify his decision to accord Telkom with the facilitator status with

Instead of requiring development finance institutions or operators of public infrastructure to have to obtain verification certificates, a process was developed to accord them "BBBEE facilitator status". A high court has now ruled that there were procedural flaws in the case of Telkom, which it also ruled was not entitled to such status as it is not a fully state-owned entity. The current authorities will have to determine the way forward on that particular issue.

A lot of smoke and mirrors in that paragraph. Davies told the commenting public – which is any stakeholder in the globe that might compete with Telkom in South Africa, that Telkom had applied for facilitator status. They hadn't. I mention the benefit of this facilitator status in my Maverick article.

The advantage to Telkom is massive. About 51% of Telkom's shareholding is made up of investors on the JSE.  It is possible to derive a black ownership scorecard out of those shareholders, but it is onerous, expensive and very rarely delivers anything close to the target under any code (the ICT code sets a target of 30% black ownership). 

Telkom, therefore, walked into a verification with a guaranteed 25 points on the scorecard – all it needs to do is worry about the balance of the elements. These 25 points can decide whether a company is competitive or not.

There were a few more amusing comments he made.

One such denialist is Paul Janisch (Business Maverick, 22/7/2020). For some years, Janisch has run a blog dedicated to demonising any measure aimed at promoting broad-based black economic empowerment (BBBEE). His stock in trade has involved highly personalised attacks, including developing an infantile nickname for myself: Bolshie Bob. Wednesday's piece was yet another example of his red-baiting anti-transformation rants.

The denial he refers to is a transformation denialist. I would like to respond to this paragraph specifically

1. The blog goes back a lot more than some years – it's coming up for its 14^th anniversary (even predates Davies)
2. I am grateful that he mentioned his blog nickname – although he was mistaken if he thought that I thought enough of him to put that nickname in uppercase, he was consistently lowercase
3. I don't think the nickname is infantile. I think it's puerile.
4. I am impressed that he read my blog. I wondered if he knew about it
5. He refers to me as a denialist because he can't call me racist. I dispute that this blog is denialist. I wrote over 1000 articles about empowerment because I wanted it to become a de facto knowledge base on the subject. I don't believe I am denialist. I would prefer to regard myself as a realist. I objected to his policies because they were devoid of logic and could not result in any transformation- they are simply too expensive to implement. If there is expense then clever solutions are found.
6. He's right about the red-baiting. I have no interest in communists in politics. I disagree with the concept even though I have a very significant communist relative.
7. What Davies failed to understand that it was people like me (and there is one under every rock) who were left to interpret and implement the drivel that he published. He offered little, if any, guidance.

I stand by this. The blog is the best free BEE resource in the world. I will never agree with any government policy that I find impulsive or devoid of objective logic.

WHY NOW?

I would certainly have started targeting Davies in about 2012 on this blog. It seems that the term bolshie bob started in 2018. Many of the posts from 2012 to now would have had some go at him. On top of this I had published a few articles in very respectable publications where I had shown very little (in fact no) support for Davies over the years. All of these are not complimentary of Davies or his department. In realistic terms this is quite a battering. Not a rebuttal nor a word from Davies was ever forthcoming.

This Maverick article struck a nerve and I can only speculate as to why. Obviously Davies would have liked to have left a positive legacy – that's not possible. A friend of mine called me yesterday and correctly observed how Davies' appointment as head of trade and industry shows how politically astute zuma was. As long as Davies believed that he was working within his communist framework then he would do zuma's bidding. I think he was the only minister who was consistent in the same portfolio during the 9 wasted years. History is not going to be kind to zuma and it won't be kind to any of his ministers and it won't look at Davies at being anything else as destructive.

Perhaps Davies' rebuttal is as a result of him being a little concerned about what he signed in those ten years. I do believe that he didn't check what he signed. I come back to the first iteration of his revised codes (then nicknamed Rob's Folly), they were shockingly written. I elaborated on them at the time. They are an embarrassment for someone with a PHD. It suggests that he did not read them.

I suspect he is going back on the last ten years and wondering whether his minions were honest with him about what he signed.

Bolshie bob gets a high court bollocking - this must open the doors for more litigation

There are two types of people in this world, Harry van der Merwe and everybody else.  I happen to like Harry - can't be sure about most other people, specifically if they are anc appointees.   Harry sent this to me today. 

My old friend - the ever destructive bolshie bob has been told via his new mate Slaptjips, that he cannot go ahead and summarily pronounce without following due process.

The high court in Pretoria has overturned a controversial 2019 decision by former trade & industry minister Rob Davies that gave Telkom privileged black economic empowerment status by the government. At the time, Davies agreed to give Telkom BEE “facilitator status”. The partially state-owned telecommunications operator welcomed the decision, saying it would boost its empowerment credentials and its competitiveness.

The problem was that bolshie, the nasty and destructive commie he is, decided Telkom needed BEE facilitator status (in effect rendered 100% black owned - according to the article) and then claimed that Telkom had made the application for this status.   The court found that

No such application was ever made. An application was cobbled together by the department of trade & industry; the BEE chief directorate requested the designation; the director-general recommended the designation to the minister; and the minister approved the designation. The department of trade & industry was both the applicant and a participant in the decision-making process.

Then there is the crux

“There is a material difference between the decision proposed in the notice and the decision which was made. The notice suggested a decision would be made to grant Telkom facilitator status whereas the final approval granted facilitator status to the government of South Africa represented by the office of the presidency. This difference materially impacts upon what was proposed to be done, what the public perceived was proposed to be done, and what the public was invited to comment upon.”

In other words, this idiot of a minister (ex-minister thank fuck) misled us, the commenting public.  He lied.

What else did he lie about.  I have long had my doubts that the comments received for any of his so-called transformation codes were ever taken into account.  Think about the 2.5% of payroll required for bursaries.  Who would have agreed to that?  I spoke to a very large company who was struggling to get these points and they told me that this was absolutely ludicrous.

What now?

We now have a court saying that he lied, that he misled us and that he wasn't allowed to do so.  The beauty of this judgement is that bolshie wasn't the person facing the music - it was Telkom.  bolshie can't appeal this - and Telkom have said  they won't appeal it.

I always had this suspicion that bolshie bob was a devious so and so.  He either was by commission - in other words he purposefully went ahead and published policies because he wanted them.  Or he didn't bother reading what his minions proposed, he just signed them.  If you read the first iteration of the BEE codes from 2013 you'll see a document that was pasted together by a semi-literate child.  bolshie is a learned man.

Either way - we suffered under his misguided moronity.  We may just have the ammunition to get a lot of things challenged in court.

BEE is for the good times – these AREN’T good times

Well this was the original intention, until bolshie bob was launched upon us. His commie-addled mind could not understand that you can't grow and share if there is no growth.

It wasn't a surprise that this little vignette hit the news

A day after President Cyril Ramaphosa announced a nationwide shutdown and relief measures to support small businesses during the coronavirus or Covid-19 crisis, the Department of Small Business Development's website crashed for many hours.  

Without a functioning website belonging to the custodian of small businesses in SA and the limited flow of credible information, a misinformation campaign can easily find fertile ground on social media. And it did on Tuesday. 

The department was criticised on Twitter for allegedly imposing racial ownership requirements on small businesses that want financial assistance from the government to cushion the blow of the impending national shutdown that Ramaphosa declared on Monday 23 March. Ramaphosa announced the three-week shutdown, which kicks in from midnight 26 March, to contain SA's Covid-19 outbreak. Infections have passed the 500 mark. 

Various misinformation peddlers claimed the relief measures proposed by the government would only help small businesses that are at least 51% black-owned and exclude those without a favourable transformation profile.

This kind of sentiment was very common under bolshie. Once or twice he was caught off-guard, he didn't always bother reading some of the stuff he signed. You could expect this from the zoomer maladministration.

Once again Cyril has shown that we need to work together as a nation and not favour certain types of companies. BEE cannot be a consideration under the COVID19 pandemic. Preservation of jobs IS THE PRIORITY, irrespective of who owns the company.

Small business development minister Khumbudzo Ntshavheni said at an inter-ministerial briefing in Pretoria on Tuesday that the purported racial requirement was "fake news".

Good one Cyril, but it does show that a number of your administrators are still operating under the zoomer banner. You can find these people and remove them – they are the thorn in your side and they are still operating.

As an aside, if they wanted 51% black owned company so that I could keep it running, I would make a huge plan and quickly. I would use the substance over form rule and transfer the shares and wait for lawyers to start operating again. In the interim I would issue an affidavit confirming that I am 51% black owned by making a cryptic reference to the substance over form rule.

We need a dti holiday and accredited Verification Agencies (March 2020)

Before I go into the number of VAs (79 of them) there is something else that needs to be discussed. And it's the dti and their BEE codes.

The economy is now comfortably in a recession, productivity is decreasing substantially because of the isolation. Small businesses (which are the backbone of the economy – that's why the dti wants to control them) are suffering because of the lack of economic activity. And we have the most ridiculous BEE targets that need to be achieved this year. It's a known fact that BEE stopped being about transformation years ago. It's a whipping tool that suddenly became a useful thing to sort out social ills like fees must fall. Under that useless commie idiot bolshie bob (rob davies) the BEE codes would have become a saviour for the whole nation – he was not above upping the targets to sort out tax problems.

Ebie's different though. He seems to be a lot more balanced than bolshie was. One thing for sure, he doesn't speak as much. He garnered a lot of praise for the Pepsi deal, he's known to scupper deals because he's a bloody unionist. This time not,

One competition lawyer told Moneyweb that given the grim state of the local economy and the government's high-profile campaign to encourage foreign investment, Patel can have had little room to push for onerous public interest commitments. "It can't have been a good time to fight for workers getting some control," said the lawyer.

This does show that Ebie understands that we need to be rational here. So Ebie, here what I say to you. Give us a BEE holiday for the rest of the year where every BEE scorecard that is issued where the measurement period starts in March 2020 has relaxed targets. Don't give up procurement, reduce the skills, enterprise and supplier development targets. It'll show that you see that business need to survive this pandemic – they don't need financial targets that are going to close them down. And whilst you are at it tell Samson to climb off his mining hobby horse and give us reliable green power – and then he can tell the bbc, zungu and adil to shut up as well.

Now onto verification agencies.

What is interesting is that the list that I have put on this blog is read often. Why not update it.  Not much has happened since that last post - only 79 now.

Here's a chart showing where you can find them

Interestingly the two "other" ones are in Limpopo and the North West. You can find them here – you need to dig deep into the website to find the list. My calculations are here.

bolshie bob's bye bye surprise - good riddance to that destructive commie

Oh to leave a legacy.  This wasn't a priority for zuma and it's certainly not a priority for bolshie bob who demonstrated a callous disregard for the well being of the economy.  Before he vacated his office he left us with four more gazettes.  This is no longer his problem, it's now Ebie's issue.  As to where the money is going to come from to fund these far out amendments, only bolshie knows; and history has shown the bolshie knew very little indeed.

Our erstwhile friend signed these nasty documents in early April and then wrote that these were "for implementation within 6 Months from date of Gazette". The date of the gazettte is 31 May 2019.   I suppose I am supposed to tell you what this six months means.  I have no idea what it means. Is there a further notice the Ebie is going to send out to tell us when this is going to apply?  Knowing SANAS we're all in for a surprise, they'll probably tell us that we should have known about it on the 9th of April when that erstwhile dingbat signed it. This smacks of last minute bitterness.

Also - these are only applicable to the dti's codes.  

Replace (the applicable code) within Gazette 36928 with the following Amend(ment)

Ebie now needs to amend all the other codes.  This then begs the question of fairness.  Mein Gott Ebie - you've got your work cut out for you.

Here are the four amendments.  I haven't read them properly, they are inevitably much worse than my initial reading suggests.  The blurbs below are brief summaries.

Download 42496gen306 flow through removed

We knew the modified flow through would be removed when it came to a level 2 as an EME and QSE.  It's gone now

Download 42496gen303 amended definitions

He's tightened up a number of definitions.  However he's very clear the ED or SD beneficiaries are EMEs and QSEs.  Something he doesn't stick to in the ED/SD code below

Download 42496gen305 skills and bursaries

Rob Davies lives in cloud fucking deluded land (yes I put his name in uppercase -  I want someone to Google this and know who fucking bolshie bob is).  For 4 points companies now have been given the grand privilege of donating 2.5% of payroll to students at higher education institutions.  Somewhere or somehow bolshie bob and his band of desperate warriors seem to think that this is a reasonable amendment to the code.  That the economy is shrinking and more people are losing their jobs is not our commie hero's issue.  He must have believed that there is enough money for these donations (according to the EAP).  No company I know has got enough money for these four points.  I wrote about this in 2014, by my calculations Standard Bank would be in for about R400m for those 4 points (not that they are subject to that code).  I still wonder how many companies actually agreed to this requirement.  This alone needs to be queried.

He's also made one section for learnerships, apprenticeships and internships, it's now up to 6 points for 5% of staff.

Download 42496gen304 - ED proc et al

Probably the most controversial of them all.  He's upped the points for black owned purchases and pushed the target to 50%.  You can use generic (large) entities as ED/SD beneficiaries subject to them being ED/SD beneficiaries as EMEs or QSEs.  And a supplier development beneficiary is on the supply chain list and the ED one isn't.  He could have simplified the EME and QSE purchases into one section, as he proposed in the draft, but he didn't.

Happy reading folks.  I suppose this bodes well for Ebie - because it is fucking hard to destroy an economy with the same level of prowess as his predecessor.

Has the commissioner stepped over the trust mark?

It certainly appears so.  This is a strange story because it seems that only Business Day published the story.  And as usual they published behind their paywall so you can't see it.  I do have a copy though and I will lift a paragraph or two for your benefit.

The Black Economic Empowerment Commission, which was set up in the department of trade & industry in 2017, has written to dozens of companies informing them of the need to rectify their ownership structure and undergo reverification of their BEE status or face investigation for fronting.

The companies that she has written to include (reportedly) 

Kagiso Trust, Wiphold Investment Trust, the Sactwu Investment Trust, the Royal Bafokeng Nation Trust, and the Batho Batho Trust, which owns 47,5% of Thebe Investments

This is barely a fraction of the companies that will be affected by this pronouncement.  An email sent out by Sanjay Kassen -head of ENSafrica's B-BBEE practice group noted

To simply state that the vast majority of broad-based B-BBEE trusts are not compliant with the law and constitute fronting is not something that corporate South Africa is going accept easily and such a change would also cause significant instability in a market that is already facing challenging economic conditions.
The threat of criminal sanction where there has been no intention to commit fronting will not, in our view, yield the results the Department of Trade and Industry and the B-BBEE Commission seek to achieve. There needs to be a more collaborative approach between government and corporate South Africa so that there can be a clear direction going forward on broad-based Black ownership.

In other words, if you suddenly cancel the trust rule, expect litigation.  It's also important to note that the commissioner cannot proclaim that this is fronting.  Fronting is in fact a crime - the crime of fraud.  I wrote an extensive piece about fronting a while ago.   This is the essence of what needs to be proven by the NPA (who are tasked with conducting the case)

Proving fronting

Whilst fronting has been specifically created as a crime by the BEE Act, it is suggested that it is very similar to the common law crime of fraud. There are numerous definitions of the term fraud but this oneappears to be the most comprehensive.

"Fraud is the unlawful, intentional making of misrepresentation which causes actual prejudice to another or holds potential prejudice to another"

Five elements must be proved simultaneously for a conviction under fraud, these are

• prejudice,
• misrepresentation,
• unlawfulness,
• causality and
• criminal intent.

Each must be proven by the state beyond a reasonable doubt.

As to when the awesome commissioner is going to to this is anyone's guess.  If you watch the clip below at 4:50, the awesome tells the interviewer that she doesn't have the resources to do this.  I would suggest that the resources in question are qualified personnel and money.  The personnel issue is a major problem for the commission.  Some of the documents that I have read that are so-called findings are ridiculously weak.

 

A bit more on the process.  I am now going to borrow liberally from an opinion written by Bobby Lanham-Love.

Bobby writes the following

we do not consider these reported comments to carry any weight until such time as the Minister formally proposes an amendment to the Act and/or the Codes.

We remind that only Parliament can amend the Act and only the Minister may amend the Codes.

Both these procedures require formal consultation with all stakeholders and are subject to judicial review. We are not currently aware of any formal changes being proposed or tabled.

I agree with him completely.  The commissioner has shot her mouth off, probably with an endorsement from some government officials, but she's on her own. The dti have said nothing about this at all, and they have posted media statements in the last few days, none of which refer to the commissioner.  Even the commissioner's own website says nothing.

And now what?

There is little doubt that this is what the aNc wants.  The commissioner is not doing anything that is not aNc policy.  I agree with this editorial 

since 2015 we have gone back to a narrower form of BEE, first by introducing punitive scoring for companies that chose not to do equity deals, and now by placing limits on broad-based trusts.  It can only be expected that the goal posts will shift again in the future.

It is now up to a vigilant private sector to make sure that they don't shift those goal posts.

In the interim, the commissioner is barking up a shothole bored tree and we can safely ignore her.

Transformation or a smokescreen - the BEE codes are more of the latter

This is a post that I have been wanting to write for a long time.  I eventually wrote it as an article for Moneyweb, who published it on Friday and syndicated it to the Citizen (now I'm really famous).  I have been mulling this over for a long time.  Why is it that these BEE codes are more focused on driving a change of ownership than the broad-based emphasis they purport to advocate?  It's patently obvious that everything broad-based is a falsehood.  I found the answer in bolshie bob's Youth Employment Service practice note, specifically paragraph 1.13

1.13 EMEs and at least 51% Black Owned or more QSEs that participate within the Y.E.S Initiative will be verified against the Qualifying Small Enterprise Scorecard and the B-BBEE Certificate will be issued by an Accredited SANAS B-BBEE Verification Agency. This is also applicable to Sector Codes of Good Practice utilising the respective QSE Scorecard.

Here is the article.  It was cleaned up a bit by a MoneyWeb editor. You'll notice that I haven't referred to bolshie bob or the awesome awdoz.  Their real names are Rob Davies and Zodwa Ntuli (uppercase is an exception on this blog)

There is a very interesting clause in the practice note for the Youth Employment Service (YES) document that appears to defy any form of logic. 

The YES programme is now linked to the black economic empowerment (BEE) scorecard and promises to promote companies up to two levels if they employ unemployed black youth for a period of 12 months.

The clause states that exempted micro enterprises (EMEs) or 51% black-owned qualifying small enterprises (QSEs) that wish to claim this benefit need to get measured on the full scorecard before they can benefit from the YES promotion.

For the uninitiated, an EME turns over less than R10 million per year and a QSE between R10 million and R50 million. EMEs with less than 51% black ownership are level 4 BEE contributors, 51%+ black-owned EMEs are automatically level 2, and 100% black-owned businesses are level 1 – which is the top of the BEE pile. The same levels apply to 51% black-owned and 100% black-owned QSEs. All other QSEs need to go through the rigorous, onerous and expensive process of implementing a BEE scorecard and taking the level that this process delivers.

It must be stressed that the process is costly, complicated and unlikely to deliver great results if your company has little (10% or less) or no black ownership. In my experience, a level 8 (which is the entry level to the scorecard) is pretty much what most companies would have to settle for without black ownership.

Why?

This begs the question – why would an exempt micro enterprise that is automatically a level 4 go through a verification to get to a level 7 or 8 and then embark on the YES programme to be promoted to a level 5 when they are already a level 4?

Similarly, why would a 51% black-owned QSE want to get verified in the hope that they come up with a level 3 and then go through the YES process to get to a level 1, when they are automatically a level 2?

And why would a 100% black-owned company even bother with YES?

Herein lies the conundrum. Minister of trade and industry Rob Davies has been forced to exclude smaller businesses from his YES programme even though they are the most likely employers of black youth under the YES programme.

The only logical reason he has done this is because a level 4 can get to a level 2 within a year just by employing a number of people that the business might actually need. But then this would pose a threat to black-owned level 2 and 1 businesses when it comes to state procurement.

There is a five and six preference point advantage, depending on the value of the tender, between a level 4 and a level 2 under the 2017 Preferential Procurement Policy Frameworks Act (PPPFA) regulations. This perceived threat to smaller black-owned businesses has to be mitigated against by discouraging lesser owned competitors from reaching their own BEE levels through any programme that promises a promotion of a couple of levels.

The minister himself has tacitly confirmed the onerous nature of the revised BEE scorecard by publishing a proposition that all 51%+ black-owned companies should all be promoted to level 2 irrespective of their turnover. I have a 100% black-owned client that is over the R50 million turnover threshold that could not get better than a level 5 when we took them through the whole BEE scorecard. This company would have truly appreciated the instant promotion that would have come at a fraction of the cost and hassle.

Dubious motive

These developments have me questioning the motive behind the revised BEE codes.

The department of trade and industry (dti) crowed that these codes were more broad-based than ever, stating that they will touch more of the people who need this empowerment than its predecessor.

But if this is the case then surely all companies, irrespective of ownership levels, should be involved in the process? The more companies that hire black people, train them and buy from black-owned businesses and support the black poor, the greater the impact on the economy and society in general.

Yet 51% black-owned companies that turn over less than R50 million don’t have to contribute to any of this because they aren’t measured on it.

I think the reasons behind this are simple, and I must confess that I have been unduly influenced by Institute of Race Relations CEO Dr Frans Cronje’s arguments about the national democratic revolution.

Cronje argues that the National Democratic Revolution (NDR) led by the ANC strives to rid South Africa of all the vestiges of its colonial past. Part of this process would see 51% of the entire economy in black hands. The reward for those companies reaching 51% would be that they may never have to implement a BEE scorecard at all. Everyone would be a level two or higher. And the need to support black-owned businesses and charities would disappear because all businesses would be black-owned.

Punitive

To someone like Davies, a member of the South African Communist Party, this is the purest and cleanest form of transformation.

But it is a very lofty ideal that is unlikely to be achieved in a free market economy. Those companies that do not wish to adhere to this ownership target will be forced to implement the complex BEE scorecard.

This is simply a punitive alternative. Its punitiveness is enhanced when you consider that the targets for elements like skills development, procurement and enterprise/supplier development are not only complex but extremely costly. It attempts to force smaller businesses to get to the 51% black ownership level in the quickest possible way. This pressure has resulted in many smaller white-owned businesses moving to 51% ownership through elaborate empowerment schemes that irritate BEE Commissioner Zodwa Ntuli because she is powerless to curtail them.

Once this concept is understood it becomes quite clear that the codes are less concerned about broad-based transformation and more concerned about giving black-owned businesses a massive competitive advantage over their lesser owned competitors, specifically in procurement that is subject to the PPPFA. To ensure that this advantage is maintained Davies has set up a series of codes that render it almost impossible to meet those levels when a company has to implement the BEE scorecard.

The exception that should be the rule

What is interesting though is that there is one sector code that is never expected to achieve 51% black ownership – the Financial Sector BEE Code (FSC).

This is because of listed shareholding and the requirement of the Banks Act that any shareholder with more than a 15% stake in a bank must meet certain liquidity requirements in the event that the bank requires the shareholder to bail it out.

The FSC is the only BEE code that focuses on the transformation of the entire sector by encouraging those companies to embark a wide range of initiatives that reach the largest amount of people.

I would argue that it is truly a broad-based code.

As for the other codes – they are a smokescreen and if they actually achieve any form of transformation in the future it will be an unintended consequence.

The transformation of South Africa will not come about as a result of those codes. Corporate South Africa needs to prepare to shoulder the blame from this fallout as it has for the government’s failures in the last two decades.

 

 

Cabinet reshuffle this afternoon - just get rid of bolshie bob. Hell you can keep butterbeelee if you must

Most people will read this post after the announcement, and I don't think my wish will come true.  Our dear friend bolshie bob is so confident in his incompetence that he has tasked one of his lackeys to defend him after a certain Robert Stone Linden wrote a letter to the Business Day and said

"the ANC insists on appointing communists to key positions of economic importance, such as the minister of trade & industry. It is the avowed intention of communism to destroy capitalism and usher in the egalitarian state, but this minister is charged with promoting business enterprise!"

The poor lackey found himself defending the indefensible which was made harder because he couldn't use the race card.  I wouldn't read any further than the first paragraph - dig

Minister Rob Davies (aka bolshie bob) has through his visionary and sterling leadership steered the Department of Trade and Industry to be recognised as the best performing department within government.

Visionary and sterling leadership - just like the Titanic's captain.

But our hero is back in the news because he's told the EU that they can fuck themselves if they don't comply with BEE regulations.

While acknowledging the need for economic transformation, the EU discussion paper said that, although broad-based BEE codes were not compulsory for private companies, they were “increasingly necessary to do business with government institutions and state-owned entities” across the value chain. “It is also increasingly mandatory where a government licence is required,” the paper said. “This has compromised prospective and existing investors’ ability to continue and/or expand their operations in South Africa. It has been particularly difficult for greenfield investors, for family-owned European companies and multinationals, who are often reluctant to dilute their control of assets.” Instead, the EU proposed that black ownership requirements be temporarily relaxed for new foreign investors and for further investments by companies already in the country. It also proposed that the weighting of the ownership pillar of the broad-based BEE codes be reduced and that a job creation pillar be introduced.

And so respondeth the bolsh

However, Davies said investors were already assisted with points through the Youth Employment Scheme, and investors were encouraged to approach the department directly for assistance with designing a BEE programme.

Really bolsh - have you tested the competence of your department.  It doesn't have a good reputation and and none of your visionary and sterling leadership has rubbed off on it

“All of our investment incentives are for job creation. You create more jobs, you get more incentives. Empowerment is not just about black people working for these companies – it’s moving away from the model of having a minor shareholding in somebody else’s company to moving into supply chains,” he said.

This is EXTREME BULLSHIT.  You have created a narrow-based BEE system that has no interest in job creation.  There is however a modicum of fact in your statement about minority shareholding, you don't want a minority shareholding, you want a MAJORITY shareholding.

“You come into our country, we give you incentives; we have to ask for something in return. I don’t think we are asking for inordinate things. We want a balance.”

I'll help you here with your job description my communist delusionist.  Your job is to encourage investment, here your biggest investor block is telling you to make another plan because you are asking for inordinate things.  But no - the world is breaking down the doors to invest in what's left of the zuma-ravaged country and hence you are permitted to spew your communist dogma.

Cyril - the only balance is the removal of this destructive minister.  He's been in the job ten years too long.