Paul Janisch

The Commissioner speaks - transformation slow. Wow how observant

Is it correct to refer to the BEE Commissioner by her first name backwards? Probably not, even though it has a lovely ring.

Our great transformation fronting crusader held a press conference last week.  Please reader, take this post from whence it comes.  I make no bones about the fact that the fundamental basis of the revised codes is wrong.  These codes are not about transformation they serve two purposes

• They are punitive.  It's retribution.  They are devoid of business sense, rendering them unimplementable unless dramatic plans are made (and I know all those plans)
• They are designed primarily to give black businesses an absolute advantage over their "untransformed" competitors.  This is aimed primarily at state procurement. You can tell this because more tenders are insisting on bidders with very high levels.  I suspect this will be challenged at some stage

Back to the commissioner.  

Broad-based black economic empowerment in South Africa is moving in the right direction, but too slowly. That’s the word from Zodwa Ntuli, acting commissioner of the Broad-Based Black Economic Empowerment Commission (B-BBEE Commission), who adds the commission is confident that the pace of broad-based black economic empowerment in South Africa will soon accelerate.

The article is mostly about fronting, not that that should come as a surprise - the commission was established for this sole purpose.  There is a statement which adequately demonstrates how absolutely devoid of reality the Commissioner and the dti are

“If we implement B-BBEE the way it is intended, we’ll be able to create more jobs and integrate more graduates into the economy,” Ntuli says.

Let's look at these statements individually.

 Transformation is happening but slowly. 

I found another article where she said she understand that these codes were new.  Even so this is a problem.  The last codes were removed because the scores got too high too quickly.  A study was conducted in a similar manner as zuma's (still lowercase, and to show my sheer disgust I have decided to also use a smaller font for this infantile moron's name) "intelligence report" on Pravin and Jonas.  The dti had proof that transformation was not taking place, they conducted a study - which also showed that black businesses were being charged R35k for a BEE certificate.  That report has never been made public and never will.

The result are the new codes.  Ridiculously hard to implement - so hard in fact that bolshie bob has suggested that all black businesses should be exempt from implementing them, irrespective of turnover.  Of course progress is going to be slow, this is exacerbated by the paucity of verification agencies and SANAS' ridiculous processes.  In fact I'm surprised that it's done as well as it has.

Correct implementation will create more jobs and integrate more graduates into the economy

At best this comment is myopic.  At worst it's complete delusion.  When you consider that the cost burden on those companies who are left to pick up the pieces of the transformation of the economy, is so high, there is no space to employ more people.  Throw in the employment legislation and you get a lack of will to employ anyone at all.  Don't forget that we are in a technical recession as well.  There's no money for any of this.

The other issue that is not being spoken about is what contribution are those black-owned businesses that are exempt from BEE making toward this process? This is an unknown because they never get verified.  

The Commissioner is not giving us a proper picture here.  But she doesn't need to because the bubble she lives in doesn't require her to.

 

 

 

 

This could be the most significant article written this year - trunceformaysheeyin be damned

The Daily Maverick is becoming the most valuable source of fine journalism in this country.  There is nothing that comes close to it.  By the way they are looking for financial support, if you are so inclined you can read more about this here.

Back to the Maverick.  Dirk de Vos wrote a fantastic article over the weekend.  I'm not a Marxist fan nor that familiar with his theories, but I do know that that inept commie bolshie bob is a massive officianado.  de Vos sets up his argument thus

In general, socialists continue to favour top-down direct interventions by the state preferably supported by “evidence based” research. When decision-making follows a process of identifying a problem with the objective of solving it by reviewing evidence and evaluating options, what we mostly get instead is some predetermined solution with evidence selected to favour the pre-selected solution. That type of policy making process is faulty because we cannot know the full ambit of what the problem is all about or that a whole number of factors will change once the policy is known. Goodhart’s Law shows the dynamics at play: Individuals who are aware of a system of rewards and punishments will optimise their actions within this system to achieve their own best outcome.

In other words policy makers come up with a solution to a problem without spending much time figuring out whether they actually know how to solve that problem. de Vos turns his attention to black economic empowerment and its raison d'etre

A good example of a failing policy is Broad-Based Black Empowerment (BEE) legislation and its regulations. The problem of lack of participation of black people in the formal economy and racial inequality is the problem to solve.

And in one sentence he sums up the fuck up that is best described as bob's folly

What we get is a a complex scheme of BEE regulation and arcane rules.

 He could stop there, the points is made, but he's far too an analytical journalist.

The only interesting thing about BEE regulation is about they reveal about what the drafters of the rules think private firms work. Well, they don’t work in the way the BEE codes suggest they do. They work in all sorts of different ways. Still, the BEE regulations provide a system of rewards and punishments. They are also thoroughly gamed: they get manipulated by a range of actors from failing white-owned companies, specialist BEE advisers (I'm one you know - in the business of making white people look black) , funders, crony capitalists and those with a talent for manipulating state procurement budgets.

I think he must have been reading this blog.   All this bullshit about voting rights and board meetings and the like - these are done by large companies.  Since when does the average smallish to large business actually sit down and conduct a board meeting?   bolshie bob obviously knows the answer.  I once heard that idiot being interviewed on the radio and telling all those who care to hear his deluded voice that he will insist that CEOs start getting involved in the operations of small black businesses.  Huh? - what would a CEO or even a high end employee be able to tell a small business about running their business.  It was Anglo, in their submission of comments on the revised codes who asked the very pertinent question.  What do we know about running a supplier's business? We are miners - we mine shit and then send it off.  But we could start working on companies upstream - we could advise them on the best ways to manage the raw materials we produce.  No! says bolshie bob.  It's all about suppliers. What fucking drivel.  Back to de Vos

Sadly, the response to the unsatisfactory outcome is to swap out some of the original rules, sub-rules and sub-sub rules with a whole raft of new rules that are equally misguided and arguably worse because they are combined with additional rules addressing issues of enforcement.

And so we bring in the awesome awdoz and SANAS.  SANAS is so concerned about process and paperwork that if has failed to take into account that all companies are doing is producing documentation to support stuff.  The actual benefit that is being derived is not measured.  de Vos absolutely hits it here.

Black empowerment won’t be advanced by better enforcement of BEE regulations. The whole scheme of BEE is wrong-headed.

And he correctly concludes with

Of course, the original problem, namely the exclusion of the black majority and inequality has not gone away and, in some respects, the original problem has got worse.

I can only hope that Cyril is reading this.  I have lamented often on this blog as to why have they made the codes so difficult to understand and even harder to measure.  I think I know one of the underlying reasons and this has to do with lobby groups like the broke black business council - who are now returning to BUSA (apparently Cyril wants business to speak with one voice).  I suspect that these lobby groups are attempting to use apartheid-style policy making where you make a certain class of people adhere to "arcane" rules and exempt others - thereby making it easier for that exempt class to gain access to the lucrative government business (a broke government I need to stress).  It's all in the name of trunceformaysheeyin.  

Employee Tax Incentive set to be extended. Call me about this, I can sort out almost all of your skills issues

For those of you who aren't aware of the Employee Tax Incentive (ETI) then read on.  Before we go into the nitty gritty of the ETI, I have read that it will be extended beyond February 2019.  It is critical to the success of the YES, which in itself is somewhat dependent on our communist leader, bolshie bob, publishing an amendment that actually encourages companies to make use of it (we sit in hope - history doesn't favour this though).

The ETI is also a very positive incentive for skills development.  We have figured out a way to get almost all the points for skills development using the ETI and for far less financial consideration than bolshie bob's ludicrous 6% of payroll.  Call me and I'll tell you more - remember, all the points for a fraction of the money.

Back to the ETI - courtesy of SARS (the link is above).

Why is there an ETI?

Millions of young South Africans are excluded from participating in economic activity, and as a result suffer disproportionately from unemployment, discouragement and economic marginalisation. High youth unemployment means young people are not gaining the skills or experience needed to drive the economy forward. This lack of skills can have long-term adverse effects on the economy.

In South Africa the current lack of skills and experience as well as perceptions regarding the restrictiveness of labour regulations make some prospective employers reluctant to hire the youth.

As a South African employer, you now have a great opportunity to boost the employment of young work seekers.

What is it?

The ETI is an incentive aimed at encouraging employers to hire young work seekers. It was implemented with effect from 1 January 2014. 

What are the benefits for employers?

The benefits of the ETI are:

• It will reduce the employers cost of hiring young people through a cost-sharing mechanism with government, by allowing you to reduce the amount of  Pay-As-You-Earn (PAYE) you pay while leaving the wage received by the employee unaffected.
• For example, employers who are registered for PAYE, and who employ a person for the full month of February 2014 and earns R2000, will get R1 000 off their monthly PAYE liability (provided that the employee is a qualifying employee based on all the other remaining requirements). For more information on how the ETI works, click here.
• Employers will be able to claim the incentive for a 24 month period for all employees who qualify. Click here for more information.
• The incentive amount differs based on the salary paid to each qualifying employee and whether the qualifying employee was employed after the inception of the ETI programme on 1 October 2013. ETI may only be claimed for a total of 24 qualifying months. Click here for more information.
• This incentive will complement existing government programmes with similar objectives e.g. learnership agreements.
• The aim of the ETI is to facilitate the increased employment of young work seekers.

Who qualifies?

• The employer is eligible to claim the ETI if the employer–
• Is registered for Employees’ Tax (PAYE), or must be eligible to register for PAYE (e.g. the employer can't register just to claim ETI, other registration requirements must be met)
• Is not in the national, provincial or local sphere of government
• Is not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance by Notice in the Gazette)
• Is not a municipal entity
• Is not disqualified by the Minister of Finance due to the displacement of an employee or by not meeting the conditions as may be prescribed by the Minister by regulation.

Top Tip: To work out if you are a qualifying employer click here.

How do I determine who is a qualifying employee?

Top Tip: There is no limit to the number of qualifying employees that an employer can hire.

 

An individual is a qualifying employee if he or she–

• Has a valid South African ID, Asylum Seeker permit or an ID issued in terms of the Refugee Act

• Is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services mainly inside a special economic zone (SEZ) to an employer that is operating inside the SEZ

A completely unsubstantiated BBC rumour

They say that without hearsay no rumour is worth spreading.  I was informed by a source that was informed by another source - the latter being directly involved in the process, that the comments on minister davies amendments have been and will be evaluated by a team that includes the BBC.  Not your famous public broadcaster - we are referring to the reportedly insolvent black business council.  

This is a very interesting, if not alarming, fact and if true makes things a lot clearer.  My source tells me that it's the council members who are pushing for the narrow based promotion.  Why?  Well it's about government business.  I get the impression from the BBC's TV channel which is really just a 45 minute awesome awdoz presentation about fronting and how government doesn't live by its own rules (as an aside, my source tells me that the awesome awdoz is not that awesome and is patently not-up-to-the-task).  

For an insolvent organisation that courts controversy and dubious presidents it certainly punches way above its weight.  This shouldn't surprise any of us.  But what we should be concerned about is their presence on committees that have a direct bearing on the future of our country. If this is true then are they the only organisation that is not related to the DTI or government sitting on this evaluation committee.  More importantly - do they have a legal mandate to sit on this committee.

This will be useful information to get to the bottom of should there be any legal challenges in future.

 

Black opinions matter, especially when it comes to BEE

There are a number of black commentators who are not in favour of bolshie bob's new amendments.  I spoke about Andile Khumalo's article in the Sunday Times a few months ago. We now have an opinion in one of oddball's publications written by Karabo Mashugane.  I don't read surve's newspapers or online publication at all.  However I have a rather old Google Words search for BEE and this article came up.  Mashugane comes from a small business perspective, his concern is that the promotion of large businesses to higher BEE levels because of their black ownership will have an impact on smaller business.  He laments both the instant promotion and the fact that the new proposed amendments allow for all significantly black owned businesses to become enterprise and supplier development beneficiaries irrespective of size.  He very correctly observes that

Enhanced recognition has been roundly criticised for sending empowerment back to pre-2007, when BEE consisted of issuing shares to the politically connected and not much more. The amendment gives the impression that black people, no matter how successful, carry no responsibility for empowering their less fortunate countrymen and contributing to job creation and economic growth.  Black ownership, even if only on paper, now carries a very high prize and offers a hassle-free existence for all corporates. It frees them from having to bother with employment equity, skills development, preferential procurement, SME development and socio-economic development.

He writes persuasively and has most certainly considered his position.  He posits

All these changes taken together appear to signal a renewed focus on ownership of companies, almost to the exclusion of all other elements. A lot of us are wondering if the dti is suffering from battle fatigue and giving up on the broad-based part of black economic empowerment. There is another perspective, though. Perhaps the dti decided to retract enhanced recognition because of the backlash it received. Maybe the second additional changes are being offered as an alternative solution.  Allowing corporates to multiply their procurement spend with black-owned businesses by “a factor of 2” on their scorecards gives the black-owned businesses a competitive edge, which makes it unnecessary to exempt them from compliance with B-BBEE.

 Mashugane seems to be of the opinion that the immediate promotion for certain levels of black ownership,irrespective of turnover, is not going to fly.  I get the impression that this was another poorly thought out amendment that was hastily drafted.  I think that his opinion should be read - it makes a strong case for the development of smaller black businesses.  He concludes with this paragraph

Black ownership alone should not be enough to get preferential market access. They should be required to meet a B-BBEE compliance threshold, say level 4, to qualify for the “factor of 2” clause. Policymakers must discourage a culture of free rides or unearned entitlements, especially for beneficiaries of B-BBEE.

And then most pertinently

All things considered, I feel compelled to venture one more wish: that the dti will explain to South Africans exactly what they are thinking and doing as they engage with the public on the Gazettes.

Exactly - we'd all love to know.  At the moment there is not enough of an economy to support the most basic of elements.

 

Rob Davies - making amends, coda to the play in one act

Whilst the play is in play the ushers hand out these two documents which will have to substitute for a programme.  The ushers inform the audience that they have 60 days to comment on the two documents.  hlaudi looks at the documents and sees there is writing on them, being neither literate nor compus he discards them.

The scene - a room in a prime office in Meintjies Street Pretoria. A nondescript bearded man in a drab SACP fleece reaches for the telephone.  He dials his secretary.

Secretary - Minister Davies?  

bolshie bob - who's Minister Davies?  My name is bolshie ................ wait a second, my real name is Davies and I am the most destructive minister in Ramaphosa's cabinet.  Yes, I am Minister Davies.  (Pause).  Please get me the BEE Commissioner.

Secretary - I'll see if the awesome awdoz is in her office.

A few seconds later the mighty commissioner comes on the line.

awesome awdoz - good morning bolsh..... I mean minister.

bolshie bob - commissioner I see that we really have set the cat amongst the pigeons with our last amendments.  We cannot stop now - these idiots (and that fucking blogger) are reading this drivel we put out.

awesome awdoz - the trick minister, is to put in subtle little things that they will never pick up on.  I have a few ideas.

bolshie bob - I'm all ears and within the next thirty years I'll have a great beard like Karl Marx

awesome awdoz - we are in the process of removing the modified flow through from black ownership and that illusive level 2 that those evil Afrikaner accountants from Edenvale have found as a loophole.  Well we need to ensure that enterprise and supplier development beneficiaries must be 51% black owned using the modified flow through principle.

bolshie bob - on that point awdoz, sorry commissioner, these white companies that have to implement broad-based black economic empowerment are using the same entities as both enterprise and supplier development beneficiaries.  We need to separate the two - one is on the suppliers' database and the other is not.  

awesome awdoz - I'll make a note of that minister......... that is your title isn't it?  Another thing that's been troubling the black owned companies who turnover more than R50m is this business about splitting procurement into EMEs and QSEs.  I think we might have received a few complaints from white companies about this - but they are just being racist.  Let's just combine the two into one section - reduce the points from seven down to five and give the extra two points to 51% black owned suppliers.

bolshie bob - up the black owned targets as well.  And can we have some clarity on whether black women owned is more than 30% or equal to 30%.  Let's just make it a straight 30% - it'll be our concession to these moaning liberals.

awesome awdoz - there needs to be a simplification of procurement.  I'm not sure whether the president will be happy with us excluding black owned businesses turning over more than R50m from BEE.  These poor struggling megaconglomerates are going to have to implement the scorecard, we have to do a few things to help them................

bolshie bob - (interrupting) get rid of the new supplier requirement and make the 51% black owned multiplier 2 from 1.2, and throw in an incentive for 51% black women owned companies as well.  And for Trotsky's sake make sure that we emphasise the flow through principle.

awesome awdoz - what do we do with those 51% black owned megaconglomerates that might not be instantly promoted?  They are pissed off that they get nothing out of our system?  Could we not make them ED and SD beneficiaries?  I know a bloke called Nemo who would like some free money to buy the new Rolls Royce SUV, he is absolutely convinced that this will make his business more sustainable. 

bolshie bob - just make sure that these extremely profitable companies actually spend money on ED and SD. Put in that industry average thing that Stats SA is supposed to release every quarter...........

A heckler from the audience shouts "they never fucking do you useless commie wannabe, maybe you should actually do a little research before you shoot your mouth off."

bolshie b0b - do it.  And this absorption thing under skills.  They're taking the piss.  Absorption means a long term contract which is the same thing as permanent employment.  Just make the definition of long term contract, working until they retire.  These companies are just putting people on learnerships forever - and you know why awdoz? (He doesn't wait to correct himself) It's because they can carry on claiming their salaries for skills development spend.  They could be using this money for bursaries. This economy is buoyant and just making the masses poorer - there's plenty of money for this external spend.  Stalin knows that we could do with another 100 thousand graduates with a BA in History and Law, easiest people in the world to employ.

awesome awdoz (giggling) - minister bob, you know I said we should put in something subtle that they wouldn't pick up on.  Well I think we should leave the net value formula definition in the definitions as it is.

bolshie bob - yes.  The one that refers to the net value formula being found in annexe 100 C?

awesome awdoz - Indeed, 100 C - the annexe that discusses rules for employee share ownership scheme.

bolshie bob - it'll be our little joke then.

The curtain closes with the players unaware that they in fact are the joke.

 

 

YES bolshie bob loves me

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.