Paul Janisch

Caird is not closing down and is open for advice (rendering and receiving)

Further to my post yesterday on the worst of times, Ray Mahlaka penned (and Tim Cohen – although the style seems to be more like Ray's) a discussion on this 51% requirement. I mentioned that there were people that are out there that have a political and narrow agenda when it comes to non-black-owned businesses (this doesn't specifically mean white).

Although the document has been rejected, it's worth noting that the actual application documents that continue to appear on the DSBD website require applicants to specify the race, nationality and gender of employees, and the race of all the shareholders individually. These are all required fields.

It is not clear what, if anything, these requirements might mean; questions to the department about how these stipulations will be applied have gone unanswered. The somewhat vague explanations from Ntshavheni in press interviews suggest applications will be considered on a "case by case basis", suggesting that BEE and local ownership criteria might still be applied, but more surreptitiously.

And then

The question, however, is whether, in the circumstances of a crisis like Covid-19, the government should be applying its transformation policy to what is essentially a national emergency. The fact is that a huge number of small businesses, perhaps even the majority of registered businesses, are minority-owned or foreign-owned, but have high proportions of black employees. If the government does intend to try to help small business employees, this may be the wrong time to attempt to throw in its transformational goals.

The authors are correct here. This is about an economy and jobs. The fucking hue of the owner is irrelevant. As I said yesterday, we could expect this under the last retard of a president. But not with this one.

Here is my offer to you the reader.

I cannot grease wheels (mostly because I hate the incumbent administrators and I think they hate me more). What I can do is advise you on emergency BEE issues – things like affidavits. I can explain the substance over legal form rule and how to apply it. You also need to know that you no longer need a commissioner of oaths for your affidavits. We can refer you to that document.

I'll post up some links that may help you in the interim

1. Keep an eye out on the Small Business Development Ministry's page for anything that talks about help for ailing businesses. You would think that right now they would actually have something on the lockdown on it. They don't. I'll keep an eye out. http://www.dsbd.gov.za/
2. There is the SolidarityFund. Again this website is a single static page with a bank account number. It's all about raising money at the moment. I'm sure that as we get deeper into the lockdown there will be more information posted on how you can apply for help https://www.solidarityfund.co.za/
3. If you need an emergency affidavit you can get them here - http://www.thedti.gov.za/economic_empowerment/bee_codes.jsp. The specialised entities are charities and the like

I will answer your emails and help where I can. I cannot give you money, it won't be worthwhile asking for it. I'll help with advice if it is requested.

And maybe it would be nice for the Black Business Council to actually make a positive contribution to this crisis, whether it's cash or something – start a feeding scheme, (if they have they can let me know), instead of moaning about their lot all the time. Your lot is not much different to ours. The BBC's website says nothing about COVID – BUSA on the other hand…….

More Emex bullshit

  The so-called EMEX Trust has been around for a long time.  They are accredited.  But that is about all that they've got.  They aren't known as the best at what they do.  And this is why

I got this email from Gert du Preez of the Emex Trust.  Gert is the Marketing Manager of this illustrious organisation - and boy oh boy can Gert market.

The pressure on enterprises to become BEE compliant will probably increase dramatically over the next few years.

Can't disagree with you there Gert.  I would suggest that the pressure is already here.  Now for the meaty bit

The Government for instance does not accept tenders if a company cannot provide a valid BEE certificate.

Really Gert, and where did you get this information?  Is there something you know that no-one else does.  To the best of my (well researched) knowledge - the PPPFA regulations advocating scorecards are still in draft form.  I suspect that you are spinning a little yarn here - or as you might better understand "jy praat fokken kak".  

Then there is something about a product that I can offer my clients as a value added service.  The email is devoid of detail as to what this product is - but I have been invited to contact them to find out more. 

This reminds me of Bernard van der Walt of BEE Rating Solutions and some of his sensational emails from last year.    Bernie has stopped with his sensational emails at least. 

Once again - I invite Gert to respond to this post.  I'll post the response as well.

Caird Code Rule #1 – Is BEE applicable to you

A while ago I was doing a presentation to the American Chamber of Commerce on Equity Equivalents. One of the delegates was an apparel manufacturer who asked my why his company should consider the programme I was proposing. I was a little surprised that such a company would even consider equity equivalents as an option. Why would they need to, they sell takkies, T shirts and caps. Every single one of their products are sold to a consumer who is very unlikely to use BEE status in their decision to buy their product. Edgars etc might ask them for their BEE status but I have my gravest doubts that they will not stock those products in their stores because that company does not comply with their BEE wishes. And it is also unlikely that Edgars will incentivise their sales staff to push a local product over the imported one. Can you imagine the conversation

Consumer: I'd like to try on these Adidas shoes.

Sales assistant: Please sir would you consider these Dlaminis. They are locally manufactured and Edgars will get more BEE points if we sell these.

Consumer: No I will not you horrid sales assistant you. I'm off to Sportsman's Warehouse.

This fictitious interaction exposes the deepest flaw in the implementation of BEE viz if the average joe is the end user then BEE is not going to be very important. This means that BEE can really only be applicable when the consumer is some sort of a corporate or government entity.

The general rule here is that if your business caters for consumers then it is unlikely that BEE will ever affect you. This would include restaurants (that don't serve alcohol), shoe shops, clothes shops, plumbers, electricians, pool companies, record shops, news agents, retail jewellers. As with any rule there are exceptions.

1. Any restaurant, hotel, pub or anything that serves alcohol requires a liquor licence. And those licenses are handed out by the DTI. And the DTI asks a bunch of BEE questions in allocating these licenses. I have written countless BEE plans for liquors wholesalers and retailers that have to be submitted with each renewal.
2. Shops looking to rent in malls that are owned by parastatals like Transnet or Eskom. I have heard that your BEE status is important to these types. ACSA is another example – the annual tender for renewals for shops in the airports require BEE credentials. I don't know who drafted those BEE questionnaires but they are so badly written they are an embarrassment (mind you so is ACSA). I haven't come across private property owners asking for BEE credentials.
3. Manufacturing jewellers have to comply with the Mineral and Petroleum Resources Development Act of 2002, (MPRDA). The requirements for this are exactly the same as those for a mining licence. I won't comment on this right now but suffice to say – this abomination requires its own future post.
4. Anything that can be used under section 10 of the BEE Act. I haven't really seen this being used, although I have worked on PPPs where the legal advisors have anticipated it in the PPP agreement. The DTI has taken a cautious path when it comes to section 10 because I believe that they recognise that over-regulation will stifle the development of the South African economy (as if we aren't over-regulated already). Technically speaking they could shove section 10 in the way of almost everything to achieve the BEE Act's transformation goals.

What about those entities that think they might need a BEE scorecard but don't

Charities and other section 21 companies that are looking for SED money

Paragraph 5 of Code 000, statement 004 states very clearly that their BEE status is not a consideration in determining whether they will be beneficiaries of SED contributions

The status of Socio-Economic Development Contributions made to any of the types of entities in paragraphs 1 and 2 under Code series 700 is not dependent on such entity's scorecard result, but rather the nature of the contribution itself and the identity of that contribution's beneficiaries.

There are some NGOs/section 21s who provide certain types of services to corporates to raise money for their core activity. Under these circumstances they become a supplier to that corporate and might be required to produce a specialised enterprises BEE scorecard (statement 004).

Entities or companies providing enterprise development services

Now this is a very common occurrence. There are many private companies providing these services, Endeavor, Raizcorp and ED Alliances are three that I know rather well. This practice is contemplated by code 600, paragraph 3.2.5.12

payments made by the Measured Entity to third parties to perform enterprise development on the Measured Entity's behalf

However it does not appear that these companies actually need to produce a BEE scorecard to provide ED services. One of the exclusions under Code 500 (Preferential Procurement) is empowerment related procurement – more specifically (paragraph 6.5.2)

investments, loans or donations qualifying for recognition under any statement under Code series 600 or 700

This means that the expenditure is excluded and hence a BEE scorecard is not needed.

A bit more on PPPs

I found this great article from a SKNews (St Kitts in the West Indies). 

The principles of PPP, when properly applied, give government tremendous leverage in undertaking many infrastructural projects simultaneously and even bring on board other projects that would otherwise be impossible.  It is well known that infrastructure drives development.

PPP is a partnership between government and a private entity specifically designed for the delivery of a public service. The private entity assumes some of the risks and responsibilities normally associated with government thus providing government the opportunity to focus on governing and the delivery of services.

More on PPPs and transaction advisors soon.

Caird BEE consultation methodology

Caird follows a very strict implementation methodology on all our engagements.

Understand the client's business

This is a singularly vital aspect in any consultation. Without a firm understanding of a company's internal and external workings it is not possible to develop any working BEE solutions. Often the codes' requirements cannot and will not fit into a client's business environment – and it is only with a complete understanding of the client's business that a working empowerment solution can be developed.

Know the industry that the client operates in

A simple requirement that is too often overlooked. Caird does not subscribe to the notion that more BEE points means more business but we firmly believe that every company must operate within the industry points' average. Caird conducts a comprehensive analysis for benchmarking purposes. We then plan our consultation to meeting this average in the shortest amount of time.

Ensure that all the correct people are involved in the process

In smaller companies this is generally an easier process because it is typically the CEO who manages the process. In larger companies there are many more people that are involved in the process – this ranges from ExCo through to sales people. Once we start implementing our balanced scorecard measurement process we are able to include almost every person in the organisation in the process.

Conduct a thorough as-is assessment

When reading a map there is no way you will ever get to your destination unless you know where you are at the moment. The as-is assessment shows where the company sits on the scorecard – both intentionally and un-intentionally (in other words points were found in the organisation that were a happy accident). It is not advisable to use the last verification certificate as a benchmark as things change and the same score might not be achieved in the next assessment.

Establish what the client would like to achieve on the scorecard and manage these expectations

Transformation is like a diet – it can take years of dedication to the programme to achieve the desired results. A client may want an incredibly high score that is not achievable in the short term. It is our job to ensure that we set realistic targets at the outset. We may work with the verification agency at a very early stage to ensure that whatever we do will be acceptable to them.

Look for points within the company first

It is amazing how many consultants fail to observe this point. We have seen companies spend hundreds of thousands on enterprise development without knowing that the points that they have just bought could be found within the company.

Bring in additional expertise

Caird expertise lies in BEE compliance. We have a broad knowledge of all the elements in all the scorecards. In some circumstances it is necessary to supplement this with legal, financial, HR etc experts. We have a network of experts that we draw on where necessary.

Implement a transformation balanced scorecard

This scorecard here refers to Kaplan and Norton's balanced scorecard. The Kaplan and Norton scorecard ties up business goals with an individual's key performance areas (KPAs) and links their performance to the overall goals of the company. In this way every person in the organisation knows what their involvement is in the overall transformation process.

Be part of the verification process

Caird comiles a logical verification file that makes it easy for the verification agency to perform the assessment in the shortest possible time.  If there are any outstanding issues we take care of them and report back to the client.  We analyse the preliminary assessment to make sure that it is accurate and correct all mistakes with the verification agency.