Paul Janisch

BEE Act(?) amended

Long-awaited amendments to the Broad-Based Black Economic Empowerment (BBBEE) Act will for the first time introduce penalties for fronting — 10% of annual turnover for companies and a fine or imprisonment of up to 10 years for individuals.

via www.businessday.co.za

First a plea to the world - if anyone has a copy please send it to me (anonymity) is assured.

Second - read this article carefully and notice how the word "fronting" is used.

Fronting, which has undermined the government’s attempts to use its large procurement budget to achieve economic transformation, occurs when companies misrepresent their black empowerment levels to win contracts.

This refers to "government" business - hence fronting can only be a problem in a government procurement situation and only if it induces the government to contract with a company (with the preference points being based on BEE scores this could be very relevant).  Also note that the ambit of fronting is likely to be extended - in other words you can purport to make SED donations and lie and this would be considered a front.  It will spill over into private procurement as a method of terminating a contract, perhaps lawyers should start amending terms and conditions immediately in anticipation.

What is of concern is the penalty clause discussed in this article

The Amendment Bill, which has been released for public comment, attributes a higher weighting to the issues of enterprise development and procurement than has hitherto been the case.
Should the legislation be approved, enhanced recognition will also be given in the scorecard to enterprise development in the sectors identified for priority attention under Ipap and the NGP.
A penalty provision for noncompliance with enterprise development and procurement elements of the BBBEE scorecard is proposed, which could result in a discount from the overall score being applied.

I would also not pay too much attention to the word "Act", it's more likely that the codes are being amended.  Do you think jungle jim knows the difference between the two?

Cabinet to discuss draft BEE bill soon

THE CABINET is expected to start deliberations on a draft empowerment bill next week, aimed at overhauling transformation in the manufacturing, retail and agricultural sectors.

The bill proposes amendments to the black economic empowerment (BEE) legislation such as the criminalisation of fronting, and speeding up transformation in the three targeted sectors.

It also seeks to move beyond mere ownership and look at ways in which black people will play a meaningful role in procurement and production processes.

The director-general of the Department of Trade and Industry, Lionel October, said black people had been involved in the running of factories at a floor manager level and understood production processes.

“There was a conflict of legislation which saw industries in the retail, agricultural and manufacturing (sectors) avoid empowerment. We will shift empowerment to production and move BEE from the margins to the mainstream. The policy was not strong on retail and manufacturing,” he said.

The bill seeks to put a greater emphasis on using skilled black workers, and helping them start their own businesses.

via www.iol.co.za

Oh well.  Just when we were getting used to what we had.  

Amendment to codes 600, 700 and a few others (oops - they're for comment)

There are big changes afoot and Rob's leading the charge. He told us a few days ago that he was going to do this and he has now started.  (Thanks Obed for sending me this).

 

 NOTICE 88 OF 2011

(Government Gazette 34019)

DEPARTMENT OF TRADE AND INDUSTRY

AMENDMENT OF THE CODES OF GOOD PRACTICE PUBLISHED IN GAZETTE NUMBER 29617 ON 9 FEBRUARY 2007 IN TERMS OF THE BROAD - BASED BLACK ECONOMIC EMPOWERMENT ACT, 2003 (Act No. 53 OF 2003)

By virtue of the powers vested in me in terms of section 9 of the abovementioned Act, I, Dr. Rob Davies, hereby amend the Codes of Good Practice as set out in the Schedule.

(Signed)

Dr ROB DAVIES, MP

MINISTER OF TRADE AND INDUSTRY

GENERAL EXPLANATORY NOTE:

[      ] Words in bold type in square brackets indicate deletions from existing enactments.

         Words underlined with a solid line indicate insertions into existing enactments.

SCHEDULE

1.

Amendment of paragraph 3 of Code 600, Statement 600 - The General Principles fur Measuring Enterprise Development Element

Paragraph 5 of Code 600. Statement 600 is hereby amended by the substitution for paragraph 3 2.8.3 of the following

"3.2.8,3 settlement of accounts with beneficiary entities over a shorter period of time in relation to the Measured Entity's normal payment period, provided the shorter payment period is no longer than [10] 15 days"

2.

Amendment of paragraph 2 of Code 600, Statement 600 - The General Principles for Measuring Enterprise Development Element

Paragraph 2 of Code 600. Statement 600 is hereby amended by the substitution for paragraph 2.2 of the following.

"2.2 the following table represents the criteria and method used for deriving a score for enterprise Development under this statement:

Criteria	Weighting Points	Compliance Target
[Average annual] Annual value of all Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target.	15	3% of NPAT

3.

Amendment of paragraph 3 of Code 600, Statement 600 - The General Principles for Measuring Enterprise Development Element

Paragraph 3 of Code 600, Statement 600 is hereby amended by the substitution for paragraph 3.1.2 of the following:

"3.1.2 Qualifying Enterprise Development Contributions of any Measured Entity are recognisable [cumulatively] on an annual basis"

4.

Amendment of paragraph 2 of Code 700, Statement 700 - The General Principles for Measuring the Socio Economic Development Element

Paragraph 2 of Code 700. Statement 700 is hereby amended by the substitution for paragraph 2.3 of the following:

"2.3 The following table represents the criteria and method used for deriving a score for Socio Economic Development under this statement:

Criteria	Weighting Points	Compliance Target
[Average annual] Annual value of all Socio Economic Development Contributions by the Measured Entity as a percentage of the target.	5	1% of NPAT

5.

Amendment of paragraph 3 of Code 700, Statement 700 - The General Principles for Measuring the Socio Economic Development Element

Paragraph 3 of Code 700. Statement 700 is hereby amended by the substitution for paragraph 3.1.2 of the following:

"3.1.2 Socio Economic Development Contributions of any Measured Entity are recognisable [cumutatively – (sic)] on an annual basts (sic again)"

6.

Amendment of paragraph 7 of Code 800, Statement 806 - Enterprise Development for QSE's

Paragraph 7 of Code 800, Statement 806 is hereby amended by the substitution for paragraph 7.1.2 of the following:

"7.1.2 The following table represents the criteria and method used for deriving a score for approved projects and enterprise development under this statement:

Criteria	Weighting Points	Compliance Target
[Average annual] Annual value of all Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target.	25	2% of NPAT

7.

Amendment of paragraph 8 of Code 800, Statement 807 - Socio Economic Development Contribution for QSE's

Paragraph 8 of Code 800, Statement 807 is hereby amended by the substitution for paragraph 8.1.2 of the following:

"8.1 2 The following table represents the criteria and method used for deriving a score for socio economic development under this statement:

Criteria	Weighting Points	Compliance Target
[Average annual] Annual value of all Socio Economic Development Contributions by the Measured Entity as a percentage of the target.	25	1% of NPAT

Now here's a question. The DTI issued a tender for interested companies to provide a study of the codes (take a look at paragraph 2.1) – and Rob has already started amending. Can we assume that this work has already been done and that the tender was a mere formality. It seems VERY strange that Rob is on the amending path when he might have to change everything again in the next year. Hmmmmmmmmmmmmmmmmmmmmm

Call for Proposals: Review of B-BBEE Legislation and Verification System – as per the DTI

The deadline for this is this Friday (11^th of Feb, 2011). It's too late for me to submit a bid, but if anyone is interested in subcontracting me on this programme – I AM VERY INTERESTED IN DOING THIS.

On 21 January 2011, the dti published, in the Government Tender Bulletin, a tender to invite service providers to assist with the review and improvement of the existing B-BBEE framework.

The review of the B-BBEE framework will include the following:

• Review of the current B-BBEE Act, with the aim of recommending possible improvements thereto. In respect of this, the appointed service provider shall present to the Chief Director of the BEE Unit:
  • A draft report containing recommendations on the aspects of the Act for possible review; and
  • A draft amendment Act that incorporates all the proposed improvements.
• Refining provisions and parts of the B-BBEE Codes of Good Practice, with a view to rectifying/enhancing them. These improved inputs, from the selected service provider, will be added to those reviewed by the dti. In respect of this, the appointed service provider shall present to the Chief Director: BEE Unit:
  • A draft report with recommended provisions on the areas of the Codes requiring rectification.
  • Investigating and recommending to the dti, effective legal instruments for the regulation of the B-BBEE Verification Industry, including recommendations for the creation of a regulated industry body for verification. In respect of this, the appointed service providers shall present to the Chief Director: BEE Unit:
  • A draft report including a recommended model for a statutory body;
  • Recommendations on the amendment of the Act in regulating the Verification Industry; and
  • Recommendations on possible amendments/improvements to the contents of the Verification Manual, to incorporate rectifications of the Codes.

Bid documents for these services are available at:

the dti Campus

Block B

Reception, Ground Floor

77 Meintjies Street

Sunnyside

Pretoria

0001

This is huge. And it must be done properly, we have to ensure that entrepreneurship and skills are prioritised, not Zungu's uninformed bullshit about ownership and management.

2009 BEE awards

I was looking through my predictions for 2009 and have to (humbly) confess that the Nostradamus way is not my calling.

• The FSC is probably going nowhere
• A bunch of charters made section 9 gazetting
• BEE scorecards have become necessary tools in doing business but are not a competitive advantage. It seems that each industry has a certain standard and if you don't meet that standard then you are at a disadvantage
• Treasury actually published updated regulations for the PPPFA and they included scorecards
• Verification agencies were accredited and before the elections too
• Can't say whether Empowerdex lost their market share to NERA – but they do seem to have lost the empowerdex.com domain

Now onto to 2009. It was one hell of a year for BEE as a policy. This is what I think were the most significant events

• Accreditation of verification agencies

I never thought this would happen. But it did and it looks as though a few more will make the cut too. I've prepared a spreadsheet that explains how much work verification agencies have on their hands in the next few years. I was fiddling around on a VERY FAMOUS verification agency's website and they proclaimed that to date they had done about 2000 certificates since they started. I have news for you VERY FAMOUS verification agency, you are going to have to do about 6,494 (I like to keep my speculative figures precise) next year. This is about 26 per day. If you'd like to check my figures - please do.

As a little postscript I have been very hard on the old VAs (but not hard enough on ABVAngelis) – I have just completed a list of procedures for a VA hoping to get through SANAS. This is a lot of work and a very expensive process. I expect I'll be doing a lot more of that next year.

• Rob Davies taking over the trade and industry ministry

This was a weird one. It seemed that Rob wasn't that interested in BEE and that he inherited a mess from Mandisi. I stand by what I have said about Rob, I think he's pushing for compliance over transformation, hoping that compliance will lead to transformation.

• Section 9 Charters

There were a bunch. Some gazetted by Mandisi and others by Rob.

• New PPPFA regulations

A bold move, even if they are in draft form. I'm not going to speculate as to when the final document gets published.

• NABC starts making a noise

The National Association of BEE Consultants. This is a total waste of time. As much as I dislike ABVA, at least they are organised. The NABC has no common agenda and lacks unified leadership. I cannot see how they are going to add any value to anything ever (oops there I go wearing my Nostradamus hat again)

• BEE advisory council

Good move Zumachine Gun. Let's see what they do in 2010.

• Expected demise of the FSC

The FSC seems to be dead in the water (on this subject the drafter of the new FSC annual report pinched almost everyone of my ideas from last year – don't they say imitation is the greatest form of flattery. It would have been nice to see a document that stuck to the actual tender requirements).

Good luck for 2010 – I am hoping to fulfil the Charlie Christian mantra throughout the year with each client (it is said that Charlie would play guitar if he got all three, but he was known to settle for two out of three)

1. Learn something new
2. Get paid
3. Have fun

And on the subject of fun – can anyone spell AC/DC.

Feel free to add your highlights in the comments section.

New Mining Charter coming soon?

Interesting article in the Miningmx about the Mining Charter.  The new charter has been finalised and will be made public by Jan or Feb 2010.  It is doubtful whether the existing Charter has been successful.  It fell horribly foul of the BEE Act and in all probability stifled investment in the minerals sector.  Perhaps this is why the DME gazetted the Mining Codes of Good Practice.  This same document is somewhat of an oddity but still sticks with the sentiment of the actual charter.  It doesn't provide a scorecard per se, but a series of requirements that have to be complied with.  It's more like an on/off switch - you either fully comply or you don't.  Very unscorecard like.

We'll see what the new one looks like.

SAB's BEE deal

It's made the press again -in fact it's made a lot of press.  I was referred to the Business Day report by Robert Simmonds.  This report concentrated on the beneficiaries, 20% of whom are SAB's lower paid white employees.  And once again Mr Obvious (one Ajay Lalu) is asked for his opinion - to which he replies  “Unfortunately, according to the codes of good practice, white beneficiaries don’t qualify,”  Er....... tell us something we don't know Ajay.  So what if they don't get any points for this deal - what SAB hopes to achieve is the financial independence of their staff and sundry other players.

And then not to be outdone ol' Aj "criticised the fact that there was no guarantee on the value of the stakes at the end of the 10-year lock-in period."  He might have been taken a bit out of context here so I'll cut our hero a little slack - but just in case AjLal is not that clued up about these things I'll explain it for him.  RISK AND REWARD OLD MAN, CAPITALISM IS ALL ABOUT RISK AND REWARD.

I've blogged about the SAB deal before

SAB is a fascinating deal, it stands out as the only one where the business reasons are so apparent.   We know that the Western Cape is clamping down on unlicensed taverns and 70% of SAB's turnover comes from unlicensed taverns.  Here is SAB staring at the potential demise of their biggest channel unless they do something.  Sheer brilliance, if I may use such a superlative.

And I still think it's the best deal done so far, in spite of what Fawu says.  Let them strike I say - just make sure that you suck on Windhoek Lager at the end of the day of hard toyi-toying.

Zuma appoints members of BBBEE Advisory Council

I just got a call from Mzwandile Jacks telling me about the BEE Advisory Council that's just been announced.  This is what it looks like

1. Minister of Trade and Industry, Rob Davies.
2. Minister of Labour, Membathisi Mdladlana
3. Minister of Economic Development, Ebrahim Patel
4. Minister of Women, Children and Persons with Disabilities. Noluthando Mayende-Sibiya.
5. Professor Mohammed I. Jahed, professor of macro-economic policy, economics and public finance at the Wits University Graduate School of Public and Development Management.
6. Prof Eltie Links, a professor extraordinaire at University of Stellenbosch Business School
7. Wendy Lucas-Bull, a businesswoman and the founder of Peotona Group Holdings
8. Andile Lungisa, Chairperson of the National Youth Development Agency
9.  Sebenzile Matsebula, an independent consultant and former Director in the Office on the Status of Disabled Persons in the Presidency
10. Jerry Vilakazi, chief executive officer of Business Unity South Africa
11. Dumisani Mthalane, a member of the National Working Committee of the South African National Civics Organisation
12. Ellen Tshabalala, a business and management consultant with expertise in small, medium and micro-sized enterprises development, banking and marketing.
13. Adv Matshego Ramagaga, Vice-President of Black Lawyers Association
14. Tsakani Matshazi, President of the Association of Black Accountants and Vice-President of the Confederation of Black Business Organisations
15. Sidumo Dlamini, President of the Congress of South African Trade Unions
16. Sandile Zungu, businessman with extensive experience having served in various companies at a senior level including NAIL and Denel.
17. Don Mkhwanazi, a former president of the Black Management Forum
18. Dr Claudia Manning, businesswoman
19. Chantyl Mulder, senior executive for transformation and growth at the SA Institute of Chartered Accountants, who has served as facilitator of the BEE Charter process amongst other work on economic transformation.

It's the required 19 people with the exeception of the President who is required in terms of section 6(a) of the BEE Act.  I wonder if this will have an impact on the legitimacy of the council.

I would have liked to see more business representation.

De-construction

I have just been sent the new Construction Code (Gazette No. 32305).  At first glance it looks quite similar to the 9(5) gazetted charter.  I cannot pretend to be even slightly impressed with this document - it has tried to fill in the gaps that the codes have left open but it is too pie-in-the sky.  An example is the enterprise development element.

Pre-requisites for an enterprise development relationship
1)    A relationship agreement of co-operation and assistance has to be in place between the established organisation and beneficiary.
2)    The established organisation may not have an equity holding larger than 20% in the beneficiary
3)    The beneficiary that can qualify for enterprise development must:
i)    Be a legal entity compliant with SA revenue requirements:
ii)    Be an employer of at least three other permanently employed personnel and not merely a one person operation with temporary employees
iii)    Must be 50% or more black owned or 30% or more black-women owned

Take a look at those requirements in bold - fucking ridiculous if you ask me.  The upshot is that there is now no incentive to provide any assistance to any small or emerging company.  You can pay them on 30 days because no points are awarded for prompt payment.    How the hell is this going to benefit the smaller guy? 

I think this is more Mandisi shenanigan-eering - nice legacy erstwhile DTI-guy!

Oy fokken vey.  Anyway if you want to look at it, it's here.

Tourism Code is out

They slipped it through, I must have gone onto the DTI's hompage and info.gov.za at least four times a day for the last week.  The DTI must have thought it unnecessary to put it up on the homepage so they posted it here.  Officially entitled gazette No. 32259, the code is remarkably devoid of supporting information and as such will pose challenges in places where things aren't clear.
Kortbroek loves it - or so he tells us even if it was issued in terms of section 91) of the B-BBEE Act (sic).  I wonder if that can be queried - there are only about 15 sections in the act.

I can't be sure that they listened to much, if anything, of Kevin's submission to the DTI last year.  And the same typos and arithmetic mistakes that were in the 9(5) gazetting are still there.  However there is a significant changes to the EME and QSE thresholds, with EMEs falling below R2.5million and QSEs between R2.5 and R35million.

Still it's not that bad.  I've summarised it here.