Paul Janisch

The Construction Code - el revisedo

Here it is. Took a while to find it, the dti haven't put it or the revised FSC up on their page yet.

They’re repealed I tell you they are REPEALED. Giving notice means it happened yesterdie

But we don't really want to follow the process. Perhaps we don't know what the process is.

The DTI writes (but not to me)

From: Lindiwe Madonsela [mailto:[email protected]]
Sent: Friday, February 26, 2016 4:11 PM
Cc: Jacob Maphutha <[email protected]>; Joseph Melodi <[email protected]>; Liso Steto <[email protected]>; Salamina Madisha <[email protected]>; [email protected]; [email protected]
Subject: RE: FW: Statement of Clarification - Repeal of Sector Codes

 

Your email has reference.

Please note that the interpretation of the processes in your initial email is not consistent with the B-BBEE Act and Codes of Good Practice.

Firstly, the notice issued on 17 February 2016 to repeal both the Construction and CA sector codes does not refer to a process to repeal, but rather informing the public of the actual repeal. The words "give notice to" does not refer to a future date. Following the process as of 1 May 2015, one would note that sufficient notice on the repeal of sector codes not aligned was provided. Firstly, the general notice issued on 15 May 2015 referred to a consideration to repeal sector codes not aligned by 30 October 2015. Secondly on the 3 November 2015, the public was informed that sector codes not submitted for approval by 15 November 2015 will be repealed. The final step taken by the department on 17 February 2016, was to notify the public of the sector codes that were repealed.

Further, section 9 (5) refers to issuing, amendment or replacement. This applies to issuing of new codes of good practice (the Codes),including sector codes as well as amending existing codes (including sector codes). The word "amend" refers to changes effected in the actual codes, whereas "repeal" refers to abolish/cancel/nullify. The two terms are different and should not be confused. When the 2007 Codes were being amended and subsequently gazetted in October 2013, measured entities continued to be measured on the 2007 Codes because they were not repealed but being amended. The construction and CA sector codes were repealed and thus cease to exist. The 60 days commentary process is not applicable to the repealing but issuing, amending or replacing. Nonetheless, sufficient notice was given dating from 15 May 2015 even though it was not specific to which sector codes.

Furthermore, reference to "remain valid until amended" means that measured entities within those sectors continues to be measured in terms of those sector codes until the actual sector codes are amended. For example a measured entity in the FSC will apply the 2012 FSC codes until the amendment process is finalised and a section 9(1) FSC which is aligned to the amended generic codes is gazetted. The 17 February 2016 notice did not mention measurement periods or financial period. The clarification statement issued on 22 February 2016 remains the Departments only clarification.

In addition, please note the attached Notice gazetted on 15 May 2015 on the implementation of sector codes aligned to the amended generic codes.

Trust that this is in order.

Regards,

Lindiwe

AND THEN I WROTE

Dear Ms Madonsela

Your email below (now above) refers.  I would respectfully request that you consider the following:

1. Up until the point that you "repealed" the two codes they enjoyed the exact same legal standing as the revised BEE codes or any code issued under section 9(1) of the Act.  Summarily repealing a code and then expecting those entities to follow another code that they may or may not be aware of is an application of retrospective legislating, something that our constitution and the rule of law frowns upon.  It is not legally reasonable for those entities to have considered using your revised codes when they were not applicable to them.
2. A repeal has to be regarded as an amendment because the public have a right to have a say in how you go about your administrative duties.  Your administrative action is similar to the following example.  Creating a punishable activity from a certain date that was legal up to that date and then prosecuting transgressors for transgressions before that date
3. I put it to you that legally, these codes are still in effect and have not been repealed

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And they have not yet responded – not that I expect them to. The logic and argument is pathetic. I love Lindiwewillrepealandyouwillsuckitupandcomply's "The words "give notice to" does not refer to a future date" argument. One definition of the term "give notice" comes up as To announce one's intent to leave a job; to inform an employer that one is leaving. This needs to be tested – common understanding of that term is that you are alerting the public about what you plan to do. You cannot allow an administrative action to be this vague. It's a simple thing – the codes are repealed and the process to repeal has been followed. This process has to be fair and reasonable. Take a look at this argument presented by Sean Lakey who appears to be an advisor to the Construction sector council

1. The rule of reasonableness and fairness applies – Was the envisaged action expressed in the 1st attachment as of 30 October 2015, whereby the implication would become effective as of 16 November 2015, delayed by circumstance and finalised on the 8th December 2015 in part, the completion for all concerned came into effect 17 February 2016?
2. (1a) To whom/which part of the concerned sectors constituents was this communicated in due time?
3. (1b.) The argument is – Do you as Government have the right to decide unanimously and irrevocably a decision beyond granting any business entity the opportunity to show objection/adherence to what you propose.(60 days)
4. Was an entity granted sufficient time to alter its operations from the Construction Sector to DTI requirements in the current financial year to meet such as per your gazetted notice of 17 February 2016?
5. Minister Rob Davies must provide the facts as to why the Gazetted document was not processed by 16 November 2015.
6. What legal basis did the first attachment above have, verification agencies would only accept a gazetted notice to this effect.

We have a right to fair administrative action. This has to go on some sort of review.

And why have I heard nothing from the CA Charter Council – they have the most to lose. 

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Repellent behaviour

Statement of clarity – vudderfawk!!!!!!!!!!!!!!!!!!!!!!

They say you should never start an article, book, sermon, song nor diatribe aimed at the DTI with I. I haven't.

I am busy, I have a hell of a lot of work to get through before the end of the year. Unfortunately the DTI and its minions are causing me to slip up on my work – and it's band practice night tonight so I have to write this post now and make up the work tomorrow.

I am going to post John Steenhuisen's little ANC roast at the end of this post because it is vital watching. He takes aim at a number of people but devotes the most time to Bolshie Bob (Rob Davies to first time readers). Watch that first and then come back and read this post, it will all make sense. Last week Rob repealed a number of codes summarily. I think I showed that this was completely unprocedural and illegal. Well blow me down if the SPECIAL ECONOMIC ZONE AND ECONOMIC TRANSFORMATION DIVISION DEPARTMENT OF (sic) TRADE AND INDUSTRY doesn't try and up the ante here. Yesterday's "Statement of Clarification – Repeal of Sector Codes" is a complete confectionary misappropriater.

I'm going to split this blog post into what the thing says, the potential ramifications and then what we should be doing.

1. What is says

As it turns not much. Id est

The repeal in the context of this clarification, implies that the two sector codes; cease to exist from the 17th February 2016.

All Measured Entities operating in the Construction and Chartered Accountancy sectors will be required to use the B-BBEE Generic Codes of Good Practice as amended and issued in terms of section 9 (1) of the B-BBEE Act No. 53 0f 2003 as amended by Act No. 46 of 2013.

All B-BBEE Certificates issued in terms of the Construction or CA Sector Codes prior the 17 February 2016 will be valid for a period of 12 months from date of issue in line with Statement 005. Such certificates should be accepted.

The first thing here is the word IMPLIES. They are not expressly stating that they are repealed. This is not a clarification – it's a muddification.

The second thing is "will be required to use". What does that mean? It doesn't say that they need to be verified under the codes from a certain defined point.

And thirdly (and I truly cannot take any credit for this – you know who you are). All B-BBEE Certificates issued in terms of the Construction or CA Sector Codes prior (sic) the 17 February 2016 will be valid for a period of 12 months from date of issue. It doesn't say certificates issued AFTER that date under those codes are not valid for 12 months.

The ramifications, intended and unintended

The main issue here is vagueness. When we were putting together our argument for our court case against the revised codes one of the attorneys argued very persuasively that vagueness offers you grounds for unconstitutionality. To the DTI's credit this is a well written document. It looks like a turd, it smells like a turd but it might just be vomit.

We don't really know what they want here. At face value it purports to repeal the codes and reinforce the repealing of them. And that's all they want. They want you to THINK this is the case because they couldn't be bothered to actually follow the process. They know that most will just get on with it. The likes of Eskom and the brilliance that resides within certain BEE verification agencies and consultancies will reject certificates issued after the 17^th under those codes. The DTI plays the "I don't know what you are talking about game", and businesses suffer. But what if the general public take this at face value? This is the most serious consequence. I have it on some authority that the reason why the CA charter council could not agree to an alignment if because IRBA verification agencies need at least a level 3 to retain their verification licence. The revised codes make it impossible (or as near as dammit to get to a level 3 – that's 90 points on a scorecard that marks against you). This is serious. There are 400 odd IRBA verification agencies that employ a number of people. I'm not going to talk about the consequences of unemployment because both Bolshie Bob and Malossie feel rocks for that. But most importantly if these companies are no longer able to verify then there is going to be a massive backlog because there aren't enough SANAS agencies. This will just be chaos – it is easier to come into this country under Malossie's visa regulations than produce and updated verification certificate.

1. What we need to do

We have a constitutional right to legislation that is clear and procedurally fair. This goes for sub-legislation as well. We need to approach a competent court to compel the DTI to follow dues process and to publish documents that talk to the subject at hand in a language that we understand. This is of critical importance. I am now going to go on another drive to get people to back me up in this drive. The consequences are more severe than ever. I won't worry about the revised codes yet, that court challenge is imminent.

I need help, I need attorneys, advocates and money. Who is in with me? I will not disclose who you are.

 

 

Repellent behaviour

Things were settling down. Zuma is being roasted by the opposition, the ANC is not too forthcoming in defending him and Rob is justifying why Ithuba is better than Gidani. But once again they caught us by surprise. Two new documents have been released, one for comment and the other just to throw the cat amongst the pigeons. It is the latter that I am most interested in. 

Broad-Based Black Economic Empowement (sic) Act (53/2003): Notice to repeal sector codes and repeal sector codes that are not aligned to the B-BBEE codes – number 39703 (17 Feb 2016)

A typo on the second page and that one almost passed me by. This is what our deluded Bolshevik signed (I have my doubts whether he wrote or read it).

I, Dr Rob Davies, hereby

1.1 Give notice to repeal the following sector codes that were not submitted for approval and which are not aligned to the Amended codes:

1.1.1 Construction Sector Code

1.1.2 Chartered Accountancy

In one paragraph he repeals two codes. Net sommer, just like that. He then offers those who are subject to these two codes some handy advice

1.2 Confirm from the date of this publication that all B-BBEE Verifications in respect of measured entities operating in the sectors mentioned (above) can be conducted using the Amended B-BBEE Codes

His letter also informs us that a number of other codes are still valid – them's ok. Things like the FSC, ICT, Property and others (you can download the document to check to see if you are OK or not).

It is my strong belief that this is another one of those documents that is going to cause our little Leon (who also had a beard you know) more embarrassment. And here is why

1. It seems common cause and I have run this past Chris van Wyk, that repealing a code is in effect an amendment. It must be an amendment because you are changing the nature of a certain piece of legislation or derivative thereof. And being the recently discovered (like in the last two weeks) constitutional democracy that we are, the public has a right to approve or disapprove of what you are doing. This is from section 9(5) of the BEE Act (as amended)

   The minister MUST, before issuing, replacing or amending a code of good practice issued in terms of subsection (1) –

   1. Publish the draft code… or amendment in the Gazette for public comment
   2. Grant interested persons …. at least 60 days to comment on the draft or amendment

   All that Rob did was tell us that if they weren't making progress by October last year then they would be repealed. We got no express intention from him that he planned to repeal these two codes. And he hasn't asked me (as the public) for my opinion as to whether I agree. Simply this note is unprocedural and as a result null and void.

2. Why did Rob say those companies CAN use his new codes. Why not MUST? My friend who I consult often under these circumstances suggests to me that this a e-toll-type move. He's trying to get more people to get behind his codes (thus far it's only Tsebo who have been verified under these codes and they've come up as a level one………..hmmm, and they couldn't do better than a level 2 under the old codes? Hmmmmmmmmmmmmmmmmmmmmm)

   Another thing that's missing is Rob telling us what financial period must be used before you have to shoot the lights out with his new codes. There's not a great deal of commitment here

3. The date that Rob signed this (it was published three months later) is December 8 2015. That is one day before Zoomer gave the whole of South Africa a reason to hate him. Rumours had been circulating at that point that Rob was going to get a janitor's job at Brics Bank. Zoomer was still flying high and was the man and Africa is so big that that the world can fit into it and Des was going to manage our money. This note could have been Rob's farewell, his dear John. My friend William Wallis told me that the emerging contractors had placed an undue amount of pressure on Bolshie Bob to repeal the construction code. It makes sense – they would all be level one and their competitors would not even get a look in.  Loane Sharp said as much last year. I think that that lobby group has lots a fair amount of their clout because everyone is now answerable to Pravin.

Now how to conclude? This note is not binding nor is it legal. It is up to us to lobby our MPs, speak to our friends and get that useless department back into line.

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It's not as though we didn't see this coming. We know that charter councils have until the 15th of this month to at, the very least, submit their revised codes to the dti (I've been told I have to be nice about them). And I quote

Sector Charter Councils have until the 15 November 2015 to submit aligned Sector Codes for approval to Minister of Trade and Industry, Dr Rob Davies. All existing Sector Codes that have not submitted application for approval to the Minister to be aligned with Broad-Based Black Economic Empowerment Codes of Good Practice will be repealed.

This does leave us in a somewhat difficult position. If they are summarily repealed what do you do? I spoke Chris van Wyk about this a while ago and he said that repealing is in effect an amendment and must go out for comment as per the act, which says 60 days. The about-to-be-repealed code must still be in force during that period and during the period that the dti is "considering" the comments. In theory there is no guarantee that the code will in fact be repealed. Only then can you come up with an alternative but that alternative can only operate from the date that the code is finally repealed. If you declare one sunny day that "all scorecards issued from now on can only be issued using the revised codes" you are violating the rule of law. Rule of law you ask, yes. This would be an application of retrospective legislating. What you are saying is that a code that was not applicable to you because your specific sector code was still valid is now suddenly applicable. Oh many would argue that you should have known about the revised codes. Yes you should have known but only in so far as the revised codes exist – they are not applicable to you and hence you legally and legitimately do not need to worry about them. What is also very important to remember is that it is only Rob the red that issue a code or decide when or what anything may apply.

Not so if you are Construction Sector Charter Council (perhaps just the CEO of the Charter Council). You decide to take over Rob's role and spew forth the following

03 November 2015

Communication to:

All Construction Sector Stakeholders

All Industry Voluntary Associations

All Verification Agencies

All Construction Sector BBBEE Practitioners

Subject:

Verification Measurement Position Beyond the 31 October 2015

Hmmm, this should be interesting. Our author blabs on about 31 October and repealing etc, you can read it here. That, dear reader, is not the most significant bit. This is

Applicable Measurement position after the 31^st October2015

5. Following the letter of communication issued by the Minister of Trade and Industry on the 30 th October 2015, although no additional extension has been granted by the DTI, major construction industry associations/stakeholders under the Charter Council have however been provided an opportunity to finalise outstanding areas of the CSC alignment process and targets.

In the interim, all construction measured entities seeking to renew their BBBEE Verification Certificates will make use of the revised generic BBBEE code as gazetted on the 1 May 2015.

Here we are – a god complex. Like the uber trumping clause ever. And this is why this is a problem

1. The CSCC cannot dictate, suggest, intimate or scream from the mountain tops that companies that operate within their sector must use a certain scorecard system other than the one they are responsible for
2. Their code hasn't been repealed
3. This is retrospective legislating. Let me explain what retrospective legislating is. Say the department of transport announces that from tomorrow all cars need to be left hand drive and will drive on the right hand side of the road (which is very similar to adopting the revised codes). They then scrutinise fines for infringements from before the 6^th of November and prosecute those drivers who drove on the left hand side and had right hand drive cars because they have infringed the new law.
4. It is only Rob who can make such a call
5. Whoever drafted has no idea about the rule of law.

I was pretty sure I was right when I saw this but I consulted my colleague and friend Chris van Wyk about it. This is what he had to say

You are absolutely correct though. They are acting way outside the scope of their authority. The council may not impose a repeal of the sector code where it is still valid. It is only the Minister that may repeal it. Even if repealed, they may not impose the general "Amended Codes" on a construction company whose year end preceded the repeal date. At most they can on repeal impose it on businesses whose year ends completed after 30 April 2015. Those whose year ends finished prior to 30 April should be capable of measurement on the old 2007 general codes.

In a phone conversation Chris stressed that if the code is repealed you must allow certificates based on a measurement period before the date of repealing to be issued in terms of the code that was valid at that time.

What do you do if you come across this notice? Ignore it, the rule of thumb is that if it comes from Rob or his minions you can pay attention.

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A recent email from AQRate said the following

This is probably the question we are asked the most often. Will these Amended Codes and all Sector Codes really become effective on 1 May 2015. A well known BEE Consultancy recently advised that there would be a delay and this was refuted in the strongest of terms the following day by the Dti. We believe that the Dti will continue to pursue the 1 May 2015 implementation date. One of the solutions that have (sic) been suggested is that all current Sector Codes will be repealed before 1 May 2015 and that on this date everyone will use the Amended Codes of Good Practice until their particular sector code has been amended and gazetted.

The underlined section poses a wide number of issues.

1. Can the DTI summarily repeal current codes?
2. Is there a process that needs to be followed?
3. What are the ramifications of such an action?

I can't answer question one in any informed way. I would imagine they can't but will anyway. Which brings me onto the second question. I cannot see that a piece of legislation or secondary legislation can be arbitrarily repealed, there must be a standard procedure contained within our law. I don't know what that procedure is and I don't know how to ask DuckDuckGo how I go about this. Chris van Wyk suggested to me that the action of repealing a code must follow the standard process as prescribed in section 9 (5) of the act which is to put it out for comment for 60 days. 9(5) talks about "issuing, replacing or amending" a code. Chris posits that repealing is either an amendment or replacement.

Time has now run out for the sector codes to meet the 1 May deadline. If they published them all for comment tomorrow then the 60 day comment period would end in early May. They have to consider comments and hence cannot logically publish the final code the day after. The consideration period for the revised shambles was about a year. Let's say it takes them two months to consider the comments, we are looking at about July before the first code comes into effect. We know from the QSE codes et al that were published last year for comment that a sector code has no lead in period (which I certainly believe is unreasonable). July at the earliest.

There are two possible options that could happen.

1. The DTI summarily repeals all the codes and tells everyone (as per AQRate's email) that those companies must now follow the revised BEE codes

This would be procedurally wrong and legislatively unfair. We know that all codes issued under section 9(1) enjoy the same legal status. This means that those companies subject to an industry code have no reason to even consider or anticipate implementing the revised codes. They could persuasively argue (unfortunately only in a court of law) that they can't be expected to consider the revised codes in such a short period of time. Also I would encourage some form of litigation from charter councils or their constituents to query as to whether the DTI may do this.

2)    The DTI follows the prescribed process

As I wrote earlier I don't know what the prescribed process is but I'm willing to bet that you cannot summarily repeal a piece of legislation without at least putting it to some sort of public vote or similar.

My money is on the fact that there will be a 60 day comment period whether they publish codes for comment or repeal them. If this does happen then this what I recommend you do

RECOMMENDED ACTION IF YOU ARE SUBJECT TO A SECTOR CODE

Avoid the mad rush to get your old certificate issued before the revised codes come into effect on the 1^st of May. If your certificate expires during the comment period then you are OK – get a new one issued under the old code. However if you are somewhere in between then wait until the 60 comment period has passed and immediately renew your certificate under the old code. You might be able to drag it out by about a month but I wouldn't wait any longer, don't forget that when the new code comes into effect that's it – there's no lead in period.

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Construction BEE targets may have changed

Or have they. Technically the 5-7 targets should have come into effect on the 5^th of June 2013. The only problem now is, when does the measurement period start. Rob in his infinite wisdom (which he does not have in abundance) decided that the DTI's generic codes would kick in mid-month. In other words if your financial year ended after the 9^th of February then the new targets would apply to you. A grossly unfair state of events for those companies whose year ends at the end of February. This time things are a little different. IRBA is without doubt the more popular verification authority and it is run by accountants. Accountants like certainty and black and red (and white too) – the way they would interpret this is that all measurement periods commencing after the 5^th of June 2013 would be subject to the new targets. I agree with this, but it is unlikely that the personnel at the Construction Sector Council and the DTI would ever understand usch an international standard. Alas we are at their mercy. I must then conclude that all companies subject to the code should use the new targets from the 5^th of June 2013.

For your convenience and mine, I have put up those generic codes for Construction and BEPs.

Ownership (Construction and BEP)

Ownership. Total points - 25
Description		Weighting points	Compliance Target Year 5-7
	Voting rights
Exercisable voting rights in the enterprise in the hands of black people.		4	30%
Exercisable voting rights in the enterprise in the hands of black women.		2	10%
	Economic interest
Economic interest in the enterprise to which black people are entitled		5	30%
Economic interest in the enterprise to which black women are entitled		2	10%
Economic interest of the following black natural people in the enterprise black designated groups black participants in employee ownership schemes black beneficiaries of broad-based ownership schemes; or black participants in co-operatives are entitled		5	5%
	Realisation points
Ownership fulfilment		1	No restrictions
Net value		6	25%

Management (Construction and BEP)

Management Control. Total points –10
Description		Weighting points	Compliance Target Year 5-7
	Board participation
Exercisable voting rights of black board members using the adjusted recognition for gender (ARFG)		5	40%
	Top management participation
Black senior top management using the adjusted recognition for gender (ARFG)		5	40% (year 5-7)

Employment Equity – Construction

Employment Equity. Total points – 10
Description	Weighting points	Compliance Target (Years 5-7)
Black employees in senior management as a percentage of all such employees using the ARFG	3.5	60%
Black employees in middle management as a percentage of all such employees using the ARFG	3.5	75%
Black employees in junior management as a percentage of all such employees using the ARFG	2.5	80%
Black disabled employees as a percentage of ALL office-based employees using the ARFG	0.5	3%

Employment Equity – BEP

Employment Equity. Total points – 10
Description	Weighting points	Compliance Target (Years 5-7)
Black disabled employees as a percentage of ALL office-based employees using the ARFG	0.5	3%
Black employees in all management categories as a percentage of all such employees using the ARFG	9.5	60%

Preferential Procurement – (Construction and BEP)

Preferential Procurement. Total points – 20
Description	Weighting points	Compliance Target (Years 5-7)
B-BBEE procurement spend from all suppliers based on the B-BBEE procurement recognition levels as a percentage of total measured procurement spend	12	70%
B-BBEE procurement spend from all Qualifying Small Enterprises (QSEs) or from Exempted Micro-Enterprises (EMEs) based on the applicable B-BBEE procurement recognition levels as a percentage of total measured procurement spend	3	15%
B-BBEE procurement spend from any of the following suppliers as a percentage of total measured procurement spend:
suppliers that are 50% black owned	3	12%
suppliers that are 30 % black women owned	2	8%

PPC new BEE rating and the construction code's applicability

This is very interesting.  PPC announced that the have moved up from a level 4 to level three in their latest rating.  This is actually so important that they have made a JSE SENS announcement as well.

They haven't actually updated their website so I haven't seen the certificate but I surmise from the article that they used the DTI's codes to get there. 

PPC met its objectives in almost all of the Department of Trade and Industry’s code of good practice scorecard pillars, with notable increases in scores relating to employment equity, enterprise development and socioeconomic development

If they did use the DTI's codes then this brings up an interesting debate about which scorecard they should follow.  I presented a Construction Codes seminar around the country earlier this year and one of the delegates came from a cement manufacturing company and asked why she should attend the breakfast they are a manufacturing company that derives its income from the construction industry.  This posed a bit of a conundrum so I looked at the code itself

Code 2000, paragraph 3 (précised) says

Any company that conducts any construction-related activity must determine what percentage of their turnover is derived from construction
if the majority of their turnover is derived  from construction related activities then the charter is applicable

The construction sector is defined under the interpretations and definitions (page 29) as

all enterprises that are involved in the

• creation
• expansion
• maintenance

of fixed assets related to residential, or non-residential buildings, infrastructure or any other form of construction works in South Africa

This is difficult, manufacturers like PPC are indirectly involved in all three bullet points.  Is this link then strong enough for them to find the construction code applicable to them.  The available evidence suggests that the verification agency doing PPC might have thought that there was no strong link between them and the construction code.  However before I make any rash conclusions I need to consider

Date of applicability of the construction code

The preamble to the codes (notice 862) announces that

this notice is effective from the date of publishing (5 June 2009) and means that the Construction Sector Code is binding on all stakeholders operating in the construction sector

Does this mean that if the code falls into your measurement period then you are suddenly bound by it?  I would think not - but I have heard of VAs who seem to think so.

It is possible that the measurement period that PPC used might have pre-dated the gazetting of the construction code and that's why they used the DTI's COGP.  This sentiment is now common cause - there is nothing in the construction code that says it is retrospectively applicable.