Paul Janisch

Consulting, opinions and speaking engagements and a few other topics that I know quite a lot about

If you are looking for a realistic perspective of empowerment in South Africa and southern Africa (including Namibia, Zambia, Zimbabwe and Botswana), I am able to provide that perspective at your AGM or any other presentation. It's relatively clear from this blog that I know what I'm talking about. Over the last 20 years I've gained a very thorough understanding of the following topics

• Government procurement
• Parastatal procurement
• BEE trends within Africa
• Impact of BEE legislation
• Multinationals and empowerment within Africa

And I am very happy to provide you with an overview of these topics.

In addition I have consulted to a wide number of public and private organisations throughout South Africa on

• Public Private Partnerships
• Listed shareholding analysis
• Tax advice on BEE initiatives and tax structures (through a partner)
• Opinions on empowerment commitments that may be contractually binding
• BEE plans for tenders
• Joint Venture BEE certificates
• General opinions (similar to this one)

Or if you need someone to come in and find those points within your organisation for your next verification please contact me and we can discuss what is required. You can email me or phone me on (+2783) 227-1375.

 

Not the NABC content – but they would do well to pay attention to this post

Some people can verify BEE stuff, I can't. I cannot stand the roteness of that job – I find it staid, mundane, invasive and actually offensive. So I choose to consult – horses for courses they say. This is an article I wrote a few months' ago about the BEE consulting world.

 

What you should expect from a BEE consultant.

 

The BEE consulting industry is about 10 years old. With BEE laws and practices being reasonably bedded down the industry has become relatively established with BEE consultants being called in to provide a variety of BEE-related services to their clients.

Typically a BEE consultant is brought in for two reasons

1)    To remove the admin nightmare of both measuring BEE requirements and managing the verification process

2)    To advise on a specific issue that might need a little more focus. This point has opened up opportunities from a variety of professions ranging from lawyers and accountants through to HR professionals and corporate social investment specialists

BEE consultants differ from BEE verification agencies in that consultants do not verify. A simple analogy would be a cricket game where the players are watched over by an umpire. All decisions regarding wickets and runs are decided by that umpire. In the BEE world the consultant is the player and the verification agency is the umpire. The cost of setting up a verification agency is somewhat prohibitive which is one of the reasons why there are so few verification agencies. However the barrier to entry to become a BEE consultant is very low, all that is needed is a modicum of expertise and a client. Because of this low barrier to entry there is a possibility that the consultant you appoint might not be able to assist you properly. In my experience the following eight pointers should serve as a guide to what you should expect from a BEE advisor

1. A working knowledge of the codes and charters and how they interact with each other. It's not necessary to be an absolute expert but over the consultation period they have to satisfy the client that they are providing the best possible advice
2. A basic financial understanding. They should at least be able to read a balance sheet and income statement (understanding Afrikaans terminology is a bonus)
3. BEE consultants deal with a variety of departments in a company – from the financial department to the HR department and the procurement department. Each one has a different set of priorities and responsibilities – a consultant must be able to talk to each person with an understanding of their responsibilities and how these will benefit the company in their own BEE scorecard.
4. Overall knowledge of the legislation that black economic empowerment derives its legal legitimacy. This includes the Companies Act, Skills Development Act, Employment Equity Act et al
5. They should know what a verification agency will or will not accept. There are two ways to get behind this, you can either read the verification manual (which is an absolute must) or they can run ideas and interpretations past a verification agency. I have learned that there is little point in arguing over something when a verification agency has decided that they won't accept it.
6. Good writing skills are a benefit. Often a consultant will need to write certain types of policies, letters, memoranda of understanding which will form the basis of verification file.
7. A consultant will often be asked to refer charities or enterprise development beneficiaries for clients to earn points. A brace of these types of causes and beneficiaries that satisfy the various charters that can be referred are always useful.
8. A decent working relationship with a verification agency. I would recommend that they work with a few verification agencies. This is because it might be very embarrassing when you have advised a client on one issue that a verification agency has rejected
9. A willingness to sign some sort of non-disclosure agreement. The consultant will be exposed to almost all your company's confidential information.

A brief case study

I was approached by an engineering company who needed BEE advice. I really cut my teeth on this project I found myself advising them on the construction charter which involved setting up a variety of initiatives and programmes to get them to the BEE score they wanted. Some of the things that I ended up doing for them were:

1. Sitting in with lawyer and assisting in the drafting of the shareholders' agreement and contract of sale for the shares. A lawyer knows the law – but they typically do not understand the subtleties of a BEE deal and the demands the codes make on such a transaction
2. Writing HR policies that are unique to the construction sector charter
3. Advising on the best method to adhere with the complicated enterprise development requirements in the charter

This was pretty much what the client expected and it proved to be a very sharp learning curve. I suspect that these kinds of demands are placed on consultants all the time.

Maybe the NABC will accept this as the standard. Hmmm – no never, that's too much hard work.

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.

Pravin and the PPPFA (not quite Peter and the Wolf, but there is a jungle element in it somewhere)

This is a repost - I messed around with the blog and lost the post.  Sorry Mike - I've also lost your comments.

 

 

In municipalities and government agencies, similarly, spending on unnecessary travel and entertainment, unfocused consultant contracts, procurement supplies at uncompetitive prices and layers of administrative paperwork that interfere with getting the job done, will be cut.

Pravin Gordhan - Medium Term Budget Policy Statement (27 October 2009)

 

This quote comes from the Weekender’s Thought of the Week.  Our new Trevor (the real one was seen by me with Maria shopping for veggies at Woollies in Hyde Park on Saturday) has impressed me no end.  I think there is a wealth of information contained in this quote.  I suppose being a consultant who does a fair amount of work with the public sector I should be concerned, but that isn’t the phrase that interests me.  Take a look at “procurement supplies at uncompetitive prices”.  This simple phrase effectively affirms Treasury’s view on the PPPFA and the preference points’ ratio.  In the space of a few words Pravin has shot down guru jungle and other lobbyists who chant an “empowerment at all costs” mantra.  So much for sir jungle of jim proclaiming that the PPPFA should be scrapped altogether or insisting on a 60:40 regime.

Which brings me to what I really want to write about – the PPPFA.  I’ll consider it my public sector, public service duty to list a few little known facts about this mysterious act.  The PPPFA is just another one of those pieces of legislation that is badly understood and very poorly implemented.  And it is remarkably short too. 

Here are a few observations.

1)    It is applicable to those entities contained in schedules 2 and 3 of the PFMA and those contained in the MFMA (I have put up this list on the Caird website). You will notice that certain SOEs contained in schedule 2 do not use the PPPFA at all – Eskom, Telkom, ACSA (who the hell advised these guys – it is the biggest mess I have ever seen) etc.  It could be that they are not subject to the PFMA and have not been removed from the list or that they don’t know.  You will know pretty quickly if the PPPFA is at play because it will present you with a fifth hand photocopy telling you what preference points are expected for that bid.

2)    It is not a filtering tool for government procurement.  In other words if a bidder does not get a single preference point they cannot then get excluded from the entire bid process (bid is the correct word by the way).  The rules state that the preference points section and the tender section need to be evaluated separately and then the points are added together and the bidder with the highest number of points should win.  (This doesn’t apply to PPPs at the RFQ stage – as a general rule certain empowerment criteria must be met in order for a bidder to be considered for the RFP phase)

3)    The state does not need to use the PPPFA for every bid.  This would add unnecessary administrative paperwork (another of Pravin’s bugbears) in the case of goods and services that can only be procured from outside the country.  Section 3 of the act states

3. Exemption.-The Minister may, on request, exempt an organ of state from any or all the provisions of this Act

(a) is in the interests of national security;

(b) the likely tenderers are international suppliers; or

(c) it is in the public interest.

4)    As a general rule the PPPFA kicks in from contracts worth R200k. Below this figure three written quotes will suffice (actually above R30k). However I have heard that this is not a hard and fast rule – a figure of up to R500k can be contemplated before the PPPFA is used. 

I’ll dig up more information and post it up here.  My next instalment is a little discourse on King III and BEE.

This thing called a consultant

  I was looking back on the last five years and wondering what caused me to choose the job I do.   My reasons for wanting to do this were borne out of a different series of circumstances to the ones that might cause people to consider a job as a consultant because the job market has taken a turn for the worst.  This is the first of a series of posts which will go into what I believe should help those people wanting to start out in this game.

My last real job was in the internet industry.  I suppose I was lucky working for the company I did because they gave me a fair amount of freedom to do what I wanted.  As a result I worked in different positions over a five year period - conveniently moving on just as I was getting bored.  This freedom helped me figure out that I was best at my job when I was interested in it.  At the same time I started believing that I was only going to truly respect myself when I became self employed. 

The great opportunity came when the American parent decided to retrench across the board - and South Africa was to lose a bunch of people too.  I must have got to work earlier than ever to make sure that I was first in the retrenchment queue.  After leaving with a redundancy cheque I joined a friend's software firm.  My confidence had been somewhat shattered in the big corporate.  I had been protected from the outside world but not protected from typical corporate politics (more on this later).  The smaller company seemed like a decent opportunity to develop a little confidence and learn a bit about running a business.

I discovered very quickly that things were very different in the smaller company.  There were fewer people and everything revolved around the business owner. This same owner had been talking to numerous black people about taking a stake in his business and no one was going for it.  He even offered me shares and I wasn't interested.

Enter the BEE interest

This is when I thought - how can such a small firm be expected to have a black ownership element, when no-one is interested in taking shares?  My research took me through the Employment Equity Act, especially section 53 that said that you had to attach a certificate indicating compliance with the EE Act.  I interpreted this to mean that you were eligible for state business if you complied with the act.

Exit formal employment

I couldn't do it anymore - it wasn't working and I had built up my confidence.  After trying numerous IT ventures, none of which worked out (I learned a few really important lessons here that I conveniently forgot a few months later),  I started concentrating on being a BEE consultant.

Next installment - getting started, getting known and getting a company name