This post has been written often in my head. It's proper title should be - "the future of empowerment is......... Fifty One Thirty". You're going to see a lot of 5130. The correct representation is actually 51/30, 51% black owned with 30% black women ownership. You're going to see a lot of those companies sprouting up within the next few years.
It works like this.
The smallest percentage of black ownership that is acceptable under the codes is 30% black women owned. 25% black ownership will get you points but doesn't provide any benefits under procurement. 30% black women ownership does - 4 points. The next best level is 51% black ownership - that'll attract a further 9 points under procurement. You then get 100% black ownership which promotes you to a level 1 but actually doesn't do much more than that. Clever companies will go the 51/30 route. This gives your company access to 13 points under preferential procurement (more if they turnover less than R50m) and sets you up as an enterprise/supplier development beneficiary. The balance of the shares can then be held by white people (or foreigners).
What are the 51/30 benefits.
If your turnover is less than R50m then you are a level 2. This means that you don't have to worry about a BEE scorecard. You can hire white people who you don't have to train. White suppliers will seek you out to supply to the larger corporates and government and they won't have to give you a BEE scorecard
You can insist on COD payment because you are an ED/SD beneficiary
When your company turns over more than R50m you can refuse to implement any of the elements in the codes because your blackness provides your clients with 13 of the 25 procurement points.
The white/foreign/infidel co-owner can still sit there calling the shots because the company that is supplying Eskom is made up of a staff trust and he's put up the cash for the company. The company is effectively a front but because there are so many of them out there, Eskom will never be able to check (don't worry Levenstain will attempt to out you). Eskom won't check because it wants to support black owned businesses. Larger corporates won't check either.
These 51/30s will go from strength to strength and monopolise procurement within the larger parastatals and corporates, effectively squeezing out those 100% black-owned businesses who are no longer competitive. The 51/30s will also become the conduit for the rest of the companies that cannot/will not comply with the BEE codes to gain access to the larger corporates. Their BEE status now becomes irrelevant.
And then what? Nothing changes, white companies have adapted and hid behind their fronts. Emerging businesses will struggle to get a foothold now that the larger corporates no longer need worry about them.
Skilled people who sell their labour at competitive prices will not struggle to find positions in the 51/30s or their suppliers. Yes you will still have those unpolicable pieces of labour legislation attempting to ensure that Manyi's distopian dream of companies reflecting the national demographics, but these will become less relevant because they cannot be policed as the government cannot afford to hire more people to police them.
If you ask me what to do with your business I would tell you to create a trust that provides for 51/30. Even if I succeed in getting rid of the revised codes (and I am quite confident that I will) 51/30 is the future of empowerment irrespective of what codes exist.
If you don't know how to do this - speak to me, I have a few good ideas.
Let's say it's the 1st of May and the revised BEE codes (aka Rob's folly, unfortunately not his worst move as head of the iDioTIc, in fact nowhere near his worst move) have now become operational. What do you do? The chances are you aren't at work because it's another public holiday that the country doesn't need. Perhaps you aren't at work because the ANC forgot to invest in the racist power network last century. That however is another story.
You wait until the 4th and then consider your options. You are probably hoping that your BEE scorecard that you renewed on the 30th of April will last you until April 2016. You may be right, but consider the following
BEE scorecards under the 2007 codes don't talk to the revised codes. You'll need to get an additional "empowering supplier" document that you can attach to your current BEE scorecard. This will probably satisfy the larger corporates BUT
the hopelessly clueless parastatals like Eskom, especially Eskom, are likely to insist on scorecards under the revised codes. Why? Simply because the equally inept DTI have gone on road shows and told them that the codes become effective on May the 1st. That the DTI themselves have no idea as to when the first scorecards will be issued is irrelevant, Eskom as the shining light (oops I forgot that you cannot use the word light in context of Eskom) of empowerment and how it should never have been implemented in the first place are going to want to curry favour with our dramatically incompetent government and show them that they are at the forefront of "radical economic transformation".
If the parastatals don't do that, they could translate the BEE score on the certificate so that it talks to the revised levels contained within Rob's folly
The larger corporates will go for the current certificates along with an empowering supplier certificate
And then there's practical side to this (more numbered points)
51% plus black owned businesses who turnover less than R50m only need to sign an affidavit confirming ownership and turnover. What Rob forgot to mention is that those whose turnover is between R10m and R50m will need an empowering supplier certificate – more on this below
Standards of verification will have to drop even though the quantity that needs to verified has increased substantially. But the market is now used to relatively stable costs for verification and won't tolerate any great increases. Also the number of verification agencies is now close to 350, this means that if your favourite VA wants to charge you a lot of money there is someone out there that will do it for the standard prices. If there is more to verify and the prices don't change then standards will drop. I expect every company that actually goes through a verification will just be made an empowering supplier whether they can prove it or not
Fronting will become less sophisticated and more patent. In excess of 50% of total procurement will need to come from 51%black owned/30% black women owned suppliers. The supplier that can deliver this will get the business (subject to other issues like pricing, competence etc). We'll see a lot of these companies springing up. These companies no longer need independent verification so their affidavit will do. This means it is of no concern who they hire, how they train them, what causes and businesses they support nor who they buy from.
I think the 51% etc companies need to be discussed in more detail.
They are not going to escape the cost of verification. Rob's folly makes it clear that the affidavit does not include a statement of empowering supplier compliance so this has to come from a third party because it's not going to come from the iDioTIc. I would imagine that verification agencies might charge 51% etc black owned QSE's and larger similar prices as a full verification for an empowering supplier certificate
There is no incentive for these businesses to ever get a BEE certificate when their blackness contributes more than 50% of the points available for procurement. The company needing the scorecard will meet their procurement sub-minimum under these circumstances.
If they don't need or plainly refuse to get a BEE scorecard they can buy from whoever and sell it on – this does add to the cost of doing business in this country but everyone wins.
And so the small emerging business trying to get off the ground won't get a look in because the large corporates are now getting their BEE points from the fronters. And the likes of Zungu make more money for jam. So much for Rob's deluded idea of creating black industrialists, actually they don't stand a snowball's chance anyway because Eskom can't produce enough electricity to run the firepool pump at Nkandla.
This is not equitable. It's a joke, Rob is a joke and the real joke is that he doesn't know he's a joke.
We can do something about this. I've raised about 75% of the money I need to interdict these codes. If you would like to see a more equitable South Africa please contact me and make a small contribution and then we can work on the larger constitutional challenge.
The response to my initial request for funds to take these codes on review was a little slow, but about two weeks ago a concerned body approached me and told me that they had raised R400k. We can now get started but we need a lot more money to ensure that we are able to make it to the Constitutional court. And it needs to go to the Constitutional court. Evidence the opening paragraph of an analysis that my attorney drafted.
Writer is of the view that it has now become the responsibility of entrepreneurs and business owners to take the Minister and the DTI to task on their total disregard to due administrative process and non-compliance with the provisions of the Constitution, so as to afford corporate South Africa the opportunity to ensure the establishment of a broad-based black economic empowerment plan that will be meaningful and sustainable and that will afford business owners the opportunity to be measured against a consistent set of rules that are unambiguous and more realistic.
I've posted his complete opinion on the blog before, here is a link to the final document on the attorney's website.
History has shown that this government, like its predecessor, is not reasonable. We have a Constitutional yardstick that is routinely ignored, it's therefore up to us to do something about it before it's too late. Arbitrary law making has serious consequences. A consequence that I hadn't considered properly is the demise of verification agencies themselves. I got this email from a prominent agency, who responded to an email I sent out last night requesting funds
(I'm) fully in support, however not really in a financial position to assist with 60% of our client base being wiped out by the new codes. Will send through to potential interested parties.
I then wrote
The VAs in the outlying areas are going to suffer. If you consider that you have a significant number of Indian owned businesses as clients they may no longer need you. However, Indian owned businesses that turn over more than R50m do need to be concerned because the codes do not allow them to employ their family/community members.
The VA responded
All African, Indian and White owned businesses will fall away as most white owned businesses on the QSE scorecard will probably end up non-compliant, so why bother with a rating and that is all EMEs and QSE's gone.
In effect, our livelihoods are on the line here. And the revised codes are the cause of it. You can't expect Rob to understand this because he's demonstrated very little understanding of anything that he is responsible for. Peter Bruce's BDLive column from this morning provides us with a few more clues as to his ignorance.
THE NEW steel plant I have just referred to is a last gasp for the developmentalists in government. Alec Hogg ran a great interview with Trade & Industry Minister Rob Davies the other day in which he asked him whether he was worried about what appeared to be a new round of companies leaving SA. He wasn't worried. There were lots of companies ready to move in in their place. Phew what a relief.
It's heartening to know that he's not only useless at empowerment related issues, he's clueless across the board.
The overview of the Equitable Transformation Alliance is attached again, please forward it onto anyone you now who would be willing to contribute. We first thought that we'd find a few large donors, this is probably not going to happen so any amount will help.
The first thing you need to understand is how many points you need to be a level 2 under the revised codes. Id est
Contribution Level
2007 Codes
2013 Codes
Recognition level
Level One
≥ 100 points
≥ 100 points
135%
Level Two
≥ 85 points but < 100 points
≥ 95 points but < 100 points
125%
Level Three
≥ 75 points but < 85 points
≥ 90 points but < 95 points
110%
Level Four
≥ 65 points but < 75 points
≥ 80 points but < 90 points
100%
Level Five
≥ 55 points but < 65 points
≥ 75 points but < 80 points
80%
Level Six
≥ 45 points but < 55 points
≥ 70 points but < 75 points
60%
Level Seven
≥ 40 points but < 45 points
≥ 55 points but < 70 points
50%
Level Eight
≥ 30 points but < 40 points
≥ 40 points but < 55 points
10%
Non-Compliant Contributor
< 30 points
< 40 points
0%
Gaming companies need to achieve a level 2 BEE score in order to retain their gambling licence. The scenario below is a speculative maximum score that Tsogo Sun might hope for under the revised codes. The score is probably too generous. It will take quite a few years for them to get to a level 2.
2007 Codes
2013 Codes
Element
Weighting (excluding bonus points)
Tsogo Sun 2013 score
Element
Actual points as per each code (excluding bonus points)
Possible Tsogo Sun score
Ownership
20
23
Ownership (priority element)
25
25
Management
10
4.44
Management control
19
5.3
Employment Equity
15
10.91
Skills development (priority element)
20
10
Skills development
15
13.45
Enterprise and Supplier Development (priority element)
40
19.5
Preferential procurement
20
18.38
Socio-economic development
5
5
Enterprise Development
15
15
Socio-economic development
5
5
TOTAL
100
90.18 (level 2)
109
64.8
Level 7, but Preferential Procurement subminimum has not been met, demoted to a level 8
They've been demoted to a level 8 under procurement because it's going to take years for their suppliers to get to an acceptable score under the revised codes. The submminimum under the revised codes is not going to be reached in a hurry.
Subdivision
Total Points
Required subminimum
Preferential Procurement
25
10
Supplier Development
10
4
Enterprise Development
5
2
TOTAL
40
16
Their only hope is to allocate 40% of their spend to 50% black owned businesses (many of which need to be black women owned). I don't think this will happen. Even if they do they are not going to get to a level 2. What then becomes of their gaming licence? It's managed by a DTI company – I think it's under an absolute threat. It's not likely that the clerk or board that considers the longevity of such a licence will understand why Tsogo has not hit its level 2 under the revised codes.
As a matter of interest there is a large group who have expressed a desire to support our action against the minister. I'll keep you posted.
The document below was drafted by Arno van Vuuren and Johnny Klopper (and AN Other – who wishes to remain anonymous). Arno is a Pretoria-based attorney and Johnny an advocate (AN Other is also an attorney). This is a frightening read, a long frightening read. It methodically demonstrates the flagrant disregard for procedure, process and the Constitution that was exhibited by Rob Davies. If it strikes a chord with you then help us fight these codes. You'll not be fighting BEE codes, you'll be sending a message to the government in general that we as business people in South Africa will not tolerate the government's substandard legislating.
INTRODUCTION:
Writer is of the view that it has now become the responsibility of entrepreneurs and business owners to take the Minister and the DTI to task on their total disregard to due administrative process and non-compliance with the provisions of the Constitution, so as to afford corporate South Africa the opportunity to ensure the establishment of a broad-based black economic empowerment plan that will be meaningful and sustainable and that will afford business owners the opportunity to be measured against a consistent set of rules that are unambiguous and more realistic.
2. THE LEGAL STATUS OF THE REVISED CODES:
2.1 The revised Codes of Good Practice on Broad Base Black Economic Empowerment ("the revised codes") issued in terms of section 9(1) of the Broad Base Black Economic Empowerment Act, Act 53 of 2003 ("the Act") and gazetted in Gazette no. 36928 is undoubtedly leading the way to a guaranteed failure of government's Broad Base Black Economic Empowerment ("B-BBEE") initiative as it appears to be nothing but mere lip service to the concept of B-BBEE in that it has become a mechanism for redistribution of wealth as opposed to the creation of wealth through meaningful and sustainable empowerment initiatives.
2.2 In this opinion, the writer will attend to illustrate the various contradictions in terms contained in the revised codes which, inter alia, relates to the re-adoption of a narrow-based approach following an exclusive approach towards B-BBEE as opposed to the approved broad-based approach by way of an inclusive process. It will further be illustrated that the revised codes represents an absolute departure from the empowerment strategy of government as alluded to in the national growth path strategy which government so proudly represented to corporate South Africa as part of its economic growth strategy. In addition to the aforementioned realities, the revised codes are also characterised by its incompleteness, contradictory terms, vagueness, uncertainties and grammatical errors.
3. In the following brief analysis of the revised codes the writer will deal with the following critical issues:
3.1 The Minister of Trade & Industry exceeded his powers by acting outside the course and scope of his authority with the issuing of the revised codes. The aforementioned statement is based on the premise that the Minister has failed to apply his mind properly to the strategy on B-BBEE, as issued in terms of section 11 and prescribed by section 9(2) of the B-BBEE Act with particular reference to the following principles:
3.1.1 Broad-base beneficiation;
3.1.2 Inclusivity;
3.1.3 Economic growth.
3.2 Contrary to the provisions of section 9(5) of the Act, the revised codes did not lay for public commentary for the prescribed period of sixty days.
3.3 Despite an overwhelming response from interested parties emanating from public commentary including responses relating to technical issues, which calls for obvious rectification, the Minister failed to consider same and have no regard to such present issues.
3.4 Contrary to the authority granted to the Minister to only distinguish between black men and black women, the revised codes introduced different classes of black people with reference to African, Coloured and Indian, in dealing with the level of recognition they can contribute under management control and employment equity. To this end, the Minister clearly exceeded his powers and authority as set out in section 9(4) of the Act.
4. As already stated hereinabove, one of the unique features of the revised codes is the vagueness of its provisions. It appears to be riddled with uncertainties pertaining to, inter alia, its effective date, the commencement on of the transitional period and uncertainty as to which of the existing codes (Gazette No. 29617) remained and which of them have been repealed, substituted or amended. In addition to the aforementioned rather embarrassing short-comings, the following also appears to be left in a cloud of uncertainty:
4.1 A clear definition of the "measurement period" for measured entities;
4.2 The absence of any provision for a transitional mechanism for the measurement of the "empowering supplier status" of entities which fall within the ambit of sector codes or for the measurement of preferential procurement for the very first entities to be measured in terms of the revised codes who will have no suppliers who have been verified to be empowering suppliers;
4.3 The various references to terms which remain undefined;
4.4 The existence of clearly defined terms which are nowhere to be found in the contents of the revised codes
4.5 The existence of various contradictory definitions and applications of the same terms and principles throughout the revised codes;
4.6 The incorrect numbering of paragraphs in the revised codes.
5. The revised codes further appears to be unconstitutional for the following reasons:
5.1 The unfair and unjust administrative process from which the revised codes emanated infringes on the public's right to a just administrative action in terms of the provisions of section 33 of the Constitution.
5.2 The enforcement of a mechanism for the preferential procurement practices of government is in conflict with the provisions of section 217 of the Constitution in that such practices are patently unfair, inequitable and uncompetitive.
5.3 There is simply no room for individuals to freely participate in a trade of choice and as such it fails to constitute a law of general application that is reasonable and justifiable in a just and open society as envisaged in section 36 of the Constitution.
6. In what follows, I will briefly deal with the legislative background relevant to the subject matter so as to provide a better perspective of the submissions ventilated hereinabove.
7. THE CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA, ACT 108 OF 1996 ("THE CONSTITUTION") WITH SPECIFIC REFERENCE TO SECTION 9 AND 217 THEREOF:
7.1 Section 9 of the Constitution reads as follows:
"(1) Everyone is equal before the law and has the right to equal protection and benefit of the law;
(2) Equality includes the full and equal enjoyment of all rights and freedom. The promote the achievement of equality, legislative and other measures designed to protect or advance persons, or a category of persons, disadvantaged by unfair discrimination may be taken.
(3) The State may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth.
(4) No person may unfairly discriminate directly or indirectly against anyone on one or more grounds in terms of sub-section (3). National legislation must be enacted to prevent or prohibit unfair discrimination.
(5) Discrimination on one or more of the grounds listed in subsection (3) is unfair unless it is established that the discrimination is fair."
7.2 As a consequence of the provisions of section 9 and emanating therefrom, the Employment Equity Act, Act 55 of 1998 purports to protect or advance categories of persons, disadvantaged by unfair discrimination in terms of the provisions of section 9(2) of the Constitution.
7.3 In addition to the aforementioned provisions, the Broad-Base Black Economic Empowerment Act, Act 53 of 2003 (the "B-BBEE Act"), as well as the Codes of Good Practice on B-BBEE emanating from the Act also purports to protect and advance categories of persons, disadvantaged by unfair discrimination in terms of the provisions of section 9(2) of the Constitution.
7.4 Section 217 of the Constitution reads as follows:
"(1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.
(2) Sub-section (1) does not prevent the organs of state or institutions referred to in that sub-section from implementing a procurement policy providing for-
(a) categories of preference in the allocation of contracts; and
(b) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.
(3) National legislation must prescribe a framework within which the policy referred to in sub-section (2) must be implemented."
7.5 The provisions of section 217(3) of the Constitution manifested itself in the Preferential Procurement Policy Framework Act, Act 5 of 2000, which provides for the scoring mechanism in terms of which government tenders are to be awarded.
8. GOVERNMENT'S BROAD-BASE BLACK ECONOMIC EMPOWERMENT STRATEGY (PUBLISHED JUNE 2003):
8.1 In terms of section 9(2) of the B-BBEEAct, the Minister of Trade & Industry must issue a strategy in terms of section 11, which must be taken into account when in the preparation of any Codes of Good Practice. In particular, section 11(1)(a) of the Act states that the Minister must issue a strategy for B-BBEE.
8.2 Following the aforementioned provisions of the Act, it is clear that the Minister, in developing any Codes of Good Practice must have due consideration, to the strategy document pertaining to B-BBEE. This point of departure is of fundamental importance in the legislative process dealing with the subject matter.
8.3 For this purpose, government's B-BBEE strategy document, published in June 2003 served as a precursor to the B-BBEE Act which followed in December 2003. It contains policy objectives and key principles that underpin government's strategy towards B-BBEE. These policy objectives, listed in section 3.3 of the B-BBEE strategy documents include, inter alia, the following:
8.3.1 Increasing the number of black people who participate in the ownership and control of existing and new business in the South African economy;
8.3.2 Increasing the proportion of ownership and management that community and broad-based enterprises and co-ops have;
8.3.3 Accelerated and shared economic growth.
8.4 The aforementioned policy objectives and the strategy from an holistic point of view is further underpinned by the following four key principles of B-BBEE as listed in section 3.4 of the B-BBEE strategy document:
8.4.1 B-BBEEis broad-based;
8.4.2 B-BBEE is an inclusive process;
8.4.3 B-BBEE is associated with good corporate governance;
8.4.4 B-BBEE is part of our growth strategy.
8.5 In pursuance of the aforementioned summary of the relevant legislative background, writer is of opinion that in terms of the provisions of section 9(2) of the B-BBEE Act, any Codes of Good Practice developed and issued by the Minister or DTI must be aligned and complementary to these aforementioned policy objectives and key principles. If such initiatives fall short of these requirements, it is open for attack in a Court of law.
9. THE BROAD-BASE BLACK ECONOMIC EMPOWERMENT ACT, ACT 53 OF 2003:
9.1 The B-BBEE Act gazetted in December 2003 and which became operational in January 2004 authorises the Minister of Trade & Industry to publish subordinate legislation relating to the subject matter, same of which is commonly referred to as the "Codes of Good Practice". The Minister's authority to issue the Codes of Good Practice is defined and minuted in section 9 of the B-BBEE Act. For ease of reference section 9 is quoted herein below:
"Section 9
In order to promote the purposes of the Act, the Minister may by notice in the gazette issue codes of good practice on Black Economic Empowerment that may include –
The further interpretation and definition of Broad-Base Black Economic Empowerment and the interpretation and definition of different categories of a Black Empowerment Entity;
Qualification criteria for preferential purposes for procurement and other economic activities;
Indicators to measure Broad-Base Black Economic Empowerment;
The waiting to be attached to Broad-Base Black Economic Empowerment indicators referred to in paragraph (c);
Guidelines for stakeholders in the relevant sectors of the economy to draw up transformation charters for their sector; and
Any other matter necessary to achieve the objectives of this Act.
A strategy issued by the Minister in terms of section 11 must be taken into account preparing any Codes of Good Practice.
A Codes of Good Practice issued in terms of sub-section (1) may specify:
Targets consistent with the objectives of this Act; and
The period within which those targets must be achieved.
In order to promote the achievement of equality of women, as provided for in section 9(2) of the Constitution, a Codes of Good Practice issued in terms of sub-section (1) and any target specified in a Codes of Good Practice in terms of sub-section (3), may distinguish between black men and black women.
The Minister must, before issuing, replacing or amending a Codes of Good Practice in terms of sub-section (1)-
Publish the draft Codes of Good Practice or amendment in the gazette for public comment; and
Grant interested persons a period of at least sixty days to comment on the draft Codes of Good Practice as amended, as the case may be."
9.2 In terms of the provisions of section 9(5) of the B-BBEE Act, the Minister is clearly obligated to publish such proposed amendments in the gazette for public comment so as to afford, inter alia, interested persons at least sixty days to comment on the draft Codes of Good Practice or amendment. It follows from these provisions that at the very least, the Minister is obligated to consider such commentary subsequent to submission thereof by members of the Public and in particular interested persons.
9.3 In casu, it is common cause that the Minister failed to meet these requirements and acted contrary to the provisions of section 9(5) of the Act. Writer is of opinion that such disregard to the purpose and processes contained in the B-BBEE Act is, inter alia, a contravention of the Promotion of Administrative Justice Act, Act 3 of 2000, emanating from section 33(1) of the Constitution which states the following:
"33(1) Everyone has the right to administrative action that is lawful, reasonable and procedurally fair."
9.4 As a further consequence of the Minister's disregard to the provisions of section 9(5), the revised Codes are riddled with drafting errors, including but not limited to spelling errors, incorrect numbering, incorrect references to old legislation, reference to legal entities (i.e. section 21 Companies) that no longer exists and the omission of essential information pertaining to the verification of measured entities. These blatant errors and omissions serves as evidence that the Minister simply did not consider any of the commentaries submitted prior to the publication of the revised codes as these comments pointed out all these discrepancies.
9.5 In addition to the aforementioned discrepancies, the revised Codes further appear to be in contravention of the following provisions of the B-BBEE Act:
Transgression of section 9(2) of the Act:
9.5.1 In terms of section 9(2) the Minister must take into account the Broad-Based strategy in dealing with any Codes of Good Practice. It is therefore unequivocally clear that any subordinate legislation must have, as a fundamental principle, the idea of Broad-Based Empowerment.
9.5.2 In the national growth path published by Minister Ebrahim Patel, the following relevant statements were made:
"Government has adopted the position that Black Economic Empowerment should seek to empower all historically disadvantaged people rather than only a small group of black investors. To this end, it adopted a Broad-Based BEE Act which calls for expanded opportunities for workers and smaller enterprise as well a more representative ownership and management.
Current BEE provisions have, however, in many instances failed to ensure a Broad-Based approach, instead imposing significant costs on the economy without supporting employment creation or growth. The present BEE model remains excessively focused on transactions that involve existing assets and benefit a relatively small number of individuals. The new growth path requires a much stronger focus on the Broad-Base elements of the BEE regulations / ownership by communities and workers, increased skills development and career pathing for all working people, and support for small enterprises and co-ops, as well as a new emphasis on procurement from local producers in order to support employment creation.
The following shortcomings have emerged in the implementation of BEE. First, ownership and senior management issues received this proportionate emphasis. The unintended consequences of this trend include 'fronting', speculation and tender abuse. Second, the regulations do not adequately incentivise employment creation, support for small enterprise and local procurement. The preferential procurement regulations aggravate this situation by privileging ownership over local production. Finally, the Broad-Base BEE regulations penalize public entities as suppliers. The democratic state owns public entities on behalf of our people yet the regulations do not count them as 'black empowered'.
A major rethink is needed of the BEE framework and policy to achieve South Africa's developmental and growth goals. The DTI and EDD will work with the relevant government departments and the BBEEE advisory council to ensure:
A substantial revision of the BBBEE Codes to do more to incentivise employment creation, investment in new productive capacity by black entrepreneurs, including small business and co-ops (using among other stronger local procurement), skills development and employment equity, collective and other forms of Broad-Based ownership, and sector strategies to create jobs.
Consistent implementation of Broad-Based (instead of narrow) BEE in all sectors, with a systematic assessment of the effects on the cost of capital and investment.
Continuous monitoring and evaluation of the impact of Broad-Base BEE on overall equity, employment creation, support for new entrepreneurs, growth and innovation."
9.5.3 From the aforementioned extract it is evident that the national growth path focuses on a more Broad-Based approach in both its horizontal and vertical applications. This means that the beneficiary base of ownership transactions should include a broader base of black participants such as communities and workers as opposed to an elite group of black investors (horizontal application) and a de-emphasis of black ownership in favour of an emphasis on all the elements of the scorecard in aggregate when considering preferential treatment of a business entity (vertical application).
9.5.4 Unfortunately, the revised codes have failed miserably in achieving these objectives as it appears to distance itself from the B-BBEE fundamental principles in favour of a narrow-base approach towards BEE. To illustrate the aforementioned conclusion, I deem it necessary to refer to the following examples:
With the new definitions of "enterprise development contributions" and "supplier development contributions" which are now limited to black owned businesses, the amount of points attributable to contributions directly related solely to black ownership of businesses have increased from 23 points (23%) to 53 points (48.62%). (The 53 points represents the 25 points on the ownership scorecard and the 28 points on the enterprise and supply development scorecard related solely to black ownership). As a result of the aforementioned amendments, 48% of the available points on the revised scorecard is therefore directly related to black ownership of businesses. Contrary to the principles set out in government's black economic empowerment strategy, which included the de-emphasising of black ownership, the revised Codes elevated ownership to more than double its value as compared to the existing codes. It is therefore evident that the revised codes have divorced itself from the government's official strategy on Broad-Base black economic empowerment.
(b) In terms of the current codes a "new entrant" is defined as an individual who at the time of entering into a BEE transaction with a measured entity has not been a party to a prior BEE transaction with an aggregate value of more than R20 million. In terms of the revised Codes, this threshold has been increased to R50 million. This amendment undoubtedly has been included to accommodate the fortunate black elite to create even more wealth at the expense of the broad-base of beneficiaries, the national growth path aims to include in the ownership structure of measured entities. As such, this amendment has neither aligned itself with the stated intention as set out in the national growth path nor with the horizontal broad-based approach to ownership as ventilated hereinabove.
(c) Perhaps the most telling aspect of the revised codes with respect to its narrow-based emphasis is the new B-BBEE recognition levels set out in section 8 of statement 000 of the revised codes. Upon careful consideration of the recognition table, it appears that if one deducts the 25 points for ownership one is left with 84 points which would give a business a level 4 B-BBEE status. However, such an entity's overall B-BBEE status level will automatically be discounted with a further level down to level 5 as a consequence of the fact that ownership is regarded as a priority element. The top 4 B-BBEE status levels (level 1 to 4) is therefore reserved for entities that have scored all their ownership points. In the existing codes only the top 2 B-BBEE status levels are reserved. This amendment has resulted in a limited contribution of the other elements of the scorecard to the B-BBEE status level of an entity compared to its ownership.
Transgression of section 9(4) of the B-BBEE Act:
9.5.5 In terms of the revised codes, a clear distinction is made between different classes of black people (African, Coloured and Indian) and the level of recognition they can contribute under management control and employment equity. This clearly contradicts the provision of section 9(4) which allows the Minister to only distinguish between black men and black women. This amendment appears to be aligned with the controversial principle of representation of the national demographic which currently appears to a bone of contention in other spheres of government. Although Coloured and Indian people are for purposes of black economic empowerment considered to be black, as defined in the B-BBEE Act, they are effectively marginalized by the revised Codes on the basis that "although you are black, there are others that are more black than you". Stated differently, "all black people, as per the definition in the B-BBEE Act are equal, but some are more equal than others."
9.5.6 Although the methodology appears to be irrational and technically flawed it is not so much the technical application of the formulas that raises a major concern, but rather the principles these formulas embody. Writer is of opinion that one of the primary reasons for limiting the minister's authority to distinguish only between black male and female, was to avoid the possibility of a further divide of South Africans along racial lines, which appears to be exactly what the revised codes has achieved.
Transgression of section 9(5) of the B-BBEE Act:
9.5.7 As already alluded to hereinabove, the obligation on the Minister to submit any draft codes for a public commentary period of at least sixty days before he may gazette a final code in terms of the provisions of section 9(5) and 9(1) has not been done.
9.5.8 In addition to the aforementioned, it is evident from the content of the revised cods that such public commentary which was in fact received were not considered at all.
10. THE ARBITRARY APPROACH TO TARGET SETTING ADOPTED BY THE MINISTER OF TRADE & INDUSTRY:
10.1 In terms of the provisions of section 9(3) of the B-BBEE Act, the Minister is to set targets that are consistent with the objectives of the B-BBEE Act. It follows that such targets will not be created in a vacuum, but should at the very least be based on empirical research conducted in an administratively just fashion. In casu, it appears that the Minister has not dissolved itself of this responsibility and has adopted an arbitrary approach to target setting.
10.2 In statement 004 of the current codes, sectors of the economy that wish to develop their own sectoral codes are required to furnish empirical research to substantiate any deviations in waitings or targets that they propose. However, it appears that the DTI is not subjected to the same requirements. Although members of the parliamentary portfolio committee on B-BBEE, at hearings held on the Proposed Amendment Bill to the B-BBEE Act during 2013, commented on the lack of empirical research provided to them on the progress made with B-BBEE, it appears that such empirical research is non-existent alternatively, has no meaningful contribution at this time for the following reasons:
10.2.1 The B-BBEE Act only came into existence on 1 January 2004;
10.2.2 The codes, which contains the actual means of measuring B-BBEE were only gazetted three years later on 9 February 2007;
10.2.3 Only two years later on 9 February 2009, the DTI managed to accredit the first verification agencies. Only then was it possible to empirically measure B-BBEE. The refusal to actually amend the plethora of technical and drafting errors in the existing codes, together with unofficial ad hoc interpretations that were often adopted by the B-BBEE Unit, which more than often contradicted the actual legislation, made it impossible for verification agencies to apply measurement on a consistent basis. Writer is therefore of the opinion that any empirical research that may have been conducted, given the aforementioned limitations, is fatally flawed and of little or no value.
10.2.4 It took a further 2½ years to align the B-BBEE codes with the Preferential Procurement Policy Framework Act, Act 5 of 2000, with the gazetting of the 2011 PPPFA regulation on 7 December 2011. Only then organs of state and public entities actually started applying the B-BBEE codes. Prior to the 7 December 2011 they were under official embargo by the Department of Finance (Treasury) to not apply the B-BBEE codes when considering preferential procurement in tenders.
10.3 During the years 2009 and 2011 we witnessed the gazetting of several sectoral codes as a consequence of which businesses had to constantly re-align themselves with the different rules. Writer therefore contends that it is impossible to draw reliable conclusions during this period.
10.4 The targets for employment equity and preferential procurement which only came into existence in February 2012 have already been increased in the revised codes. One cannot but question the merits of this increase in targets and should call for full disclosure of all relevant facts which were purportedly considered in justifying the same. One has to ask, what possible empirical research could have been embarked upon from February 2012 up until the release of the revised codes that could possibly warrant a further increase?
11. The increase in score thresholds to attain a particular B-BBEE status level appears to be entirely arbitrary and designed to make it impossible for any business that does not score full marks for black ownership to achieve a significantB-BBEE status level. The proportionate differences between B-BBEE levels also does not coincide with the proportionate points available in terms of the PPPFA 2011 regulations for each B-BBEE status level.
12. Other arbitrary changes in targets and weightings include the following:
12.1 Top management target increases from 40% to 60%;
12.2 Skills development expenditure target increases from 3% to 6%;
12.3 Preferential procurement target increases from 70% (this target only came into operation in February 2012) to 80%;
12.4 Preferential procurement target for procurement of black owned business increases from 12% to 40%;
12.5 The significant decrease in weighted recognition on enterprise development matrix for almost all contributions;
12.6 All these amendments as contained in the revised codes represents a departure from government's existing formal policies on B-BBEE as embodied by the strategy document and the national growth path. In accordance with the expectation created as far back as 2011 to the extent that the existing codes of good practice is in need of technical revision, business in South Africa expected the revision of the codes to be an exercise with a purpose of addressing technical and drafting errors in the existing codes. However, the revised codes appears to be quite the contrary.
13. VAGUENESS OF REVISED CODES:
13.1 Another alarming characteristic of the revised codes is the fact that on critical issues, its contents appear to be vague and should be declared void on this issue alone. In what follows, writer will briefly refer to some vague provisions that are critical.
13.2 The effective date of the revised codes remains uncertain. If one has due consideration to the notice page of gazette no. 36928 which reads as follows:
"I, Dr Rob Davies, Minister of Trade & Industry, hereby:
Issue the following codes of good practice ('the codes') under section 9(1) of the Broad-Base Black Economic Empowerment Act, 2003 (Act5 53 of 2003); and
Determine that these codes will come into operation within twelve months from date of this publication."
13.3 Paragraph (b) referred to in 15.2 supra implies that the revised codes is not effective until such date "within twelve months" from 11 October 2013 that it will become effective. This date remains uncertain even though the Minister, in government gazette no. 37453 (notice 226 of 2014) extended the transitional period provided in paragraph 10 of the amended codes by 6 months until 30 April 2015. In the interim, or at least until such time as the Minister gazettes the date within the aforementioned period to mark the effective date, none of the revised codes is effective. The aforementioned state of affairs renders section 10 of statement 000, which appears to introduce a transitional clause, meaningless and will undoubtedly create immense confusion in the market place.
13.4 As already stated hereinabove, the measurement period for which enterprises are to be measured, has still not been defined by the codes and as such it creates uncertainty as to which set of codes will be applicable. Although a general rule against retrospective application of legislation exists, it must be noted that B-BBEE compliance in general is measured over a 12 month period. In view of the fact that the effective date of the revised codes will probable fall somewhere within a twelve month period, it raises a question as to whether such measured entity would be measureable under the old or revised codes for that relative period.
13.5 Both the existing codes and the revised codes makes provision to the extent that any codes of good practice will remain effective until amended, substituted or repealed. Although several codes have been amended, it does not necessarily mean that all statements contained in those codes have also been amended. It is uncertain as to whether such statements still exist or not. Examples of the aforementioned confusion and uncertainty are statements 003, 004, 005, 102 and 103. To further add to the aforementioned confusion, both the Minister and the Director-General of the Department of Trade & Industry stated on different public podiums that some of these statements are still effective even though they failed to reach consensus on the list of statements that are still effective.
13.6 It is to be noted that some codes (example code 800 dealing with QSE's) have not expressly been repealed, substituted or amended.
13.7 The revised codes further introduces a concept called "empowering supplier", which is defined as follows:
"An empowering supplier within the context of B-BBEE is a B-BBEE compliant entity, which is a good citizen South African entity, comply with all regulatory requirements of the country and should meet at least three if it is a large enterprise or one if it is a QSE of the following criteria:
At least 25 % of cost of sales excluding labour cost and depreciation must be procured from local producers or local supplier in SA, for service industry labour cost are included but cut to 15%.
Job creation – 50% of the jobs created are for black people provided that the number of black employees since the immediate prior verified B-BBEE measurement is maintained.
At least 25% transformation of raw material / beneficiation which include local manufacturing, production and/or assembly, and/or packaging.
Skills transfer – at least spent 12 days per annum of productivity deployed in assisting black EME's and QSE's, beneficiaries to increase their operation or financial capacity."
13.8 In accordance with the aforementioned provisions, a measured entity in order to enjoy any recognition under preferential procurement has to qualify as an empowering supplier, irrespective of its B-BBEE recognition level. However, the definition of empowering supplier is vague and in some respects totally immeasurable. For example, the term "good citizen South African entity" is not defined and as such immeasurable. The obligation to comply with all regulatory requirements is in the absence of a list or definition of all regulatory requirements in South Africa, with all due respect, vague and embarrassing.
13.9 The provisions of sub-paragraph (c) as referred to in paragraph 15.7 supra does not specify what the 25% is measured against and as such it creates uncertainties as a result of its vagueness.
13.10 The formula for management control and skills development alluded to hereinabove contains several variables which are open for one or more potential interpretations. There is no separate formula provided for the calculation of the black women indicators which makes the formula of no use for those indicators. The potential achievement of a measured entity with respect to each separate race group is not expressly limited to the target for that race group which also makes the formula of no use. The entire logic to referring to the ex post facto position of economical active people (EAP) as per the commissioner of employment equity's annual report as the target for each race and gender grouping is fatally flawed as they do not represent targets but rather factual historical positions. In the premises, writer is of opinion that both the intention and the formula itself is set out in such ambiguous terms that it renders such provisions voidable. It is to be noted that the errors in logic in these formulas were pointed out in comprehensive fashion at the commentary phase and despite such comprehensive remarks dealing with the discrepancies, the Minister and the DTI failed to address such discrepancies appropriately. In fact they appeared to have been totally ignored.
13.11 Further in view of the fact that legitimate training expenses are capped at 15% of the skills development spent it is impossible to obtain a full score for skills development.
13.12 It is further unclear for what or for whom a supplier development plan should be developed in order to claim the exclusion of imports. It cannot reasonably be argued that the supplier to be developed is the overseas suppliers as a consequence of which, the only reasonable conclusion to be made is that the Minister intended for the measured entity to create or facilitate the creation of a local intermediary supplier that is black owned. It follows that the problem is merely deferred to the newly created local suppliers as it still needs to import the goods which are not locally available. This will inevitably lead to an increase in cost of product and contrary to the principle of economic growth as a result of increased cost of product.
13.13 In addition to those already mentioned, there are a number of terms used in the body of the revised codes that are not defined at all. To illustrate the aforementioned statement reference is made to the following terms:
13.13.1 "Industry entity" which appears in the bonus point indicator of the skills development scorecard. (No definition of industry entity).
13.13.2 "Value adding" which is used in the definition of supply development contribution. Although the term "Value adding" is defined in the existing codes the definition has been removed in the revised codes. This omission can only lead to further confusion and is as such vague.
13.13.3 "Net value date" is not used in the codes but is nonetheless properly defined.
13.14 The following definitions in schedule 1 contradicts definitions of the same term in the body of the revised codes:
13.14.1 "Employee" is still defined with reference to the Labour Relations Act and not the Employment Equity Act, even though the entire basis for measuring the management control scorecard is the classification and the "targets" as per the Employment Equity Act;
13.14.2 "Qualifying enterprise and supply development beneficiary" is not consistent with the definitions in the body of the Act or with the definitions of "enterprise development contribution" and "supply development contributions". In the one it refers to 30% black women owned businesses and in the others to 50% black women owned businesses;
13.14.3 The definition of "Socio-economic development" refers to "income generating activity" in the body of the code and to "access to the economy" in the definition in schedule 1.
13.15 To add to the abovementioned submissions pertaining the vagueness of the revised codes, a number of the paragraphs in the revised codes are also incorrectly numbered.
13.16 For the reasons as summarised hereinabove, writer is of opinion that a proper case can be made out against the revised codes on the basis of its vagueness.
14. INFRINGEMENT OF THE PUBLIC'S CONSTITUTIONAL RIGHTS:
14.1 As already alluded to hereinabove, the Minister's total disregard for the requirements of section 9 has resulted in an infringement of the public's right to just administrative action as set out in section 33 of the Constitution.
14.2 In addition to the aforementioned disregard to just administrative action it appears that the revised codes and the mechanism for implementation and maintenance of the same has completely ignored the principle of a separation of powers relating to the three distinct spheres of government (legislative, executive and judiciary).
15. Lastly it would appear that the narrow-base approach which appears to have been adopted in the revised codes, will effectively lead to an exclusion of white owned businesses from the economy at large. The disproportionate amount of points attributable directly to black ownership of businesses read together with the B-BBEE recognition levels and accompanying points in terms of the PPPFA 2011 regulations effectively excludes white owned businesses from business opportunities emanating from government business which appears to now be reserved exclusively for black owned businesses. This marginalization is patently unfair, inequitable and definitely not in the best interest of the economy at large. As a consequence, it is contended that this undesirable and unfair state of affairs emanating from the revised codes is a transgression of section 217 of the Constitution.
16. CONCLUSION:
For the reasons as set out hereinabove, writer is of opinion that the implementation of the revised codes as it stands, will undoubtedly result in the death of economic transformation in South Africa. In the premises it is contended that for the reasons properly ventilated in this document, the revised codes should not be left uncontested.
[Korporasies en genoteerde maatskappye] wil nie daarvan beskuldig word dat hulle nie transformasie steun nie, hoewel hulle moontlik die meeste by ’n hofuitspraak kan baat vind.
Paul Janisch, ’n swartbemagtigingskonsultant
Pretoria. – Die departement van handel en nywerheid kan voor die konstitusionele hof gesleep word as genoeg geld daarvoor ingesamel kan word.
Paul Janisch, ’n swartbemagtigingskonsultant, wil deur die Equitable Transformation Alliance (ETA), ’n art. 21-maatskappy wat bestaan uit sakelui en regspraktisyns, hê dié hof moet die hersiene kodes van goeie praktyk met betrekking tot breedgebaseerde swart ekonomiese bemagtiging (BSEB) bekyk.
Volgens Janisch glo die ETA die hersiene kodes, wat in April volgende jaar in werking tree, is prosedureel, wetlik en grondwetlik gebrekkig en dit bedreig regsbeginsels en volhoubare ekonomiese groei.
Die ETA wil die hof nader om ’n uitspraak te kry oor die grondwetlikheid van die hersiene kodes en om te bepaal wat billike en onbillike diskriminasie is ingevolge art. 9(5) van die Grondwet.
Dié artikel handel oor gelyke regte en vryhede en bepaal dat wetgewende en ander maatreëls getref kan word vir die beskerming of ontwikkeling van mense of kategorieë mense wat deur onbillike diskriminasie benadeel is.
Janisch sê die ETA is nie gekant teen BSEB nie, maar slegs teen die hersiene kodes. Hy sê die hersiene kodes maak dit onmoontlik vir enige onderneming, behalwe dié wat swart eienaarskap het, om die gewenste puntetelling te bereik wat hulle ingevolge die bestaande stel kodes sou kon bereik.
Namate ondernemings nie meer daaraan sal kan voldoen nie, kan BSEB ’n geleidelike dood sterf, waarna dit baie moeilik sal wees om dit te laat herleef.
Janisch meen die departement kon nog nie ’n aanvaarbare verduideliking gee waarom die bestaande kodes, wat tot dusver goed gewerk het en wyd gesteun is, vervang moet word nie.
In ’n brief aan Janisch sê dr. Lionel October, direkteur-generaal van handel en nywerheid, die bestaande kodes het nie genoeg transformasie meegebring nie.
Maar volgens Janisch is die hersiene kodes en regulasies onverstaanbaar en vaag, formules werk nie en definisies ontbreek. Nie eens die departement kan antwoorde daaroor gee nie, sê Janisch.
Verder maak die hersiene kodes dit volgens hom baie makliker vir frontmaatskappye om tenders te kry as wat die geval met die bestaande kodes is.
Janisch sê hoewel ETA se veldtog die steun geniet van korporatiewe en genoteerde maatskappye, is dit in die meeste gevalle net ’n klop op die skouer en ’n “hou ons op die hoogte”.
Dié ondernemings kan nie bydra tot die sowat R3 miljoen wat nodig gaan wees om die hof te nader nie omdat skenkings in hul jaarverslae aangeteken word.
Hulle wil nie daarvan beskuldig word dat hulle nie transformasie steun nie, sê Janisch, hoewel hulle moontlik die meeste by ’n hofuitspraak kan baat vind.
Written by Helene Cilliers. She captured all the issues that I face when it comes to raising money for this court action. She did ask me if the attorneys and advocates could donate their time but I don't think they should. This is a serious issue that needs serious skill to tackle.
I'm thinking that the money will come from Afrikaans-owned businesses because they do take a stand - the larger corporates will benefit from this. Ain't like strange?
Unless a CEO is prepared to go on the record, his or her message should perhaps simply not be recorded or, at least, little value should be placed on it. Perhaps we should treat corporate South Africa's armies of spin-doctors with more caution. I know it is hard for executives to "take on" a minister, but there are countless ways it can be done productively.
These executives are failing in the most fundamental way. They are failing to protect their shareholders. They may think that by kissing the government boot they are keeping the wolf from the door, but they are not. They should learn to speak up; to have the courage of their convictions. It isn't necessary to shout. But to speak or write in measured terms of their industry, or legislation that might affect it, means we might begin to have something approaching an authentic conversation about the future of our economy. Gordhan was right. It isn't his fault when companies pay homage to policies they profoundly disagree with.
So said Peter Bruce in this week's Thick End of the Wedge column. He's completely right. There is an innate fear of government reprisals for any form of dissent. Ask Reuel Khoza about what happened to him when he apparently uttered something like "South Africa's strange breed of leaders is a threat to democracy." I think Mr Khoza managed to rise above this and gained an incredible amount of respect from a variety of quarters as a result.
Here I am raising money for a court case against the minister of trade and industry. A court case that would have huge implications for corporates. These implications range from the sheer cost of implementing what the dti wants to sending a message to the government that they many not operate beyond their constitutional mandate (which Rob has most definitely done). Thus far I have not had doors slammed on me but I have fairly good idea that listed corporates would not be that keen to support it. As someone said to me last week, no listed company would go for this because the donation would be reflected in their annual report. All it takes is one shareholder to question the contribution and then be accused of being anti-transformation. I think their fear is justified because of the sensitivity of transformation and race. The fact remains that anyone who supports this action is defending the constitution and preventing the government from barrelling our constitutional rights.
I then turned my attention to those minority groups that will be dramatically effected by the management and skills development codes. The two tables below show the contributions that Coloureds and Indians make to both those elements. Both tables draw the stats from the latest EE Commission Annual Report.
Management/EE
This is simple enough. The 1.69 points are the maximum number of points that Africans will contribute to any measurement under senior to junior management. The total number of points is 2. You have to ask yourself the question why any self-respecting company would be interested in hiring Coloureds or Indians if the maximum number of points that they can be awarded is just on 0.3 points. This will barely make a difference to the overall score. Dispense with them and focus on Africans (right now a generic term – but who knows when it is going to be broken down into a tribal EAP).
Male EAP
Female EAP
TOTAL
Black points' contribution
Black female points' contribution
African
40.70%
34.20%
74.90%
1.69
0.85
Coloured
5.80%
5.00%
10.80%
0.24
0.12
Indian
1.90%
1.10%
3.00%
0.07
0.03
Skills Development
This is a more alarming measurement category. If you have 6% of payroll to spend on training (which you now have under the revised codes) then you are required to spend over 5% on the training of Africans.
Male EAP
Black points' contribution
Female EAP
Black female points' contribution
African
40.70%
2.75
34.20%
2.31
Coloured
5.80%
0.39
5.00%
0.34
Indian
1.90%
0.13
1.10%
0.07
Let's assume that your target spend amount is R600. This is what you would spend on each race group
African Male
R275
African Female
R231
Coloured Male
R39
Coloured Female
R34
Indian Male
R13
Indian Female
R7
In case you were wondering whether the R7 is a typo, it's not, it's what the dti wants. What's the message here – do not invest in the skills of your Coloured and Indian employees. Send them on silly little NQF aligned courses that don't do anything for them or the company.
And white training – that's an additional expense.
The message I got from a respected Coloured academic this morning is that influential Coloureds won't support this because they are too in with the government.
Back to the court case
The pat-on-the-back support is overwhelming. "We are very proud of you", a company director told me. But that's as far as it has gone. It then seems that the money will be raised from smaller companies and concerned entities. Those that benefit the most from this will be those larger corporates who employ the most people. The dti (and hopefully the government too) will be sent back to the drawing board and will have to find other ways to drive their bizarre racist policies. And we'll all win. The issue here is that smaller companies have smaller pockets and they cannot finance battles that larger corporates will benefit the most from.
If this economy is going to survive another Zuma term it needs to take a stand on a variety of issues and this has to be led by those who sit at the top.
It's not as though we had much choice here. The codes, as we all know, are unintelligible - there's this post that almost wishfully hopes that the DTI understand their own codes. But alas when you read through the post you'll see that the DTI can only confirm things that everyone understands and contradict those aspects of the codes that are actually clear. Then there's anecdotal stories about the so-called DTI BEE experts patronising their audience or just plain refusing to answer real questions. Clearly this is an untenable situation. If the people who write the policies have no idea what is required then what are we as the people who have to implement these things going to do? It's not as though this is anything new, historically the DTI has never been able to provide any assistance of any value. They started off well with the Interpretive Guide and then removed it. Therefore BEE as we know it is as a result of practitioners setting standards independently of the DTI. Admittedly we had a better document to work from (2007 codes).
I've been talking about mounting a legal challenge against the codes. We are now ready to start collecting the necessary funds to do this. We do need to stress, and the marketing document is very clear, that we oppose the 2013 revised codes ONLY. This is not an action to wipe out BEE in total. We're following the OUTA route and have created a non-profit organisation under section 8 of the Company's Act (formerly a section 21 company), aptly called the Equitable Transformation Alliance (ETA). I have attached the "marketing" document that we have already started circulating. This post is an explanation of why I am so hell bent on this challenge.
I've written about the rule of law in a few posts. I eventually found a decent definition of the rule of law (discussed here). I'm only concerned about three of the four tenets.
The government and its officials and agents are accountable under the law;
The laws are clear, publicized, stable and fair, and protect fundamental human rights, including the security of persons and property;
The process by which laws are enacted, administered, and enforced is accessible, fair and efficient;
The Revised Codes (36928) cannot be regarded as even being vaguely consistent with these principles. As a result we will request the court to withdraw them and then instruct the minister (and am I hoping that it's not the Rob the Red at the time of the action) that he cannot fix up the inconsistencies and then republish the codes with the same problematic issues. We want the Constitutional Court to decide on what is fair and unfair discrimination in terms of section 9(5) of the Constitution. This is section 9
(1) Everyone is equal before the law and has the right to equal protection and benefit of the law.
(2) Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken.
(3) The state may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth.
(4) No person may unfairly discriminate directly or indirectly against anyone on one or more grounds in terms of subsection (3). National legislation must be enacted to prevent or prohibit unfair discrimination.
(5) Discrimination on one or more of the grounds listed in subsection (3) is unfair unless it is established that the discrimination is fair.
The DTI conveniently hides behind section 9(2) and irrationally argue that the codes are well within the ambit of this section (as the Nats justified apartheid in terms of the Bible). If this is their standard argument then we need Constitutional Court guidance. In my opinion setting draconian empowerment requirements for only white-owned and multinational companies (this is a little bit of a simplification), promoting 100% black-owned companies to a level 1 and exempting them from any nation building activities cannot be fair discrimination. Then to add insult to injury they have written such hogwash that the rules that these black-owned companies are exempted from are not only unintelligible, the department that's supposed to understand them has no idea how to guide those who need to implement them.
This is arbitrary law making, something our Constitution is loathe to tolerate. The problem is that we as the private sector just carry on taking whatever they throw at us. I'm not going to take it anymore. The ETA is going to go to court to let the government know (as OUTA did) that we won't endure substandard legislation. We are more than willing to play by rules that the government deems necessary but these rules need to be fair and clear.
We need financial support to get this action off the ground. We've already raised a fair amount of money but will need quite a lot more. We are looking at a crowdfunding option but in the interim money can be deposited into the attorney's trust account. As we've said on the document, we will respect the privacy of each donor but will also entertain any marketing opportunities that any organisation wishes to exploit by publicly supporting our campaign. If you know of someone who would be willing to help please can you forward this onto them.
I was asked by one of the members of our group what would happen if the Constitutional Court finds against us. If that happens then we understand the rules a whole lot better and if we choose to object to regulations or legislation we'll have to find other ways to do so – we're already seeing this in Gauteng with eTolls.