Paul Janisch

More on the KZN DPW - or a reader writes (rights too)

When people send me emails in response to the blog I can only assume that they don't want their names on this stunning piece of virtual real-estate.  This is a response to last night's post - None more black - not so say the KZN DPW

You may be reading that rubbish too narrowly.  If it excluded people who received the franchise as a result of 1983 Tricameral crap, what it is doing is excluding Coloured and Indians aged 18 and below in 1983 (in other words Coloureds and Indians under 45 year presently)

Now what’s interesting about this unthought-through garbage is that if you follow the logic to its natural conclusion, Africans aged under 35 should be excluded from the ambit of the law also. 

The level of legal support given to state agencies writing these policies is shocking beyond shocking.

This point has been made to me before (by the same reader).  The reader is correct - it's a simple mathematical equation.  

There is no doubt that the legal advisers to these entities are not up to par.  Or maybe they give the correct advice but the departments/ municipalities etc are still determined to push it through.  I believe that you can add in an element of "let's put it out and see if they stop us" in this process.

As Peter Green would say

 

They just can’t do it

You might have read that recent Mzwandile Jacks article where he quoted the ultimate bright spark, Keith Levenstain. Our PLT is quoted as saying "We would like to see the government and public enterprises obtaining a scorecard because it would show the government's commitment towards its own policies". Beautiful words – sadly uninformed and stupid. It's one thing to mouth off (as Levenstain does) but it's another thing to mouth off and actually know what you are talking about (which Levenstain doesn't).

I'll help our learned friend. Simply put – the government cannot do it.

The codes would love to let us think that government can implement them. After all the codes are really only applicable to those entities contained in schedules 2 and 3 of the PFMA, and by implication the MFMA.

Code Series 000, Statement 000: General principles and the generic scorecard – paragraph 3

3.1.1 all public entities listed in schedule 2 or schedule 3 (Parts A and C) of the Public Finance Management Act;

3.1.2 any public entity listed in schedule 3 (Parts B and D) which are trading entities which undertake any business with any organ of state, public entity or any other Enterprise;

To then add more credence to this statement they created a separate scorecard for specialised entities (Statement 004: Scorecards for SPECIALISED Enterprises). This scorecard is actually applicable to government entities – the complete list is

• companies limited by guarantee;
• Higher Education Institutions:
• Non-profit Organisations:
• public entities and other Enterprises wholly owned by organs of state;
• Public Benefit Schemes; and
• section 21 companies: and
• specify scorecards applicable to Measured Entities subject to this statement

Unfortunately the codes don't specify a scorecard so we have to guess what it might look like. This is the first problem – no scorecard is specified.

Now onto the actual scorecard.

Ownership

Strange that they left this element out. Logically they are right – the government (and section 21 companies et al) cannot be owned. However the ANC has somehow managed to convince Hitachi that they are black owned enough to be a suitable BEE partner. Be that as it may – ownership is excluded.

Management

This is one element that a government entity can implement and implement it well. They do it anyway – although it does seem as though it follows a jobs for buddies regime as opposed to merit.

Employment equity

Similar to management. In fact they are a little too good at this element, possibly even illegally too good at (as Captain Barnard will attest).

Skills development

This is where things get interesting. The government cannot favour any one race group over another when it comes to training. And the skills development element requires a vast amount of money to be spent on the training of black people (simply put) – this is quite easy to do in the private sector but not in government. They can however achieve these targets if the overwhelming majority of their staff are black – but does this then mean that they would need to request extra money from treasury to achieve it?

Any government policy that states they will favour the training of one race group over another is a huge problem and is discriminatory – which the constitution outlaws. More on this in preferential procurement.

Preferential procurement

The PPPFA might favour certain types of entities but it CANNOT and I stress CANNOT favour those entities at the expense of others. I mean, it can't exclude bidders from bidding because they don't fulfill a certain criteria which preferential procurement has to do. I'm not going to go into the finer details of the PPPFA, and I don't recommend that you ask Levenstain to explain them to you either. The best thing a government department can do is measure their procurement, it cannot target certain types of entities at the expense of others. This would be a gross violation of section 217 of the constitution. Tenderpreneurs are a different type of targeting – not something that preferential procurement envisaged either.

Enterprise development and SED

Both are no-goes. Complete and utter no-goes (not sure how to spell that). Firstly they measure it using NPAT (or some other convoluted way which no-one understands), and NPAT is not something that government understands or needs to measure. Secondly that if a government department did try and implement these two they could not favour 50% black owned companies and 75% type charities because this would be discriminatory. Thirdly if they wanted to do this they would have to go off to treasury and ask for more bucks to do it – and there is no way treasury would give it to them.

Technically speaking they can actually measure these two elements (according to Obed de Swardt). Every non-profit entity can declare a profit in the form of a surplus and it would be a percentage of that that would be measured – but I can't see that this would work in a government context.

 

I have been a little verbose here but it is abundantly clear that the DTI has not figured out a method to include government departments in their broad-based system. I told the same to Mzwandile when he called me about this story but he chose to go with Ajay Lalu (Udge – I hope you were quoted wrongly in this article because if not it does not bode well for your knowledge of the codes). My thinking is that the DTI is acutely aware of this problem and has decided to leave BEE in the capable hands of the private sector. Unless of course they are going to throw this problem at the BEE Council just to test their mettle.

Malfunction

Malema sells newspapers.  The press love him - and they want his blood.  I'm not too sure what he did to City Press, but they really hate him.  I think part of this must be Ferial Haffajee - who is their new editor.

City Press alleges that SGL Engineering's tax issues are not in order - in other words they do not have a tax clearance certificate.  In an article published an hour later City Press reported that SGL were awarded four tenders in a month.

The Greater Letaba municipality also handed Malema tenders worth R28m.  "Yes, they submitted a tax clearance certificate," said Mayor Godfrey Modjadji.

If this is the case then we have some very odd workings going on.   A tax clearance certificate is the state's filtering system - if you don't have one your bid is automatically rejected.  PPPFA 101.

I read somewhere years ago about the drug dealers in New York in the 70s and 80s who were the kings of bling who lived the life.  They became easy targets for the authorities and eventually toned it down.  Malema appears to be the same - and might just be his own worst enemy.  Can't wait to see what happens here.

More law

Two different articles came up today

Business Day - Advocates raise the bar on transformation

ADVOCATES in Johannesburg aspiring to attain the highest status in their profession — that of senior counsel or “silk” — will from now on have to display a “demonstrable commitment to transformation” to qualify for selection. This is froma a resolution passed by the Johannesburg Bar Council.

This demonstrable commitment

Now the silks committee had to consider the extent to which a candidate had mentored black and women juniors, his participation in transformation through bar structures, and how often he had involved black and women juniors in cases.

I like this.

FM - GOVERNMENT TENDERS - Sold, to the highest bidder

A sad tale of a person who applied to the court to get a tender decision set-aside.  It took him two years to get the matter to the supreme court.  By the time the court had heard it the contract (winning bidder) had run its course.

The SCA concluded that the question was moot and any judgment would have no practical effect. The appeal was dismissed with costs.

And so says Andrew Donnelly of Shepstone & Wylie

"(I)nterdicts are often hurried and we don't always have all the information, but this is our one bite at the cherry," says Donnelly. "And if it is unsuccessful, it is not practical to take it any further."

The message seems to be that you need to have your act firmly together if you want to pursue this route.  Read the article.

Rob's dropping hints

Government will revise procurement legislation, regulations and practices to enable the designation of large, strategic and repeat or ‘fleet' procurements in a range of sectors.  This will aim to sequentially increase competitive local procurement and supplier development opportunities, minimise ‘leakages' from the domestic economy, and support meaningful Broad Based Black Economic Empowerment (B-BBEE) in all 3 spheres of government and in SOE's.

So sayeth Rob Davies Minister of Trade and Industry on February 18 2010 - as quoted by Politicsweb.  This speech was at the launch of the 2010/11 - 2012/13 Industrial Policy Action Plan (IPAP).

The actual plan is not something that I will comment on, but I am interested in the harmonisation of government procurement, BEE and the stimulation of local industry.  I've always felt that the codes are a lone voice with very little backing.  If Rob can pull this off then he will be a very successful minister of trade and industry indeed.

I speculated a while ago that RDP goals would be included in the final PPPFA regulations and now it seems that local content will be rewarded too.  The question is whether it will make its way via the PPPFA or the actual supply chain rules will be changed to award points for local manufacture out of the 80 or 90 points.  I would suggest that if Rob is serious then that is where the points should come in.

Rob also went through the types of fronting that he doesn't like (including blackwashing).

One of the big problems with black economic empowerment is that companies tendering for state contracts profess to be empowerment groups while they are not.

He says there are three types of malpractices.

1. One is where a company misrepresents itself as a black company in order to get contracts.
2. Another way is via the so-called tender entrepreneur. Davies explained that this type of company pursues tenders but, because the tender field is not its area of specialisation, white companies are contracted to do the actual work.
3. The other method is where an empowerment company applies for a tender and then imports the goods instead of manufacturing them locally.

 

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.

More Emex bullshit

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

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

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

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

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

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

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

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

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

Comment from Kevin Lester on Advisory Council

Kevin commented on my Zuma appoints members of BBBEE Advisory Council post. It's too good to leave buried away under comments so I've reblogged it.

I am thrilled by the composition of the Advisory Council - not one BEE consultant, not one verification agent and not one member of the team that drafted the Codes - finally an opportunity for an un-conflicted regulator. Chantyl Mulder was a member of the committee that drafted the Accounting Professions Charter, but she is an extremely level headed and capable person who is unlikely to be conflicted, even if that charter becomes a Sector Code.

Eltie Links, Wendy Lucas-Bull, Jerry Vilakazi, Sandile Zungu, Don Mkhwanazi and Claudia Manning all have extensive business experience. Big business in South Africa could not hope for a better "representative" than Lucas Bull who ran FNB before going out and co-building a not unimpressive BEE Investment house (Peotona that now holds some pretty impressive shareholdings, including a stake in De Beers)

But, all things being equal, a DTI that serves, an ABVA and NABC that is being watched, and my old friend Sandile Zungu up there, I have no complaints at all. Indeed, safe hands are finally completely on the wheel – I must say, with a team like this, I doubt very much that the (real or imagined) influence peddlers are going to be happy with this outcome.

But, if I have any complaint, I wonder why those with experience in establishing and managing genuine viable broad-based groups are absent from the team. People like Clifford Elk (MIC), Kgotso Schoeman (Kagiso Trust), Tanya Slabbert or Sonja Sebotsa (Women's Development Bank) and (my shareholder) Salukazi Dakile-Hlongwane (Nozala).

Also some people who manage BEE compliance from within major corporates would also have been useful, and I think particularly here of Nolitha Fakude, who's absence from this Council is notable.

In the interests of ensuring consistency in policy, I think it might have been useful for the President to co-opt Philisiwe Buthelezi from the National Empowerment Fund, but perhaps her role will be like that of the BEE Unit of the DTI, which is (I assume) to guide and support the Council.

But that said, I am still very impressed.

(ENDS)

Oy, Zumachine Gun - if you're reading this do as Kevin says (this is Paul writing).

Jacob Zuma on plans for economic transformation

Zuma's ANC letter beautifully precised by Moneyweb as "ANC president responds to the concerns raised by the BMF over Eskom and other SOE's". 

A few features/quotes

• One of the key focus areas of the ANC government is economic transformation.
• We emphasise that the creation of decent work will be at the centre of our economic policies and will influence our investment attraction and job-creation initiatives.

To achieve this, we said we would utilise state levers such as procurement, licensing and financial support to assist small and medium enterprises as well as to promote the implementation of Broad-Based Black Economic Empowerment (BBBEE) and affirmative action policies. These policies must not just benefit a few but should be extended to a broad section, especially the workers, youth, women and people with disabilities.

(You know where licensing comes in - good old section 10)

And then a reference to the BMF (who now deny that they ever suggested Bobby is racist, but they want the board to resign).  And now for a post within a post.  This is from November the 9th (Business Report) in which they called for the resignation of the board and threw in a few choice epithets.

Mnyaka said the problems at the power utility stemmed from an ideological disconnection between the strategic imperatives of the ANC government and the board led by its chairman Bobby Godsell, as well as lack of clarity between his and Maroga's role. She added that Maroga was a victim of "anti-transformation people with a racist agenda" at the electricity parastatal.

'nuff sed about that.  Back to Zumachine Gun

• Our meetings with black business sensitised us to some actions of government which serve to hamper the development of small entrepreneurs. One of these is the delays in paying small businesses.
  
  During the election campaign we said we would change the way in which government works, and that we would ensure faster delivery. Treasury Regulations on the approval of expenditure in government states that unless determined otherwise in a contract or other agreement, all payments due to creditors must be settled within 30 days from receipt of an invoice or, in the case of civil claims, from the date of settlement or court judgment.
  
  We have instructed all government departments to comply with this regulation without delay.
• To further streamline our transformation work, we are currently in the process of appointing a BBBEE Advisory Council which in terms of the BBBEE Act will be chaired by the President of the Republic. This process should be completed in a few weeks’ time. The Council’s responsibility will be among others to advise government on black economic empowerment, monitor implementation and review progress in achieving black economic empowerment.

That's about it.  You can read the whole thing here.

Section 53 of the EE Act

A recent PPP bid document from the City of Johannesburg had this notice as a condition

EMPLOYMENT EQUITY STATUS
Proposer must include in their Proposers (sic) submission full details of their company/venture with the DoL regarding their compliance with the provisions contained in the EE Act

Proposals must include at least the following:
Not required to register in terms of the Act (Details to be provided)
Exemption received from the DoL
Compliance with the Act (Proof to be submitted)

Failure to provide this information may render the proposal liable to rejection on the grounds of being incomplete.

THE CITY OF JOHANNESBURG RESERVES THE RIGHT NOT TO PROCEED WITH ALL OR PART OF THE AWARD OF THE PROPOSAL

I am sure that this condition has been used before but it's the first time I have seen it.  The condition is taken from section 53 of the EE Act which states:

  53.     State contracts

 (1)     Every employer that makes an offer to conclude an agreement with any organ of state for the furnishing of supplies or services to that organ of state or for the hiring or letting of anything -

(a)     must -
(i)      if it is a designated employer, comply with Chapters II and III of this Act; or
(ii)      if it is not a designated employer, comply with Chapter II of this Act; and
(b)     attach to that offer either -
(i)      a certificate in terms of subsection (2) which is conclusive evidence that the employer complies with the relevant Chapters of this Act; or
(ii)      a declaration by the employer that it complies with the relevant Chapters of this Act, which, when verified by the Director-General, is conclusive evidence of compliance.
(2)     An employer referred to in subsection (1) may request a certificate from the Minister confirming its compliance with Chapter II, or Chapters II and III, as the case may be.
(3)     A certificate issued in terms of subsection (2) is valid for 12 months from the date of issue or until the next date on which the employer is obliged to submit a report in terms of section 21, whichever period is the longer.
(4)     A failure to comply with the relevant provisions of this Act is sufficient ground for rejection of any offer to conclude an agreement referred to in subsection (1) or for cancellation of the agreement.

It was this section that started my interest in BEE.  It's the same section that jungle is going insist is used in all government tenders.   As far as I know the tender must state that it is a requirement otherwise the standard PPPFA rules apply. 

To the best of my knowledge no-one has ever seen this certificate from the minister but I would imagine that the receipt you get from a manual submission of confirmation of submission for online submissions should suffice.

jungle's success as DG will be measured by the number of tenders that do include this.  And we'll see whether he gets his 10% of turnover as a fine.  I also heard that the DoL lost their Comair fight.