Paul Janisch

ICT QSE and Specialised code levels - sorted

Not really my work, I have to thank my friend Feeeeeeeeeeee for pursuing this.  I wrote the last blog post on the subject because a useless verification agency (that I will never use again) refused to recognise that the company was a specialised NPC and that the ICT code hasn't got it's stuff together to do something about these incongruities.  

As it turns out the ICT Code Council was aware of this. Feeeeeeeeeeee pursued them doggedly and they sent her this attachment, which has this to say

 3.1 CLAUSE 8.2. B-BBEE RECOGNITION LEVELS FOR A QUALIFYING SMALL ENTERPRISE (QSE), SPECIALISED QUALIFYING SMALL ENTERPRISE AND SPECIALISED GENERIC ENTITY APPLIES TO THE AMENDED B-BBEE ICT SECTOR CODE SERIES AICT000 STATEMENT AICT000 / AICT600 STATEMENT AICT600, AS IS INDICATED IN THE  TABLE  BELOW:

The table in question shows the levels contained in the dti's generic codes. That should put this to bed - not that I expect the verification agency in question to note this. 

Just for the record the verification agency I'm referring to is not Honeycomb - I used them once and found them remarkably unprofessional and dubiously respectful of the referral. I won't use them ever again and you would do well not to as well. 

ICT code levels - QSE and specialised measured out of what?

There was a conversation between me and a person who I had met yet about their BEE scorecard.  They were told by their completely unreasonable clients that they have to be a level 1 or 2.  We're talking about a QSE - the company actually wanted to implement the BEE scorecard to get their.  After describing bolshie bob  (Rob Davies) as a useless minister, an inept communist and a total economy wrecker (amidst a mountain of apt expletives), I persuaded her to restructure her company to get 51% black owned.  There are new schemes out there that I'm in favour of and she's going that route.  

Here is another example of a document that carries the minister's signature and like its generic predecessor it defies basic mathematical logic. You would think that if this useless economy wrecker signed something he would actually have read it.  But he hasn't and he doesn't - he wants to make us strong like mother Russia, basic literacy is not his thing.  He needs to be fired for sheer ineptitude.  Cyril - just get rid of him, he's killing the country.

There is a solution at the bottom of this diatribe - please read on.

However there is a flaw in the amended ICT Code when it comes to specialised entities and qualifying small enterprises.

The ICT Code sets the following levels

Contribution Level	Generic Code	ICT Code	Recognition level
Level One	≥ 100 points	≥ 120 points	135%
Level Two	≥ 95 points but < 100 points	≥ 115 points but < 120 points	125%
Level Three	≥ 90 points but < 95 points	≥ 110 points but < 115 points	110%
Level Four	≥ 80 points but < 90 points	≥ 100 points but < 110 points	100%
Level Five	≥ 75 points but < 80 points	≥ 95 points but < 100 points	80%
Level Six	≥ 70 points but < 75 points	≥ 90 points but < 95 points	60%
Level Seven	≥ 55 points but < 70 points	≥ 75 points but < 90 points	50%
Level Eight	≥ 40 points but < 55 points	≥ 55 points but < 75 points	10%
Non-Compliant Contributor	< 40 points	< 55 points	0%

It follows that if the points to level ratio is increased because the scorecard comes out at a higher total.  This is true for the large enterprises BEE scorecard which is summarised below.

Element	Sub-element	Total
Ownership (priority)		25
Management Control		23
Skills Development (priority)		20
Bonus points		5
Enterprise and supplier development (priority)
	Procurement	25
	Bonus points	2
	Supplier Development (2%)	10
	Enterprise Development (3%)	15
	Bonus points	4
Socio-economic development (1.5%)		12
TOTAL		141

The total of 141 points is a full 21 points over the level one target of 120 points – amounting to a 15% margin of points.   The total number of points excluding bonus points is 130 – 10 points in excess of the level one target.

By way of illustration, the dti’s generic revised BEE codes of good practice are measure out of a total of 118 points.  This is 109 points excluding the bonus points - 9 points in excess of the level one target.

Element	Actual points as per each code
Ownership (priority element)	25
Management control	19
Skills development (priority element)	25
Enterprise and Supplier Development (priority element)	44
Socio-economic development	5
	118

In this case we have a similar margin of 18%. 

The ICT specialised entities scorecard comes out at a total of 123 points if one reads the code.

Element	Sub-element	Total
Management Control		20
Bonus points		2
Skills Development		25
Bonus points		5
Enterprise and supplier development
	Procurement	30
	Bonus points	2
	Supplier Development (2%)	10
	Enterprise Development (3%)	15
	Bonus points	2
Socio-economic development (1.5%)		12
TOTAL		123

This is in contradiction of paragraph 3.5 of STATEMENT AICT004: SCORECARDS FOR SPECIALISED ENTERPRISES, which provides the following table. It’s important to note that even with the bonus 11 points it is impossible to get to a level 1.

Element	Total
Management Control	20
Skills Development	25
Enterprise and supplier development	50
Socio-economic development (1.5%)	12
TOTAL	107 (excluding bonus points)

A similar issue has happened with the QSE ICT Codes. In this case the code comes to a total of 117 points before bonus points

Element	Sub-element	Total
Ownership (priority)		25
Management Control		15
Skills Development (alternative priority)		25
Bonus points		5
Enterprise and supplier development (alternative priority)
	Procurement	15
	Bonus point	1
	Supplier Development (2%)	10
	Enterprise Development (2%)	15
	Bonus points	4
Socio-economic development (1%)		12
TOTAL		127

It's patently obvious that this is an error and that QSE's and specilialised entities CANNOT get to a level one because the code doesn't permit it.  Other codes allow those types of entities to get to a level one without bonus points.  What I say to you is that you measure these two using the generic levels.  Please don't ask the B-BBEE ICT Sector Council - they haven't said a word about this glaring error since bobbie put his inconsequential signature on the code in November 2016 .  

Let's say you offer high quality BEE consulting but have little idea of what you are talking about

There is a ridiculously famous and competent consultant out there. We mere mortals aspire to be as good as he and his high quality company are.  Here is a man (not a tall man - but gargantuan in competence) who understands fronting very well.  He is the one who told the world that FRONTING IS FRAUD.  And then most knowledgeably told a certain verification agency that fraud can be committed unknowingly (pity that he knew not, or possibly knows not, that fraud is an intention crime).  His bugbear is using the wrong BEE code. This, dear reader, is the worst type of fronting.  He's even gone to court after alleging that someone fronted somewhere - pity it didn't make it beyond the court steps.  

Let us return to the high quality consultation.  A company that is in recruitment has been informed by the high quality consultants that because they only recruit into the IT industry they are subject to the ICT code.  My response to this was (my specific comments are underlined)

The code says the following right at the beginning (paragraph 3 STATEMENT AICT000)

3. Application of the Amended B-BBEE ICT Sector Code
3.1 The following entities are measurable under the Amended B-BBEE ICT Sector Code:
3.1.1 All persons, organisations and entities operating in the ICT Sector in South Africa;

That statement would APPEAR to include a recruitment agency operating in the ICT sector. However this must be read in conjunction with Schedule 1 (last page in the code) . This is what it says

The “Information & Communication Technology Sector” shall without in any way limiting the ordinary meaning of the terms, mean the sector in which employers and employees are associated with carrying on any one or more of the following activities:

Marketing, manufacturing, assembling, servicing, installing, maintaining and/or repairing systems, software, equipment, machines, devices and apparatus, whether utilising manual, photographic, optical, mechanical, electrical, electrostatic or electronic principles or any combination of such principles, that are primarily intended for the recording and/or processing and/or monitoring and/or transmission of voice and/or data and/or image and/or text or any combination thereof for use in any one or more of the following activities:

Accounting, calculating, data processing, data transmission, duplicating, test processing, document reproduction, document transmission, record keeping and record retrieval, broadcast or transmission for entertainment or information purposes of voice and/or image text or any combination thereof and/or: the provision of services relating to the above.

There is nothing in your business that performs any function listed in the middle paragraph. A law firm that only specialises in banking law is a law firm, not a bank. An accounting firm that only deals with civil engineers is an accounting firm, not a civil engineering firm. It’s very clear to me that you are not subject to the ICT code.

The high quality consulting firm responds with the following, somewhat edited with the occasional italic jibe

After a long deliberation with some of my colleagues regarding whether you should follow the amended ICT Sector Codes or the amended Codes of Good Practice. A unanimous (my emphasis) decision was reached based on the line of business your company solely focuses on - specializing in IT recruitment - that it should comply with the amended ICT sector codes and not the amended codes of good practice.

On your website the following is promulgated:

Starting off as a small  recruiting agency last century the company has grown to a formidable force in the IT Recruitment Industry. The company continues to grow their unique model of IT recruitment.

Now reading the above statement in conjunction with statement AICT000, general principle and the scorecard, paragraph 3, application of the amended B-BBEE ICT sector codes:

3.1 The following entities are measurable under the Amended B-BBEE ICT Sector Code:
3.1.1 All persons, organizations and entities operating in the ICT Sector in South Africa.

And further breaking down statement 3.1.1, basically the statement refers to persons, organizations and entities generating the majority of their revenues from ICT related activities. Analyzing your core business which is servicing clients and potential clients with highly ICT skilled individuals, the majority of it's (sic) revenue is definitely generated from ICT related activities. (Are they in fact ICT related, does a cleaning company cleaning a building that their ICT client works from perform ICT related activities? Similarly is Wesbank a finance house or in the motor industry?) Therefore under this statement this qualifies your company to be complaint (dig - complaint) with the amended ICT sector charter and not the amended codes of good practice.

Now the question becomes, "your company does not produce any ICT related equipment/software nor does it offer technical services to its clients, why must it still comply with the amended ICT sector charter?". Reading further deeper into Schedule AICT1 under the amended ICT sector charter:

Analysing the wording highlighted in yellow (not included in this post) under Schedule AICT1, the first statement emphasizes that the ICT sector does not limit the persons, organizations and entities falling within the ICT sector codes to persons, organizations and entities producing ICT equipment and/or offering technical services to its customers. But it broadens the scope to persons, organizations and entities also offering IT recruitment services to customer or potential customers, employee like property, plant and equipment from part of any organization's asset base. Offering IT recruitment services to an organization qualifies as servicing that particular organizations IT function, as those recruited individuals will be at the end of the day responsible of making sure an organization's IT function operates effectively, efficiently and sustainable. (And finance houses providing finance for IT related goods and services are also IT companies. Makes perfect sense)

They approached my logic with the following

"A law firm that only specialises in banking law is a law firm, not a bank. An accounting firm that only deals with civil engineers is an accounting firm, not a civil engineering firm" .
The law firm specialising in banking law might not be a bank, but will have to comply with the banking charter. The reason being that the bank was established on the sole purpose of servicing the banking industry, the majority of it's (sic) income is generated through banking related activities and without the existence of the baking industry the law firm wouldn't be generating income or wouldn't have been established to begin with.

The underlined paragraph is all over the place.  There is a genuine mistake there, the bank that was established really refers to the law firm, now that I've cleared that up it still doesn't follow any logic.  Without the banking industry the law firm would be providing other legal advice and deriving an income from that. 

Let's put this to bed.  This logic is flawed for a few reasons.  

1. We need to understand the purpose of each sector code.  They are (supposed to be) designed to address the transformative requirements of a particular sector.  It is assumed that the code deals with the peculiarities of that industry because it understands that industry.  A company providing recruitment services to another company is not equipped to deal with the skills development, enterprise and supplier development requirements of a sector code.  How could a law firm that provides services exclusively to a bank be able to deal with access to financial services? Similarly, how could recruitment firm provide ICT-type ED services.  They can't - what they do is get professionals into companies.  They aren't professionals themselves.
2. Why would a services belong to the Services SETA when it is subject to the ICT code?  Companies operating in the ICT sector belong to the MICT SETA.  Services companies belong to the Services SETA because they are services companies.  

In spite of the above this does however pose an interesting conundrum, one that a cement company raised years ago.  A cement company is a manufacturer of cement, they are not construction companies.  Sephaku Cement's last old codes assessment was conducted under the dti's old generic codes.  I would agree with this.  

At least now I know what high quality consultation is, it's something to aspire to.

ICT code gazetted, Bloshie (sic) Bob still on a roll

How wrong I was. I was convinced that with the ANC being in such a state that Bolshie Bob would have bigger fish to fry (if the inept fisheries department allowed Bolshie to actually catch a fish) than a mere BEE code.  Not so - Bob is pushing ahead with his new code.

And so says his preamble

L Or Rob Davies, Minister of Trade and Industry, hereby issue the Amended Information and Communication Technology Sector Code (the ICT Sector terres of section 9 (1) of the Broad -rased Black Economic Empowerment Act, (Act No 53 of 2003) as amended by. B -BBEE Act 46 of 2013, and determine that these Codes come into effect on the dale of this publication.

Translated hence (this was copied from the code and hasn't transferred very well

I Dr Rob Davies (rabid communist and economy destroyer), Minister of Trade and Industry, hereby issue the Amended Information and Communication Technology Sector Code (the ICT Sector in terms of section 9 (1) of the Broad -based Black Economic Empowerment Act, (Act No 53 of 2003) as amended by. B -BBEE Act 46 of 2013, and determine that these Codes come into effect on the date of this publication (being 7 November 2016).

And so gazette number 40407 enters our world.  Of course what is not clear and is unlikely to be clarified is whether ALL scorecards issued under this code from this date on are subject to it.  I would argue not and recommend that the reader uses the same logic that the amended codes used - all periods measured before the 7th of November can elect to use either ICT code.  All periods after this period must use the revised ICT code.

Here it is - once again thank you Thinus. 

 

ICT Charter - Andile's contribution to round about nothing

Picture the scene.  A bearded man kneels before his bed and utters this prayer to a deity of his choosing.  "Dear God (name chosen for convenience), please can you make sure that the brilliant work I do as minister of trade and industry has a long and positive impact on this wonderful country called South Africa."  Now God, who is not one to answer prayers directly, decides to offer Rob a little bit of advice to ensure that Rob's legacy is ensured.  God replies (in a clear, impressive voice)

Rob - get rid of the twits who draft your BEE charters and then perhaps people won't talk about you at all when you are unceremoniously fired from your job.  Yes Rob, most people think you are incompetent and by surrounding yourselves with a courtroom full of idiots you are perpetuating this perception.

Alas - Rob doesn't read this blog or the daily press and continues to employ the Andiles of this world as advisers.  And so his name ends up on these shambolic documents.  What is of course so strange is that Rob is happy to gazette a myriad dodgy charters and yet will not gazette the only one that makes sense, has been spell-checked and is properly thought out - viz the FSC.

I have now had the privilege of looking through the ICT Charter because  I have clients that will need to start looking at it soon.  Besides the glaring errors in spelling, grammar etc there is this mistaken belief that if you put up the targets then you will "accelerate the pace of transformation in the sector". Id est (page 21)

The ICT Sector Codes deviates (sic) from the Generic Codes on the ownership target which has been increased to 30%. The substance of the deviation of the ICT sector Code from the Codes of Good Practice (25.1% +1) is the recognition by the ICT sector to accelerate the pace of transformation in the sector, thus ensuring more companies in (verb missing) the hands of black people. The ICT sector believes that given the pace of transformation and black ownership in the sector, it may take longer to bring about real transformation in the sector if the sector is to adopt the 25%+ 1 compliance target. Tllis is also to recognize the  uniqueness of the ICT sector and that it cannot be treated as any other sector, hence the deviation from the compliance target in the codes of good practice.  

Don't you just love this?  Make the targets higher so that people will transform quicker!!  What profound form of logic is this?  That people aren't really going for the 25% in the rest of the economy is somewhat missed. Rob loves this - he thinks that people will transform faster if you deduct points off their scorecard.  God - would you like to reconsider your suggestion to Rob, perhaps you might tell him that there is no hope for him and his legacy.

Here is the scorecard summarised.  I double checked it - but if you come across Rob-like mistakes in it please don't blame him, it's my fault.  Let me know and I'll fix it up.