Happy birthday BEE blog. I started this blog 13 years ago. I needed a web presence and had no html (I still don't) skills. I was very inspired, and remain inspired, by Fred Wilson. Fred is incredibly prolific, he posts something new every day, and he does it religiously. I had been reading his blog for a few years before I started this one. Fred's blog was on Typepad - so I did what Fred did. Here we are 13 years later.
My target now is the sheer arbitrariness of the dti and its multitude agencies and resident fascists. I think the BEE commissioner needs to be reminded that she has a broader job to do than chase unwinnable ownership cases - does her behaviour ring any bells? Cut from the same cloth those two.
WINDHOEK – President Hage Geingob yesterday confirmed that the fiercely debated 25 percent equity stake stipulated in the National Equitable Economic Empowerment Policy Framework (NEEEF) has been removed. Its critics, who say the move would restore investors’ confidence, welcomed the removal of the clause.
This doesn't mean that NEEEF is going away
However, he was quick to point out that all pillars of NEEEF will remain and be taken into account for enterprises doing business with government and applying for natural resource licensing. For several years now, the private sector has been pressuring government to remove the clause that would have forced white businesses to sell a 25 percent stake to previously disadvantaged Namibians.
I wonder whether NEEEF will ever take off. I've been visiting Namibia for the last ten years, I've done two conferences on the subject and they are no closer to implementing this policy.
I'm available for consultation and conferences in Namibia. It's one of my favourite places in the world
This Workers Day, Geingob said, let all Namibians follow the example of workers and sacrifice for the benefit of all! He said as government, they will intensify efforts to finalise the Namibia Equitable Economic Empowerment Framework (NEEEF).
“I call on all stakeholders involved to handle this as a matter of urgency. During my 2018 Sona, I stated that employee share schemes are one of the most effective forms of broad-based empowerment,” he said.
In this regard, Geingob expressed his appreciation to private sector organisations that have heeded the government’s call for economic empowerment through employee share schemes.
As per the New Era. This has been going on for so long. I think it might be time for another conference. I am always willing to come and chair it and present if need be.
Taken up by Namibian Prime Minister Saara Kuugongelwa-Amadhila. To quote the Namibian
Kuugongelwa-Amadhila said Neeef has six pillars, which are of equal importance. Neeef is more than the 25% equity ownership. (There are) six pillars, and all those pillars are very important. The pillars are ownership, management control and employment equity, human resources and skills development, entrepreneurship development, corporate social responsibility and value addition, technology and innovation, she explained. According to the PM, equity can only be achieved if people are empowered in greater numbers, instead of benefiting a select few. “If you say 25% must go to previously disadvantaged Namibians, and you end up with 10 people who have a stake in all of the companies, you will still have inequities,” said Kuugongelwa-Amadhila.
So much sense coming from a southern African country. You'd be hard pressed to think it was our immediate neighbour.
Contrast this to a press release that was sent to me. I think the press release is for general consumption if not - well then you heard about on this blog first. It was sent out by Rachel Lailey, Content Manager - Norton Rose Fulbright South Africa Inc.
Black ownership versus transformation: proposed amendments to the BEE Codes defeat their purpose It is irrefutable that transformation is required across all aspects of South African business. However, the draft amendments to the BEE Codes, published by the Department of Trade and Industry (DTI) on 29 March and 15 June 2018, undermine the legislation intended to drive this transformative process. It is clear from the draft amendments that the DTI is prioritising entities which have at least 51% Black ownership. It has done this through two key aspects:
entitling generic enterprises with a turnover of more than R50 million to automatic BEE levels; and
amending the enterprise and supplier development element to increase the requirement and incentive to procure goods and services from entities which have at least 51% Black ownership.
This could be viewed as being against transformation despite its intention to drive business to entities with majority Black ownership. It is imperative to understand what constitutes ownership for the purposes of BEE. Black ownership for the purposes of BEE is a very limited measurement of ownership and only measures voting rights and rights to economic interest (a right akin to receipt of dividends) in the hands of Black people and sub-categories of Black people. Ownership for BEE purposes is similar to the rights a person would have if they held shares in a JSE listed company – it does not include any involvement in the operation of the entity, nor does it inherently involve any upskilling of the shareholders. It simply entitles a shareholder to vote on proposed shareholder resolutions, and receive dividends in the event that the company declares any.
And so Norton Rose recommends that companies comment. And they are right - we are going so far backwards Malema and Steve Hofmeyr can now kiss each other intimately.
Last year I hosted a conference in Windhoek about the NEEEF. The overriding impression I got was that the government was willing to talk and listen to business. Something that our dear bolshie bob is not willing to do at all. The latest NEEEF developments are a reflection of this
the controversial NEEEF clause that required companies to cede a 25 percent stake to previously disadvantaged will not translate into broad-based empowerment and has been done away with. The government role, according to Geingob, is to create a conducive business environment where owners, whether black or white, who can afford risk capital, can participate in equity transactions under NEEEF.
A plan by Namibia, among the world’s most economically unequal nations, to better distribute wealth among its citizens may end up the way neighboring South Africa’s has — benefiting an elite minority.
The nation is working on a law that will require all businesses to be at least a quarter owned by “racially disadvantaged people.” While only about 6% of Namibia’s 2.5 million citizens are white, they own most enterprises. This is a legacy of white-minority rule that South Africa imposed when it controlled Namibia from World War I to 1990, with black people being disenfranchised and displaced.
Critics of South Africa’s policy, including the biggest labor-union federation, say it has failed to redress the inequalities because it focuses on increasing black ownership of companies rather than raising education standards to match a skills shortage, and has benefited a small number of wealthy individuals. Proposals by Namibia, the world’s biggest marine-diamond producer, are similar, which could hamper investment and growth in an economy that’s contracted every quarter since March last year.
The basis of my presentation in Namibia two months' ago was that Namibia would do well to learn from what South Africa has learned (or learnt as the Daily Maverick is now wont to write). BEE has made massive strides but my god is has made some monumental mistakes - the guptas are the perfect example.
I finished my presentation with a quote from Jenny Cargill's definitive BEE book - Trick or Treat (pp 82/3)
Yet evidence suggests that South Africa should be very cautious about drawing on Malaysia's (Bumiputera Policy). Malaysians I spoke to often cautioned against using their country as a model to justify BEE. Instead they believe it offers many mistakes on what to avoid.
I would love to have put it better. Gerrit van Rooyen, quoted in the lead article on Moneyweb hit the nail squarely on the head.
The plan “has caused much unease among white business owners and heightened investment uncertainty,” Gerrit van Rooyen, an analyst at NKC African Economics in Paarl said. Both governments have to “create incentives to boost employment and stimulate investment. Black economic empowerment cannot succeed without job creation and wage growth.”
What is it about Namibia and Namibians? They are so different to us. They just want to get on with their lives and business and are willing to talk to each other in a constructive way to do this. I was invited to present a paper at a NEEEF conference in Windhoek a few weeks' ago, as it turns out I ended up chairing it (they told me when I arrived I was the man to do this). They asked me to speak about a localisation strategy but I chose to speak about what Namibia could learn from South Africa - I'll save the cynicism for a later post.
Namibia is about 15 years behind South Africa when it comes to a national empowerment policy. Established business is nervous about the policy and the policy is vague and in draft format. What I found interesting was how white business was nervous and government saw the need for the policy (like we were fifteen years ago), but they want to talk to each other. This conference was apparently a political hot potato. The organisers had been trying to arrange it for the last year and had come across major hurdles. The public wanted the conference because they wanted some information and so they got it. The speakers were extraordinary (I thought I was pretty good too), I don't know if I have been to a conference where speakers managed to hold the attention of the entire hall for the whole day.
Each speaker put their case strongly from the objective Ngoni Bopoto, the Namibian economist who painted a solid picture on Namibia's current economy through to Phillip Ellis, who made no bones about his capitalist slant. On the way we were given an overview of the Employment Equity Commissioner's thoughts on the necessity for redress. The commissioner, Vilbard Usiku, is one of those rare policy makers who comes across as objective (like Thuli was when she was public protector). I learned more about South Africa's apartheid legislation from Vilbard than I will from any of the current anc politicians. He has given me a copy of his speech which I would be more than happy to disseminate to anyone who requires it. We heard from the lawyers tasked with getting the draft bill promulgated. Again there was no "like or lump it" attitude here, I got the distinct impression that they want the process to be accepted by those who need to implement it. The highlight of the conference for me was Phillip Ellis. Phillip was concerned about NEEEF (pronounced NeeYIF) because it had been a mooted policy for years. It started off its life as TESEF, and slowly migrated across to NEEEF. A draft of the NEEEF bill has been available for comment for the last few years. Phillip is a very respected businessman and adviser to many businesses (both local and foreign) and he reckons that this uncertainty is hampering investment in the country. He told an interesting anecdote how a certain large South African company wanted to uproot to Namibia after zuma's Nene firing but refused to come because of the existence of the policy in draft format. Phillip quipped that people would prefer to have the finalised policy than the sword of Damocles. This is about policy certainty, Namibia has known about this for years and it gets delayed and reformatted.
This is the second NEEEF conference that I have chaired and spoken at (I'll speak at every other one too) and in each case I have put a strong argument for the procurement element. BEE as a policy exists and can measure its success because of the private sector. Without procurement as the glue these policies will fail. If BEE was left to the government to implement it would have fallen by the wayside years ago. This is the issue that I have not been able to understand, how is this supposed to succeed if a NEEEF scorecard is only required for licenses and state procurement. All the companies will just create a company for this purpose and so fronting will continue.
My two presentations are attached. I managed to present the one on lessons from South Africa, but couldn't tear Phillip away from the audience to present my why diets fail presentation.
Thanks to the organisers for arranging a conference that everyone enjoyed - me especially.
The Namibian Financial Sector Charter was introduced by the Ministry of Finance in November 2008. The NFSC is a voluntarily adopted transformation charter, which constitutes a framework and establishes the principles upon which empowerment will be implemented in the financial services industry in Namibia. The objective of the charter is to facilitate the transformation of the Namibian financial sector and to bring about tangible benefits for Namibians. Standard Bank Namibia through the Namibian Bankers Association is a signatory to the charter. The bank is committed to achieving full compliance with the minimum targets for 2014 and 2019 as set out in the charter. “Standard Bank Namibia aims to achieve specific targets that are set for the following pillars of the charter: ownership and control; human resources development; preferential procurement and enterprise development; corporate social investment; empowerment financing; and lastly, access and affordability of products and services,” explained Advocate Sigrid Tjijorokisa, Group Company Secretary of Standard Bank.
The Namibian FSC is a voluntary document and quite similar to the 2003 version of the South African FSC. Unlike NEEEF it does have a procurement element but seems to be based on narrow principles.
Key principles are to be applied when calculating BBEE procurement expenditure. This will include each financial institution categorising its suppliers, both current and potential, into the following:
BBEE-owned companies
BBEE women-empowering companies
BBEE-empowered companies
BBEE-influenced companies
Designated groups
Procurement spend ramps up from 30% in 2014 to 60% in 2019. No calculation formula is provided but it might be similar to the one we use in SA.
Each financial institution has to conduct an independent investigation in respect of each of its suppliers to verify their BBEE status. BBEE suppliers should be registered with a rating agency recognised by the NFSC Council.
I'm aware of one or two rating agencies in Namibia but they seem to be part time there doesn't seem to be enough business to sustain them.
I suspect the Standard Bank scorecard is measured without procurement.
The Namibian empowerment landscape has fascinated me for the last five years or so. My interest was piqued when Hartmut Ruppel called me from Windhoek and asked me to help with a BEE issue at a mine in Namibia. Since then I've read everything I could get my hands on about TESEF and NEEEF and Namibianisation. Last week I chaired a two day conference on the New Equitable Economic Empowerment Framework in Windhoek. The speakers make up some of the finest minds on the subject and included both Namibian and South African speakers. The South Africans were there to specifically speak about their experiences in South Africa, the Namibians gave us an insight into NEEEF as a policy and where it's headed. Here is a very brief summary of the conference.
Day 1
Anund Mudhoo – Ministry of Finance
Anund is a Mauritian who is on a three year contract to the Ministry of Finance. He's been tasked with drafting new procurement regulations based on international standards. He proved to be a very entertaining speaker and a great start to a conference. His presentation took us through the international procurement standards and then told us what Namibia could expect. I think the final draft will look a little similar to South Africa's PPPFA. NEEEF goals could be tied to this. It's not clear whether they'll use a preference points' system. We can expect something in about February 2014.
Mihe Goamab II – Namibian Economic Society
Mihe is a much respected BEE/TESEF/NEEEF commentator in Namibia. He has a very commanding presence and put together a strong argument as to why Namibia has decided to call NEEEF "new" and "equitable". The arguments are contained in his presentation which I have attached. But the gist of his presentation focused on the competitiveness of the country and how NEEEF can enhance this competitiveness. This presentation could be delivered in any country in the world that has a sort empowerment redress process.
Felicity !Owoses-/Goagoses – Ministry of Justice
Felicity was introduced as Felicity Smith. If you are new to clicks in a language then you might also struggle pronouncing her surname – and she coached me for a good 20 minutes to get it right. Felicity's presentation focused on the legal status of NEEEF. And she concluded that the policy is just a policy and has no legislative nor corporate backing. We debated as to whether NEEEF could filter through the economy like it has in South Africa which was driven by the private sector. It doesn't appear that this will work. NEEEF needs a champion and it's lacking that champion.
Vilbard T Usiku – Employment Equity Commission
Vilbard is powerpoint phobic and so presented a paper on the history of suppressing black Namibians in the workplace. As with Mihe, Vilbard's presentation could be delivered anywhere where apartheid existed. He put forward a convincing argument as to why the Affirmative Action Act still has a while to travel.
Bob Kandetu – Trustco Group International
Here is a person who tells us that he was fired as the head of the Namibian Broadcasting Corporation. His slide presentation was a single slide and he spoke for an hour on his topic. It's almost impossible to capture the essence of his presentation which was on Transparency and Good Governance. A very experienced man with a great view on the world. There was one line from his presentation that I wrote down. "The absence of integrity breeds a lack of transparency which leads to corruption." At least we know that South Africa is not alone in the corruption sphere (although they have set a very high standard for other corruptors to beat). He finished off his presentation with this paragraph.
In closing, please allow me to if only cursorily, make a remark on the very document that brings us together - NEEEF. This seems to be a good attempt at providing an overarching structure to this effect. I however find it rather loosely drafted and rough on the edges. Also, I think, that it seems to be drafted in a vacuum as it does not depart from a history of other transformational empowerment programmes such as Black Economic Empowerment, Youth Development and Empowerment, Women Development and Empowerment just to mention a few. For this reason, a contextual overview of these attempts would have been of material assistance, reflecting what did we do in the past 22 years of addressing the ill and deficiencies we set out to eradicate since independence. What are reports telling us about what worked and did not work? An opening overview would have given the reader better insight of what we are attempting to achieve and why. I thank you. (Written September, 2013).
Day 2
Kershini Govender – Nedbank South Africa.
Kersh's presence at this conference is my doing. I recommended someone from Nedbank Namibia and they obviously recommended her. The striking thing about her presentation and Nedbank's overall BEE strategy is that you can't separate BEE from the company's actual growth strategy. They are intertwined. Not only are they intertwined but they are built on a lot of serious thought and research. She made reference to a number of business strategists from Jim Collins to Kaplan & Norton and John P Kotter (who is my current favourite). The result however is a unique strategy for the South African banking environment. A fantastic presentation.
Francois Kuttel – Oceana South Africa
Francois Kuttel caught the red eye from Cape Town to Windhoek to present at the conference and then returned the same day. He is the CEO of Oceana so obviously Oceana's empowerment status is very important to him. He's perhaps most famous for going to the high court to establish what being empowered actually means. His presentation was a indepth discussion of Oceana's empowerment and most specifically how to deal with conflicting pieces of legislation – his issue is the allocation of fishing licences. His recommendation is simply to use an "easy, simple, robust way to measure your transformation".
Ashnie Muthusamy – Sun International South Africa
The similarities between Ashnie and Francois abound. Both caught the red eye and returned the same day and both have to deal with the allocation of licences. In the case of Sun International they require gambling licences in different provinces – which is a complete nightmare. We were told how each provincial division is required to submit its own BEE scorecard (a group one won't do) and that often the gambling authority wants to double check the information that was used to make up the verification certificate. They also have to be a level 2 at all times which is something they have achieved. The new codes pose a substantial threat to them because their level will drop and it's likely that the gambling authority will be somewhat unsympathetic.
Malverene Theron
Unfortunately I missed this presentation. I'll try and get some more on this
My presentations
I've attached both. The first one discusses BEE and how far it's come. We must remember that BEE in South Africa exists in spite of the government and DTI assistance or involvement. I'm convinced that it's been a remarkable success and that the cabal of concernees (read BBC and Advisory Council) have a very narrow agenda that requires BEE to look like a failure.
The second presentation uses John P Kotter's 8 reasons why a transformation process fails. Kotter is mostly concerned with corporations but the reasons can be easily incorporated into a national transformation strategy.
Conclusion
There were three conclusions
NEEEF is a policy and no more. There are some companies that produce NEEEF scorecards because they feel it is a competitive advantage. But without some pressure from the government nothing is going to happen.
A transformation policy that must apply to the whole economy needs something like preferential procurement to make it work. NEEEF assumes that government procurement will force companies to comply but all that will happen under these circumstances is that a handful of compliant companies will become agents for those that don't. And it will only be those few that do comply.
There is no comprehensive definition of a Previously Disadvantaged Namibian yet.
I will certainly be back in Windhoek again. Invite me to your next conference.
The report suggests that turning these figures around will depend on the three Es - education, entrepreneurship, and economic growth - the only way in which real empowerment can occur, particularly for those who were disadvantaged by the racial policies of the past. Future progress may therefore come to depend less on racial policies such as Black Economic Empowerment and more on ensuring access to sound education while fostering a climate conducive to economic growth.
This refers to a report written by the South African Institute of Race Relations. For those who have not yet read the DA's Economic Inclusion Green Paper, it carries a similar sentiment. If the ANC had done only one thing properly and that was focusing on education and making it work then we'd have a fraction of the BEE and social problems we have now. If you don't look after the basics you'll never achieve anything. This argument is the gist of my presentation at the NEEEF conference in Namibia later this month.
Namibia's new proposed black economic empowerment policy, the New Equitable Economic Empowerment Framework (NEEEF), is too close to the South African model which was "widely perceived to have failed", Dawe said.
Talks with Prime Minister Nahas Angula have shown that his position "is flexible on condition that our [chamber] members honestly embraced the NEEEF principles and that the targets [of the policy] would eventually be met", Mark Dawe, president of the Chamber of Mines of Namibia said. Discussion in this regard are ongoing, he said.
Dawe on Wednesday said: "As we grapple through a minefield of policy and economic philosophies, we should never lose sight of the fact that this great country would be so much greater if the private sector would be allowed to flourish under a conducive, supportive and regulatory framework that optimises the utilisation of its mineral endowment to the benefit of all Namibians."
The government's flexibility in the implementation of NEEEF. NEEEF is too extreme and is likely to alienate more people than it will benefit. But a collaborative approach is a great start.
BEE (South Africa) is deemed to have failed. Not so - it's the ANC that has failed BEE, not BEE that has failed as a policy.
The same sentiments about government intervention exist in Namibia as in South Africa.