Paul Janisch

NEEEF has been published - probably in draft form

It's quite hard to extract the document from the Prime Minister's website so I have posted it here.  It doesn't look all that different to the earlier one I saw.  The designated group is described as “Previously disadvantaged” which means victims of Apartheid policies.  Again they've stuck to mandatory elements.

Companies tendering for Government and SOE contracts or applying for licences must receive NEEEF rating from the NEEEF Commission. This rating consists of a score out of 100.  A total of 20 points are available for each of the five empowerment pillars. Companies must score a minimum of 10 points in the three mandatory pillars of ownership, management and control, and skills development. Companies must score at least 50 points out of 100 to be considered empowered.

We'll see where this is going.  Most of my sources say that the document is still being discussed with a variety of stakeholders.  It might be easier to download it from here.  

Also if you are interested in the Namibian economy and doing business with them, you'd do well to read the TIPEEG document too. Got to love these Namibian policies and their acronyms.

 

Affirmative action dragging heels, says watchdog

Nope this is not South Africa.  It's Namibia - startlingly similar to our local politicians.  As to the merits of the argument, I can't comment on that.  However when it comes to South Africa there is more than enough evidence to show that the public school system is so poor that the argument that those unfortunate to go through the system are in all probability not skilled enough.

THE Employment Equity Commission (EEC) has lashed out at companies’ reluctance to appoint racially disadvantaged (people) in top positions, saying it is “rooted in racial bigotry” and warning that the watchdog won’t stand for it.

For the year ended March 2011, blacks held only 26 per cent of all executive director positions in the country, compared to 59 per cent held by whites.
“The progress towards equity in employment has been slow and the top echelon in most business sectors remained unacceptably skewed in favour of white employees,” Vilbard Usiku, employment equity commissioner, said in the EEC’s latest annual report. The continuous marginalisation of blacks perpetuates the income inequalities along racial divide, he said.
Usiku said he no longer buys employers’ excuse that blacks aren’t skilled enough for top positions.
“White management appears to be perpetually stuck in the mindset that believes that the workmanship of the black persons is essentially shoddy and that they generally lack work ethic and ingenuity,” he said.
“This mindset, deeply rooted in racial bigotry, is a very serious and urgent challenge to the commission,” Usiku said. He said the income gap along racial lines in Namibia is real.

via www.namibian.com.na

 

NEEEF in detail – a generous reader donates

Sometimes I wonder whether my pleas for information ever reach an audience; every now and then I am pleasantly surprised. A concerned reader has forwarded the New Equitable Economic Empowerment Framework (NEEEF) onto me (thank you reader). It is a very sparse document – running into 23 odd pages, written in a generous font with large spaces, which does make for easy reading. The reader asked me for my thoughts – so here we go.

• Definitions

Very few definitions, and those that are offered have vague explanations. Perhaps the most important definition is that of "previously disadvantaged Namibian" meaning victims of Apartheid policies. The document does refer to various articles in the Namibian constitution for clarity – specifically Article 23 (viz)

(2) Nothing contained in Article 10 hereof shall prevent Parliament from enacting legislation providing directly or indirectly for the advancement of persons within Namibia who have been socially, economically or educationally disadvantaged by past discriminatory laws or practices, or for the implementation of policies and programmes aimed at redressing social, economic or educational imbalances in the Namibian society arising out of past discriminatory laws or practices, or for achieving a balanced structuring of the public service, the defence force, the police force and the correctional service.

Article 23 does not make the definition any clearer for NEEEF purposes – Kosie Pretorius attempts to dissect Article 23 in this Informante piece.

• The liberal use of the word "will"

Documents that talk about what a government "will" do in the future is problematic. If you are putting down something that the private sector is going to follow then you need to be very specific and direct.

• NEEEF replaces TESEF

The NEEEF will supersede all other transformation and empowerment policies of Government as well as provide the framework within which all private sector initiatives….. will be expected to conform to.

• More than a passing resemblance to BEE and other South African policies

There is a reference to "decent work" and the document encourages Employee Share Ownership Programmes (ESOPs). The latter is something that we expect in the new version of the SA BEE codes.

• Red tape

The first thing that struck me was that the NEEEF Board has to approve every ownership transaction. Goodness knows how long this is going to take – it could delay the issuing of a NEEEF scorecard for a long time which might prejudice a company's chances in winning state contracts (more on this below).

• Verification

"Businesses…will be expected to provide audited proof that they have achieved NEEEF targets. This audit will be conducted as an additional component of their annual audits by external auditors."

Another revenue stream for auditors. The sentence does not preclude an auditing firm to conduct a NEEEF audit based on another auditing firm's financial audit. It does appear that the verification agencies that BEE has attracted in SA will not be operating in Namibia.

• Forced voluntary compliance

"Companies that fail to comply with NEEEF targets will not be explicitly penalised. However they will not be eligible to tender for Government or SOE contracts or to receive fishing, mining, telecoms or other licences and may therefore find themselves in a disadvantageous and uncompetitive position."

And those that don't do business with the government

"Companies that do not tender for Government or SOE contracts will also be expected to score themselves according to the NEEEF scorecard is they want to be positively regarded by Government as contributing to empowerment and transformation in Namibia."

Gulp…….. this is immensely problematic. Firstly the government effectively precludes itself from importing anything because they state that you can only do business with government if you have a scorecard, on top of that they are limiting their chances of attracting the best prices in a tender environment because only a finite number of companies will be able to tender (see the scorecard below) because they comply with NEEEF. South Africa's supply chain rules allow them to purchase directly from foreign companies without going local. The PPPFA would not apply under these circumstances.

It's also not clear what be positively regarded by Government as contributing to empowerment and transformation in Namibia means. There is no preferential procurement element here (other than a procurement feature for previously disadvantaged Namibians) – so encouraging companies to comply is not going to happen naturally like it did in SA.

• Mandatory elements and minimum targets

NEEEF will score each business that is required to be compliant according to the NEEEF scorecard. Each business can score up to 100 points in total made up of 20 points per empowerment pillar. To achieve compliance, a business will have to score more than 50 points in total. A minimum of 10 points on each of the three pillars of ownership, management control and employment equity, and human resources and skills development is mandatory.

Not a good idea, not a good idea at all. The stick route has not worked in South Africa. The upshot of this is some sort of social engineering that Apartheid was particularly good at. There is a slight silver lining though

Overachievement on one pillar can be offset against underachievement in another pillar.

The Scorecard

Here is the scorecard (the target group are previously disadvantaged Namibians – no emphasis on women)

Pillar	Minimum	Maximum	TOTAL
Ownership (mandatory) 10 points awarded for 25% ownership. Each additional 7.5% scores another point until 50% is reached.	25% ownership	100% ownership	20
Management Control and Employment Equity (mandatory) 10 points awarded if the combined board and top management is filled. Each additional 10% attracts 2 points to a maximum of 100%	50% board and management	100% board and management	20
Human resources and skills development (mandatory) 10 points for devoting the equivalent of 1.5% of its gross wages to training. Each additional 0.1% attracts 2 points to a maximum of 2%	1.5% of gross wages	2% of gross wages	20
Entrepreneurship Development Points are scored in proportion to the value of procurement spend allocated to businesses owned by previously disadvantaged Namibians up to a maximum of 50%. Additional points may be made available for other support given to those businesses including mentorship programmes, joint ventures, market access and other initiatives. The points awarded for such initiatives will be based on more detailed criteria laid down by the NEEEF commission.	0% of procurement	50% of procurement	20
Community Investment A maximum of 10 points for devoting 1% of after tax profits to community investment. Each additional 0.2% scores an additional 2 points to a maximum of 2%. Businesses will be rewarded for establishing operations in depressed communities. More detailed criteria laid down by the NEEEF commission.	1% of after tax profits	2% of after tax profits	20
TOTAL			100

 

So what do I really think?

A terrible document and policy that is going to govern Namibian transformation until 2036. There are too many contradictions in the document which will make it very difficult to implement. It sets a 50% minimum that very few companies will be able to achieve in the short term which is

1. Stupid – because how are the majority of companies going to comply at the outset
2. This is going to be to the absolute detriment to the Namibian government.

This wouldn't be too bad as an early draft but I have my doubts that it is because the preamble clearly states that the "Cabinet of the Republic of Namibia adopts the NEEEF."

Namibia: Private Sector Unhappy With New Equitable Economic Empowerment Framework

Not only is the private sector unhappy about not being consulted, but is equally not satisfied with the actual content, saying NEEEF does not go deeper to address inequities, unemployment and poverty as well as having the economy in the hands of the minority. Hangala, very outspokenly, said NEEEF comes at a crucial time when there is huge need for a major transformation to bring the majority of Namibians into the mainstream economy.

via allafrica.com

I didn't mention this last night. It seems as though the Prime Minister has pushed this through rather hastily

Piecing NEEF together

Slowly the pieces of the NEEEF puzzle are coming together. There is still no sight of the official document but this will come in time. The pieces come from various articles from Namibian publications. What is very apparent though is that it is more than a little similar to our own broad based BEE, a key difference being that it is destined to end on 2036 (which makes it a 25 year project). Similarities include:

NEEEF will be based on voluntary business practice" and 'Government will use all legitimate market mechanism at its disposal, in the form of procurement programmes and licensing regimes, to promote transformation and empowerment'. In other words, the whole empowerment framework boils down to the awarding of Government tenders and is otherwise left to voluntary changes.

The quote above was taken from a very informative article in the Villager written by Herbert Jauch, who seems to be a Namibian unionist of sorts. Jauch provides a short summary of the scorecard

Companies tendering for contracts from Government or state-owned enterprises (parastatals) will be rated by a newly-created NEEEF Commission according to five "empowerment pillars". These are made up of the following:

1. Business ownership with a minimum requirement of 25% ownership by 'previously disadvantaged Namibians'.
2. Management control and employment equity with a minimum of 50% of board and management consisting of such Namibians.
3. Expenditure on training and skills development with a minimum of 1,5% of gross wages to be spent.
4. Entrepreneurship development with procurement spending on goods and services to be provided by historically disadvantaged Namibians.
5. Community investments with a minimum of 1% of after tax profits to be spent on community development projects.

Not that different to BEE. Most of the reports that I have read about this tend to focus on these issues above – it suggests to me that only a summary has been submitted and the detail is to follow.

NEEEF - want to know more? So do I

This document is still somewhat elusive.  However the Namibian has offered the following:

1. the primary purpose of the proposed policy is to promote equitable, inclusive and shared economic development, to narrow income disparities between rich and poor over the next 25 years – from 2011 to 2036.  Not too different from TESEF, 25 years is a very long time.
2. previously disadvantaged Namibians will be given assistance through State-owned financial institutions like the Development Bank of Namibia (DBN) and the SME Bank to buy into existing businesses on commercial or near-commercial terms. Oh no, just like the shambles that is ownership under SA's BEE.
3. the commission that will administer Neeef consists of representatives of Government, business, trade unions “and other organisations” including the Employment Equity Commission, the National Training Authority, the DBN, SME Bank and the Ministry of Trade and Industry. (OK)
4. “equitable”  means “a fair redress and redistribution action”.  It's not clear what is being redistributed.
   
5. “social” -  is defined as “how human beings relate to each other in production, class, gender and generational relations”.  That's very loose, why would you want to define such a word.  The document will reveal all.
6.  “previously disadvantaged” -  “victims of Apartheid policies” 
7. Neeef policy states that it will be based on “voluntary” business practice, it further states that non-compliant companies will not be eligible to tender for Government or State-owned Enterprise contracts. This cannot work in SA, as much as Rob would like it to.  It also precludes the government from procuring imports, because those companies would never have NEEEF scorecards.  Not a good idea.
8. There is to be a review every five years. Companies would score points on ownership, management control, employment equity and human resources as well as skills development.
   

The New Era reports that the private sector is very unhappy with the policy, they were not given much time to respond to it.  Also, and very pertinently

NEEEF replaces the Transformation of Economic and Social Empowerment Framework (TESEF), much to the disappointment of the private sector that says constant changes in the names indicates indecisiveness on government's part.

There doesn't seem to be much certainty in this policy.  And the one thing the private sector really appreciates, it's certainty.  Humans are very adaptable and will do anything you legislate, but the process is made so much easier if the parameters are well defined.

I'm still looking for a copy of the NEEEF, so if anyone has one please send it to me.

 

 

Namibia: TESEF replaced by NEEEF

WINDHOEK - The New Equitable Economic Empowerment Framework (NEEEF), Namibia’s new euphemism for black economic empowerment (BEE), has ruffled the feathers of the private sector.

The private sector says there was no prior consultation on NEEEF and that the new plan lacks determination to address the root causes of economic inequalities in the country.

via www.newera.com.na

The Namibians have a new transformation system which seems to have replaced TESEF.  This notice from the 19th of October (2011) tells us more  

The Namibian Government is to implement a plan that would empower previously disadvantaged communities to benefit from economic activities in the country. Prime Minister Nahas Angula tabled the New Equitable Economic Empowerment Framework (NEEEF) in the National Assembly

The New Era provides the following insight into NEEEF

NEEEF would make use of a rating system that allocates points to private companies on five empowerment pillars to determine whether they satisfy the requirement to be considered empowered. Fishing, manufacturing, construction, trade, tourism, telecoms, logistics, mining, agriculture and financial services, are the sectors targeted. 
The programme is to be in place for 25 years starting this year until 2036, but components would be adjusted according to experience and circumstances. 
A commission for Equitable Economic Empowerment will provide a written annual report to the Prime Minister and parliament on progress on NEEEF. 
There would be a review every five years. Companies would score points on ownership, management control, employment equity and human resources as well as skills development.

The article suggests that the plan is to be elaborated today.  If anybody gets an early release please send it to me.