Paul Janisch

Ownershield has launched a Whatsapp Group for BEE advice

Click on the link and join us.  It's broadcast only but if you have any questions we'll take emails

We have a number of really good products coming out.  We don't think that the market has seen these products before and many of them transcend BEE compliance.  We'll keep you posted

Ownersheepish - and the only BEE compliance course

Someone searched for this on the blog.  I wrote this 14 years ago.  I'm glad to see that my thought process hasn't changed.  I've probably become a little more jaded over time. 

We have a unique online BEE course coming up.  It's all about compliance. I don't know of another course that deals only with the substance of the codes and doesn't touch on what is right or  emotional issues.  Click on the link and join us

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Bless me for it has been a while.  I discovered that if you get twittering your blogging suffers - something my fellow blogger Melissa Chang told me is a very normal process.   It's been a very interesting month - I went on a national tour talking to both the private and public sectors about the PPPFA regulations.  I was quoted in Business Day - something I have been wanting since I started this BEE lark five years ago and I appeared on TV.   Now before my head gets too big..........

I found this article on my alerts "BEE firms could warm up to family businesses" that initially got up my nose (I've changed tack since I started writing this post).  It's written by Cynthia Mapaure who is the financial director of the Mineworkers Investment Company and in it she avers

Family businesses employ millions of black workers yet black economic empowerment (BEE) has made only limited inroads within these companies - leading to impatience in some quarters over the slow pace of change at the core of our economy.

OK - I don't agree with this statement.  I firmly believe that family businesses should be allowed to remain exactly that FAMILY BUSINESSES.  Why on earth should they sell out to a BEE investor or any investor for that matter. 

But Cynthia goes one step further, surprising me very pleasantly.

Why would a family business that had stalled on BEE for years suddenly have a change of heart in the middle of a downturn? Chances are the company is in dire need of capital and is embracing a new partner out of necessity.

She backs this up with

Some empowerment companies still have relatively strong balance sheets and solid capital reserves. They might benefit from value opportunities like this.

Is she perhaps suggesting that empowerment companies might actually be willing to part with money for their shares - something VERY few have been interested in doing up until now.

Her concluding remarks are

If you are serious about your empowerment mission, there can be no shirking the responsibility of extending transformation to the workers who depend on these businesses for jobs and a regular income.

And this is where I draw a line.  We know where Cynthia is coming from - the byline tells us that she is the financial director of the Mineworkers Investment Company, a leading BEE company with a 14-year track record.  She does deals.  But surely someone who knows anything about deals knows that there is a scorecard that looks after the transformation of the workers.

I put it to you Cynthia - can you seriously prove that by extending the ownership of a private company to the workers you are benefiting them in any real way?  Let me tell you what I think

1. The shares ain't worth shit unless someone is going to buy them.  And in a private company situation this is not going to happen readily
2. I have yet to be convinced that ownership in a company where the shares are not readily for sale actually improves staff retention

Come now Cynthia - drop the ownership rubbish and start talking about job creation and entrepreneurship.  Focus on skills development and whilst you are at it talk to the SETAs about innovative ways to develop skills.  And then why not invest some of your own money in starting black owned family businesses that will compete healthily with white owned businesses.  Leave the ownership of family businesses alone - they are the cornerstone of our economy.

Our first BEE compliance course. BEE COMPLIANCE MADE EXTREMELY COST EFFECTIVE and SIMPLE

This is very overdue. I have seen so many courses offered by companies that want to instil a ridiculous fear in their delegates. So many companies have been chronically ripped off by these charlatans. We are talking ugly ripped off

This is the first course that I am aware of where we go through the shortcuts. We talk about acceptable compliance. Transformation in this country is a politicised joke. Look at every single parastatal in the country. They are dysfunctional because of BEE-related corruption. If they don't give a toss about transformation then why should the rest of the country.

But you need a BEE certificate to do business. I've got 20 years of BEE compliance experience. Most of the stuff that I will talk about is not on this blog. It's stuff that has worked over many years. It's time to pass it on.  Here's the flyer

Ownershield presents

BEE COMPLIANCE MADE EXTREMELY COST EFFECTIVE and SIMPLE

Tuesday 8 August 2023.

R599 per person.

Online only.

Book by emailing [email protected]

B-BBEE compliance, as with any type of compliance including tax compliance, is open to interpretation. Verification agencies are happy to accept these interpretations if they are in keeping with what the BEE codes prescribe.

Fact "the spirit of BEE" does not exist within the context of a BEE verification

No verification agency has the ability to assess you in terms of "𝘁𝗵𝗲 𝘀𝗽𝗶𝗿𝗶𝘁" because their mandate is to objectively measure the evidence you present. Similarly, SANAS is not an interpreter of the BEE codes. They are there merely to assess the quality of the information submitted to a verification agency.

It follows that any reasonable interpretation of the codes will suffice for compliance purposes.

BEE Compliance has to fit within your business strategy and operations NOT THE OTHER WAY AROUND

It's likely that we would have no loadshedding if Eskom hadn't put "empowerment" credentials above their mandate to deliver cost effective and reliable electricity.

Why expose your business to a similar fate. Your business exists to provide employment and generate a return for its shareholders. Splurging large amounts of money on BEE points with all too willing service providers could impact on both of those business imperatives.

Don't do it!!!! There are much more cost effective alternatives.

Take aways from the course

• The four hour online course covers practical short and medium term tips that will generate points under most BEE codes for the least amount of money and effort.
• Each element will be covered
• You'll hear about alternative compliance programmes. These will include options, alternates, internships, loans and many other tips in detail
• An overview of the verification process – it's all about documentation, all of that documentation is easy to draw up

Please note we are not going to teach you how to front and nor are we going to suggest that you change your HR practices to appease the despicable new Employment Equity regulations.

COST AND FORMAT

Tuesday 8 August 2023.

R599 per person.

Online only.

BOOKING

Send an email to [email protected] to confirm your booking. We will send you an invoice. Proof of payment will confirm your place on this one of a kind course.

About your presenters

Rudolf Rautenbach is the BEE tax and structuring expert in South Africa. He has worked on multiple large transactions and has a wealth of knowledge about ownership transactions their tax pitfalls, amongst other things

Paul Janisch is a BEE compliance expert. Over the last 20 years he has saved his clients millions of rands in their BEE processes whilst delivering high BEE scores. He is also the rudest BEE blogger in the southern hemisphere.

CONTACT US

Please contact us to learn more about how our solutions can empower your business

Rudolf Rautenbach	Paul Janisch
083 759 0374	083 227 1375
[email protected]	[email protected]

For more information please visit our website - https://ownershield.co.za/

Politics, empowerment and new rules around water use

The article was available for publishing - thanks Ryk and Moneyweb for publishing it and fixing it up. 

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Two controversial regulations are in their public comment period – here is my comment.

By Paul Janisch 29 Jun 2023 

 

There is a simple rule that needs to be followed when it comes to government policies that require public participation, specifically South African policies – the government cannot be trusted. It’s that simple. It cannot be trusted to govern and certainly cannot be trusted to consider constructive comments on its policies.

There are two controversial regulations that have been requested for public comment and are currently in their comment period.

The first is the Draft Employment Equity Regulations, which gives the minister the power to set regional and national targets for racial representivity at the various management levels in the private sector.

The second, and most pertinent to the agricultural sector, are the proposed water licence application regulations.

‘Transparent opportunism’

Agri SA CEO Christo van der Rheede recently told Business Times (10 June 2023) that the regulations were transparent political opportunism.

In fact he went so far, correctly I would say, to describe them as “short term populist thinking that is geared towards the 2024 elections”.

A reading of the regulations does suggest that these requirements are for new water licences and amendments to existing water use licences, not to existing water licences.

The issue that we as citizens and business people face in this country is that we may know what the intention of the legislation is – it’s the administrators who issue those licences that either don’t know or choose not to know.

This is where the real danger lies.

The period for consultation and comments ends in mid-July.

‘Thorough consultation’ on BEE aspect

Minister in the Presidency [Khumbudzo Ntshavheni] told Business Times on 10 June 2023 that Minister of Water and Sanitation Senzo Mchunu would “undertake a thorough consultation process on the black ownership requirements before any proposal was implemented”.

I find this extremely hard to believe.

In the 20-odd years that I have been operating in the black economic empowerment (BEE) sector I have seen how the current government pays little or no attention to any constructive comments that disagree with their policies.

When the revised BEE codes were gazetted in 2012, the minister of the Department of Trade, Industry and Competition (dtic) claimed they had received 550 constructive comments – yet went ahead and gazetted the original BEE codes almost as they were drafted.

Roy Cokayne reaffirmed my experience when he noted in a recent Moneyweb article about the draft employment equity regulations that the Construction Alliance South Africa (Casa) tirelessly tried to convince the department to work together with the alliance.

The alliance is not arguing against the motive behind the setting of targets for the industry, but rather what targets can realistically, reasonably, and rationally be enforced on companies.

“We outlined to them [the dtic] some of the constitutional flaws that exist in that legislation as it stands, and the need for a more detailed exercise and research to look at what the numbers look like if the targets they are considering are implemented,” said Chris Campbell, a Casa board member and CEO of Consulting Engineers South Africa (Cesa).

“They went through the motions of the consultation with very little appetite to absorb, or take in [suggestions], or even collaborate.”

History will show that the minister’s assurances will amount to nothing.

Cherry-picking

If anything, it’s likely that the ministry will only look at comments that support the regulations, as the African Farmers’ Association of South Africa has indicated it will do.

Where does this leave the agricultural sector? It cannot not comment.

In fact I would recommend that each player in the sector – from the farmers through to the co-operatives and other related bodies – submit comments, even if they are the same comments.

Read: There’s a place for big and small farms in securing SA’s food supply

In the likelihood that these comments are ignored and the regulations are gazetted as is, or barely amended, then there is a record of comments.

If this is the case then we can expect litigation, which is possibly what the government wants – it wants to use such a record as a tool against certain population groups that are resistant to transformation.

Ensuring accountability

In my own experience I strongly believed that the amended BEE codes were distantly related to anything constitutional. I was informed by Lionel October, then a director-general in the dtic, that the codes were “constitutional”.

What October was actually telling me [was], if you don’t think it’s constitutional then prove it. He was not willing to explain why they were constitutional.

In other words, the dtic never bothered to test the codes against the constitution.

I went on a drive to raise money to challenge the codes and raised nothing and hence we’re stuck with this convoluted gobbledegook that purports to further the transformation of South Africa.

I should have considered the step in between, and that was making an application to the department in terms of the Promotion of Access to Information Act and requesting a copy of the many comments to check whether the government did in fact apply its mind in the process.

It’s likely that this stage of the process will show that the government did not in fact apply its mind.

I am sure that this situation will be the same for the proposals in question.

 

 

 

Beneficial Ownership registers for trusts

South Africa gets grey listed and Slaptjips decides to do something about it.  This is what he does.  It's a Google document link - you can download the register which is an Excel document created by one Graeme Buss who appears to work for SITA.

Once you've filled in this form it seems to be uploaded to a Google drive.  And then what.  Well according to BDO - in a fearmongering article

Failure to comply with these requirements may result in a penalty of up to R10 million and/or five years' imprisonment for trustees. Additional sanctions may be applied by the Master of the High Court or the Financial Intelligence Centre.

It is likely that trust changes lodged with the Master of the High Court may trigger an inspection of the Beneficial Ownership database, resulting in penalties being administered for non-compliance.

We urge you to take immediate action to ensure compliance with these new requirements to avoid any penalties. BDO can assist trustees to digitally submit all the required information under a Power of Attorney

The article assumes that the master can get it together to capture this information.  Ask anyone who wants to lodge a trust with the master about what you have to do.  It's simple, pay someone who will pay someone.  It's just as corrupt as any other government department.

I, being the responsible blogger that I seem to be on a part time basis asked a serious lawyer at a serious law firm.  His response is above my  question

Yes, we are gearing up for these type of filings, although the last time I checked the Master of the High Court was not yet geared up to accept filings.

From: Paul Janisch
Sent: 20 June 2023 16:05

Subject:  Trust Beneficial Ownership

It’s a matter of  time before the verification agencies will want to see that this register has at least been submitted.  How have you handled this because the trust has a varied number of beneficiaries and it’s impossible to capture the beneficiaries of each beneficiary?

Thank you

There you have it.  But what concerns me is that the desperately incompetent SANAS will add this submission to the list of reasons to prove all white people are racist.  This register is complicated as BDO noted.  They want ID numbers of each owner.  How the fuck do you do that with broad-based trusts whose beneficiaries change on a monthly  or daily basis. 

It fascinates me that we have these badly thought out policies and the drafters leave them to us to sort out because they aren't paid to work beyond their 2-3 in the afternoon full time job.

My advice - leave it for now. 

 

Using the Promotion of Access to Information to show the government doesn't listen

It is hoped that this article will be published by Landbou Weekblad. I can tell you it's hard to get articles in that publication.

I'm now reading that the so called government does not read or consider comments.  This is the extent to which we, as citizens, and reluctant tax payers are taken for absolute fools.  This is across the board.  A president with a standard three can come up with more sound policies (please do not think I'm referring to that thief zuma).  But we engage and talk and fawn and fail the people around us.

The Poland incident shows the extent to which we as a country are a joke in the eyes of the world.  It's heartbreaking

If you want to publish the story below - please do.

----------------------------------------------------

There is a simple rule that needs to be followed when it comes to government policies that require public participation, specifically South African policies  – the government cannot be trusted.  It’s that simple.  It cannot be trusted to govern and certainly cannot be trusted to consider constructive comments on its policies.

There are two controversial regulations that have been requested for public comment and are currently in their comment period.  The first is the Draft Employment Equity Regulations, which gives the minister the power to set regional and national targets for racial representivity at the various management levels in the private sector.  The second, and most pertinent to the agricultural sector are the proposed water licence application regulations. 

Agri SA CEO, Christo van der Rheede recently told Business Times (June 10 2023) that the regulations were transparent political opportunism.  In fact he went so far, correctly I would say, to describe them as “short term populist thinking that is geared towards the 2024 elections.” 

A reading of the regulations does suggest that these requirements are for new water licences and an amendment of an existing water use licence.  The issue that we as citizens and business people face in this country, is that we know what the intention of the legislation is, it’s the administrators who issue those licences that either don’t know or choose not to know.  This is where the real danger lies.

The period for consultation and comments ends in mid July 2023.  Minister in the Presidency told the Business Times (June 10 2023) that the Minister of Water and Sanitation, Senzo Mchunu, would “undertake a thorough consultation process on the black ownership requirements before any proposal was implemented.”

I find this extremely hard to believe.  In the 20 odd years that I have been operating in the black economic empowerment sector I haves seen how the current government pays little or no attention to any constructive comments that disagree with their policies.  When the revised BEE codes were gazetted in 2012, the minister of trade and industry claimed that they had received 550 constructive comments and yet went ahead and gazetted the original BEE codes almost as they were drafted.  Roy Cockayne noted in a recent Moneyweb article about the draft employment equity regulations that the Construction Alliance South Africa (CASA)

tirelessly tried to convince the department to work together with the alliance, which is not arguing against the motive behind the setting of targets for the industry, but rather what targets can realistically, reasonably, and rationally be enforced on companies.  “We outlined to them, some of the constitutional flaws that exist in that legislation as it stands, and the need for a more detailed exercise and research to look at what the numbers look like if the targets they are considering are implemented,” Campbell said.  “They [DEL] went through the motions of the consultation with very little appetite to absorb, or take in [suggestions], or even collaborate.”

It's very likely that the minister’s assurances will amount to nothing.  If anything it’s likely that the Ministry will only look at comments that support the regulations, as the African Farmers Association of South Africa has indicated that they would do. 

Where does leave the agricultural sector.  It can’t not comment, in fact I would recommend that each player in the sector from the farmers through to the co-operatives and other related bodies submit comments.  Even if they are the same comment.  In the likelihood that these comments are ignored and the regulations are gazetted as is, or barely amended.  If this is the case then we can expect litigation which is possibly what the government wants, it wants to use it as a tool against certain population groups that are resistant to transformation. 

There’s a step on between.  Something that I should have considered many years ago and that is making an application to the department in terms of the Protection of Access to Information Act (PAIA) and requesting a copy of the many comments to check whether the government did in fact apply its mind in the process.  It’s likely that this stage of the process will show that the government did not in fact apply its mind.

Paul Janisch is a BEE consultant who has realised that BEE is only for a boom economy, which is not where the South African economy is recently.

I have been remiss and missing. there's so much going on and I'm not writing about it. I'm going to change that. I pay for this bloody blog. I have to post

Banks and employment equity. They'll win but they don't want to fight. Disappointing

These articles are delightfully frustrating to read.  It's behind a paywall but I got the paper yesterday, as shit a read as it is.  The headline is very compelling

Banks threatened over transformation laws

Followed by the sentence that we all want to read - Department of labour set to haul Standard Bank, FNB and Absa to court for non-compliance

You'd think that this useless anc government (and I don't say this in isolation here) would be figuring out how to fix up the country that they have destroyed over the last 30 years.  Oh no, they have set their wolfhounds on the large corporates for their "failure to transform".  One Fikiswa Mncanca-Bede, who has the exalted title of Director for statutory and advocacy services want to taken the three banks to court for their failure to transform.  You can imagine how Nedbank and Investec are sitting in a corner and wondering when this useless department is going to come for them.  Fikiswa certainly has a sense of humour - she says she is going to ask the court to impose a fine of R1.5m or 2% of turnover, whichever is greater.

There's the usual splutter of resistance to transform.  We've given you 30 years and you resist. It's amazing this useless fucking government forgets to mention that its educational system is so dysfunctional that it can't produce people with the requisite education that makes the economy want to employ them.  And even if they were employable the economy is so broken, due to anc greed and ineptitude that they can't employ these people.

And the banks. What do they say?  "They are in talks with the department over the possible  imposition of penalties." 

What a fucking disappointment.  It's time to stop negotiating.  It's time to go to court.  There is no ways the the department will win, especially if it hires mpofu to take on the case.  We need business leadership here, not the stroking of egos.  We need companies taking the government on and getting them to do their jobs. We can't depend on Afriforum or Sakeliga or Solidariteit.  

You are negotiating with a rattlesnake.  Forget it. Fight it, cyril (unfortunately now lowercase) doesn't have the ability to locate his manhood to get anything right.

When are you legally obliged to implement a BEE programme? Public sector is

It's not like me to post something that may agree with the BEE Commission.  Here's an article I found that is interesting. I'll post it in its entirety

This news may come as a surprise to many private companies operating in South Africa. Black economic empowerment is a voluntary process. It could never be made mandatory because the constitution would never permit it. It’s just become such that it’s now almost impossible to do business in this country without a BEE certificate.

However the broad-based BEE codes make it absolutely clear that all organs of state and public entities are “measurable under the Codes.” Strangely enough it is these same entities that have barely paid any attention to a full scorecard. They certainly are aware of the procurement requirements but little else.

The uptake of compliance is so dire that that the BEE Commission, in their National Status and Trends on B-BBEE Transformation Report 2021 observed that of the 326 organs of state (including municipalities) only 82 submitted their BEE report to the commission. Something that the BEE Act compels them to do. Interestingly of these 82 entities, one third of them were non-compliant.

Rudolf Rautenbach of Ownershield, a BEE solutions company observes that there could be greater consequences for these entities if they do not comply with the BEE Act. “The BEE Commission might not appear to carry much weight in this process, but the Auditor General may flag this as being a non-compliance in that entity’s overall governance.” He adds that, “many municipalities are far behind on service delivery and need to show their constituents that they are making progress towards a good governance track record.”

Why do so few organs of state submit reports and many of those that do can’t show much in terms of BEE compliance? Rautenbach suggests that they simply don’t know what to do. “BEE compliance in the smaller towns is almost non-existent because the municipalities themselves are not leading by example. This is a simple education issue. “

Observing that BEE Compliance is complicated, Rautenbach argues that once the many principles are understood then it’s a process of implementing what needs to be done on an annual basis. “We often come across municipalities that tell us that their management is completely black and that they only target black-owned suppliers and service providers. Our response is that at best they may have achieved less than 40 points on the scorecard and remain non-compliant.”

On the other hand Rautenbach says he’s come across municipalities that have developed an understanding of compliance and in the process helped build the local economy through their enterprise and supplier development programmes. “I have seen certain towns creating youth empowerment programmes under the socio-economic development element.” All of this adds to a social cohesion that appears to be sorely lacking in this country at the moment. The solution appears to be education and guidance. “The benefits are enormous to each municipality, we’ve found that our day workshop has started a thought process that has resulted in the beginning of a process that has steadily improved year on year.”

To find out more about the Ownershield BEE Courses for Municipalities email [email protected] 

Here's the course and costs.  It's a first ever

Why BEE and public private partnerships could work

Courtesy of Moneyweb.  They published my article

 

Why BEE and public private partnerships could work

While relatively new to South Africa, public-private partnerships have incredible potential to deliver on empowerment measures.

By Paul Janisch 10 Feb 2023  11:40 

A recent article indicated that Transnet is considering outsourcing its container corridor between Durban and Johannesburg.  The proposal appears to be some sort of an interim solution with the winning bidder handing it back to Transnet in 20 years.

To me this seems like a public-private partnership (PPP). It also suggests that state-owned entities (SOEs) may be softening their attitude to these partnerships.

PPPs are without doubt the most effective tool the government has to achieve its Black Economic Empowerment (BEE), reconstruction and development programme and other empowerment-related goals. Yet this method of procurement is not making the most of these opportunities.

The problem seems to be that the transaction advisors that are used in the early stages of the feasibility study are not suitably aware of empowerment requirements and structures that PPPs would like to achieve in the long term. The majority of these bid documents contain antiquated empowerment requirements that might deliver a narrow type of empowerment structure that ultimately benefits very few people.

The empowerment criteria for PPPs are contained in Module 2 of the National Treasury PPP Practice Note of 2004. The practice note precedes the Department of Trade and Industry’s broad-based BEE codes of good practice (COGP) by about three years, but a careful reading of both the COGP and the practice note reveals that they are remarkably similar and that a standard COGP implementation will more than likely cover almost every requirement that Module 2 has laid out.

 Interestingly the Municipal Service Delivery and PPP Guidelines have deviated from Treasury’s module 2 and incorporated the DTI’s codes of good practice into its requirements – suggesting perhaps that the Treasury module will follow suit in the future.

The stated empowerment objectives of PPPs include

• Increasing levels of black ownership and management
• Development of local skills
• Development of supporting entrepreneurship
• Creation of local jobs (directly and indirectly)

It is the last three objectives that tend to be ignored in most PPPs.

The management and ownership requirements are pushed to the fore and more often than not benefit people who may not reside or have any roots in the area that the PPP has targeted.

It may appear that empowerment has been achieved but, without the required emphasis on local economic development, the local population might come out of this process completely neglected.

Perhaps the best way to explain this process is to use an example of a PPP that we worked on in a remote area of the Eastern Cape.

Case study

The specific project was located in a region that was a labour sourcing area during apartheid. It is still suffering from the chronic ravages of this policy and as a result has virtually no infrastructure, with an economically active population that is mostly female with a high HIV infection rate.

It stands to reason that any investment in this area must have some positive impact on the local community. Our job was to ensure that the empowerment requirements would continuously develop that local community.

Using both module 2 and the DTI’s codes as a starting point we recognised that the construction phase was unlikely to employ any of the local population on a permanent basis. As such, budgets that would typically be allocated under a standard BEE scorecard were re-allocated to other areas of the scorecard that would see a greater investment in the local community.

We specified that the local community (i.e. people living within a 50km radius of the target area) was to be used, because the DTI’s BEE scorecard only speaks of black people – not local people. This means that without specifying local investment it is conceivable that a company operating in this area could be fully compliant by investing in any other area. The facilities’ management scorecard built on the BEE foundations laid by the construction phase and increased the number of local people employed on a permanent basis over a ten-year period. The modifications to the scorecards were within the ambit of module 2.

The single most important feature of a PPP is that the Treasury Manual insists that all empowerment requirements are made contractually binding on the winning consortium, with penalties for non-compliance.

Of course this requires both the government and the private party to measure their BEE performance. If the prescribed scorecard deviates so far from a standard scorecard then there is no conventional method of measurement. Verification agencies have been mandated to measure empowerment based on either the DTI’s scorecard or a sectoral charter and do not have the legal capacity to measure any other type of scorecard that deviates from these norms. This means that an additional third party has to be contracted to measure and report on this.

PPPs are still relatively new to South Africa and their efficacy is not yet fully tested. But there is little doubt that they have incredible potential to deliver on government’s empowerment measures.

It is very important that these measures are carefully thought out at the early stages of any PPP, because it may be very difficult to change them ten years down the line when it is realised that they are not achieving what all stakeholders hoped they would. Proper advice at the outset mitigates this risk.

Paul Janisch is a BEE consultant with wide experience in the transaction phase of a number of PPPs