Paul Janisch

This could be the most significant article written this year - trunceformaysheeyin be damned

The Daily Maverick is becoming the most valuable source of fine journalism in this country.  There is nothing that comes close to it.  By the way they are looking for financial support, if you are so inclined you can read more about this here.

Back to the Maverick.  Dirk de Vos wrote a fantastic article over the weekend.  I'm not a Marxist fan nor that familiar with his theories, but I do know that that inept commie bolshie bob is a massive officianado.  de Vos sets up his argument thus

In general, socialists continue to favour top-down direct interventions by the state preferably supported by “evidence based” research. When decision-making follows a process of identifying a problem with the objective of solving it by reviewing evidence and evaluating options, what we mostly get instead is some predetermined solution with evidence selected to favour the pre-selected solution. That type of policy making process is faulty because we cannot know the full ambit of what the problem is all about or that a whole number of factors will change once the policy is known. Goodhart’s Law shows the dynamics at play: Individuals who are aware of a system of rewards and punishments will optimise their actions within this system to achieve their own best outcome.

In other words policy makers come up with a solution to a problem without spending much time figuring out whether they actually know how to solve that problem. de Vos turns his attention to black economic empowerment and its raison d'etre

A good example of a failing policy is Broad-Based Black Empowerment (BEE) legislation and its regulations. The problem of lack of participation of black people in the formal economy and racial inequality is the problem to solve.

And in one sentence he sums up the fuck up that is best described as bob's folly

What we get is a a complex scheme of BEE regulation and arcane rules.

 He could stop there, the points is made, but he's far too an analytical journalist.

The only interesting thing about BEE regulation is about they reveal about what the drafters of the rules think private firms work. Well, they don’t work in the way the BEE codes suggest they do. They work in all sorts of different ways. Still, the BEE regulations provide a system of rewards and punishments. They are also thoroughly gamed: they get manipulated by a range of actors from failing white-owned companies, specialist BEE advisers (I'm one you know - in the business of making white people look black) , funders, crony capitalists and those with a talent for manipulating state procurement budgets.

I think he must have been reading this blog.   All this bullshit about voting rights and board meetings and the like - these are done by large companies.  Since when does the average smallish to large business actually sit down and conduct a board meeting?   bolshie bob obviously knows the answer.  I once heard that idiot being interviewed on the radio and telling all those who care to hear his deluded voice that he will insist that CEOs start getting involved in the operations of small black businesses.  Huh? - what would a CEO or even a high end employee be able to tell a small business about running their business.  It was Anglo, in their submission of comments on the revised codes who asked the very pertinent question.  What do we know about running a supplier's business? We are miners - we mine shit and then send it off.  But we could start working on companies upstream - we could advise them on the best ways to manage the raw materials we produce.  No! says bolshie bob.  It's all about suppliers. What fucking drivel.  Back to de Vos

Sadly, the response to the unsatisfactory outcome is to swap out some of the original rules, sub-rules and sub-sub rules with a whole raft of new rules that are equally misguided and arguably worse because they are combined with additional rules addressing issues of enforcement.

And so we bring in the awesome awdoz and SANAS.  SANAS is so concerned about process and paperwork that if has failed to take into account that all companies are doing is producing documentation to support stuff.  The actual benefit that is being derived is not measured.  de Vos absolutely hits it here.

Black empowerment won’t be advanced by better enforcement of BEE regulations. The whole scheme of BEE is wrong-headed.

And he correctly concludes with

Of course, the original problem, namely the exclusion of the black majority and inequality has not gone away and, in some respects, the original problem has got worse.

I can only hope that Cyril is reading this.  I have lamented often on this blog as to why have they made the codes so difficult to understand and even harder to measure.  I think I know one of the underlying reasons and this has to do with lobby groups like the broke black business council - who are now returning to BUSA (apparently Cyril wants business to speak with one voice).  I suspect that these lobby groups are attempting to use apartheid-style policy making where you make a certain class of people adhere to "arcane" rules and exempt others - thereby making it easier for that exempt class to gain access to the lucrative government business (a broke government I need to stress).  It's all in the name of trunceformaysheeyin.  

A completely unsubstantiated BBC rumour

They say that without hearsay no rumour is worth spreading.  I was informed by a source that was informed by another source - the latter being directly involved in the process, that the comments on minister davies amendments have been and will be evaluated by a team that includes the BBC.  Not your famous public broadcaster - we are referring to the reportedly insolvent black business council.  

This is a very interesting, if not alarming, fact and if true makes things a lot clearer.  My source tells me that it's the council members who are pushing for the narrow based promotion.  Why?  Well it's about government business.  I get the impression from the BBC's TV channel which is really just a 45 minute awesome awdoz presentation about fronting and how government doesn't live by its own rules (as an aside, my source tells me that the awesome awdoz is not that awesome and is patently not-up-to-the-task).  

For an insolvent organisation that courts controversy and dubious presidents it certainly punches way above its weight.  This shouldn't surprise any of us.  But what we should be concerned about is their presence on committees that have a direct bearing on the future of our country. If this is true then are they the only organisation that is not related to the DTI or government sitting on this evaluation committee.  More importantly - do they have a legal mandate to sit on this committee.

This will be useful information to get to the bottom of should there be any legal challenges in future.

 

Black opinions matter, especially when it comes to BEE

There are a number of black commentators who are not in favour of bolshie bob's new amendments.  I spoke about Andile Khumalo's article in the Sunday Times a few months ago. We now have an opinion in one of oddball's publications written by Karabo Mashugane.  I don't read surve's newspapers or online publication at all.  However I have a rather old Google Words search for BEE and this article came up.  Mashugane comes from a small business perspective, his concern is that the promotion of large businesses to higher BEE levels because of their black ownership will have an impact on smaller business.  He laments both the instant promotion and the fact that the new proposed amendments allow for all significantly black owned businesses to become enterprise and supplier development beneficiaries irrespective of size.  He very correctly observes that

Enhanced recognition has been roundly criticised for sending empowerment back to pre-2007, when BEE consisted of issuing shares to the politically connected and not much more. The amendment gives the impression that black people, no matter how successful, carry no responsibility for empowering their less fortunate countrymen and contributing to job creation and economic growth.  Black ownership, even if only on paper, now carries a very high prize and offers a hassle-free existence for all corporates. It frees them from having to bother with employment equity, skills development, preferential procurement, SME development and socio-economic development.

He writes persuasively and has most certainly considered his position.  He posits

All these changes taken together appear to signal a renewed focus on ownership of companies, almost to the exclusion of all other elements. A lot of us are wondering if the dti is suffering from battle fatigue and giving up on the broad-based part of black economic empowerment. There is another perspective, though. Perhaps the dti decided to retract enhanced recognition because of the backlash it received. Maybe the second additional changes are being offered as an alternative solution.  Allowing corporates to multiply their procurement spend with black-owned businesses by “a factor of 2” on their scorecards gives the black-owned businesses a competitive edge, which makes it unnecessary to exempt them from compliance with B-BBEE.

 Mashugane seems to be of the opinion that the immediate promotion for certain levels of black ownership,irrespective of turnover, is not going to fly.  I get the impression that this was another poorly thought out amendment that was hastily drafted.  I think that his opinion should be read - it makes a strong case for the development of smaller black businesses.  He concludes with this paragraph

Black ownership alone should not be enough to get preferential market access. They should be required to meet a B-BBEE compliance threshold, say level 4, to qualify for the “factor of 2” clause. Policymakers must discourage a culture of free rides or unearned entitlements, especially for beneficiaries of B-BBEE.

And then most pertinently

All things considered, I feel compelled to venture one more wish: that the dti will explain to South Africans exactly what they are thinking and doing as they engage with the public on the Gazettes.

Exactly - we'd all love to know.  At the moment there is not enough of an economy to support the most basic of elements.

 

Rob Davies - making amends, coda to the play in one act

Whilst the play is in play the ushers hand out these two documents which will have to substitute for a programme.  The ushers inform the audience that they have 60 days to comment on the two documents.  hlaudi looks at the documents and sees there is writing on them, being neither literate nor compus he discards them.

The scene - a room in a prime office in Meintjies Street Pretoria. A nondescript bearded man in a drab SACP fleece reaches for the telephone.  He dials his secretary.

Secretary - Minister Davies?  

bolshie bob - who's Minister Davies?  My name is bolshie ................ wait a second, my real name is Davies and I am the most destructive minister in Ramaphosa's cabinet.  Yes, I am Minister Davies.  (Pause).  Please get me the BEE Commissioner.

Secretary - I'll see if the awesome awdoz is in her office.

A few seconds later the mighty commissioner comes on the line.

awesome awdoz - good morning bolsh..... I mean minister.

bolshie bob - commissioner I see that we really have set the cat amongst the pigeons with our last amendments.  We cannot stop now - these idiots (and that fucking blogger) are reading this drivel we put out.

awesome awdoz - the trick minister, is to put in subtle little things that they will never pick up on.  I have a few ideas.

bolshie bob - I'm all ears and within the next thirty years I'll have a great beard like Karl Marx

awesome awdoz - we are in the process of removing the modified flow through from black ownership and that illusive level 2 that those evil Afrikaner accountants from Edenvale have found as a loophole.  Well we need to ensure that enterprise and supplier development beneficiaries must be 51% black owned using the modified flow through principle.

bolshie bob - on that point awdoz, sorry commissioner, these white companies that have to implement broad-based black economic empowerment are using the same entities as both enterprise and supplier development beneficiaries.  We need to separate the two - one is on the suppliers' database and the other is not.  

awesome awdoz - I'll make a note of that minister......... that is your title isn't it?  Another thing that's been troubling the black owned companies who turnover more than R50m is this business about splitting procurement into EMEs and QSEs.  I think we might have received a few complaints from white companies about this - but they are just being racist.  Let's just combine the two into one section - reduce the points from seven down to five and give the extra two points to 51% black owned suppliers.

bolshie bob - up the black owned targets as well.  And can we have some clarity on whether black women owned is more than 30% or equal to 30%.  Let's just make it a straight 30% - it'll be our concession to these moaning liberals.

awesome awdoz - there needs to be a simplification of procurement.  I'm not sure whether the president will be happy with us excluding black owned businesses turning over more than R50m from BEE.  These poor struggling megaconglomerates are going to have to implement the scorecard, we have to do a few things to help them................

bolshie bob - (interrupting) get rid of the new supplier requirement and make the 51% black owned multiplier 2 from 1.2, and throw in an incentive for 51% black women owned companies as well.  And for Trotsky's sake make sure that we emphasise the flow through principle.

awesome awdoz - what do we do with those 51% black owned megaconglomerates that might not be instantly promoted?  They are pissed off that they get nothing out of our system?  Could we not make them ED and SD beneficiaries?  I know a bloke called Nemo who would like some free money to buy the new Rolls Royce SUV, he is absolutely convinced that this will make his business more sustainable. 

bolshie bob - just make sure that these extremely profitable companies actually spend money on ED and SD. Put in that industry average thing that Stats SA is supposed to release every quarter...........

A heckler from the audience shouts "they never fucking do you useless commie wannabe, maybe you should actually do a little research before you shoot your mouth off."

bolshie b0b - do it.  And this absorption thing under skills.  They're taking the piss.  Absorption means a long term contract which is the same thing as permanent employment.  Just make the definition of long term contract, working until they retire.  These companies are just putting people on learnerships forever - and you know why awdoz? (He doesn't wait to correct himself) It's because they can carry on claiming their salaries for skills development spend.  They could be using this money for bursaries. This economy is buoyant and just making the masses poorer - there's plenty of money for this external spend.  Stalin knows that we could do with another 100 thousand graduates with a BA in History and Law, easiest people in the world to employ.

awesome awdoz (giggling) - minister bob, you know I said we should put in something subtle that they wouldn't pick up on.  Well I think we should leave the net value formula definition in the definitions as it is.

bolshie bob - yes.  The one that refers to the net value formula being found in annexe 100 C?

awesome awdoz - Indeed, 100 C - the annexe that discusses rules for employee share ownership scheme.

bolshie bob - it'll be our little joke then.

The curtain closes with the players unaware that they in fact are the joke.

 

 

YES bolshie bob loves me

Ain't that the truth.  The more I think about our esteemed minister of trade and industry the more I realise that he is worse than zuma when it comes to destroying an economy.  His first world mind resides in the second world and operates in the third world.  It is most happy when he creates rules and red tape.  That's his thing.  And now it is our thing.  Last weekend I spent an afternoon calculating the skills score under the construction code. It took a whole afternoon.  Why ?I asked myself.  Is transformation going to happen because there is one idiot in Pretoria who thinks that the harder we make it the more transformed we will become as a country?  It must be because bolshie bob has a phd in something.

I come back to my play in one act in which I spoofed a series of phonecalls that davies receives from a variety of black businesses complaining about the complexity of compliance and why they should have to implement and measure those programmes.  A recent article by Deon Oberholzer adds more clarity.

The dti proposes a number of clarifying restrictions that seek to ensure that “real black-owned business” would be exempt... It’s not rocket science to understand why this happened.  The voice of black business is getting stronger and the argument is that they are supposed to be the beneficiaries of BEE, even if they are successful and large. It is common cause that the cost of BEE is high and often a serious financial burden on business. If it wasn’t, black business would not have bothered to lobby government for exemption.

Oberholzer postulates that this ultimate exemption will allow large black businesses to conduct their business with SOEs and government and those corporates that insist on high levels of black ownership and that white businesses will just supply to them.  Ultimately the means of production remain in the current hands and black business is only known for its ability to act as an agent.

Very special is our bolshie bob.  Cyril remove this moron before he destroys the country completely.  He is the one standing in your way, forget the eff.  It's this man who is killing the Youth Employment Service, making a mockery of thuma mina and forever pigeonholing black businesses into part time players.

We now wait to see how long it takes bolshie to publish the final amendment where he places scant regard for those who politely tell him how wrong he is.

 

 

Two weeks to go to submit comments about the BEE amendments - 28 May deadline

As I've said before, the dti will push through anything it wants because it knows that no one will ever raise a stink about their legislating by decree.  If they ignored 550 comments when pushing through their last attempt at transformation then they will ignore comments again.  But if there are enough comments then we can all group together and force them to explain what they have done.

There was an interesting article written by Andile Khumalo in the Sunday Times yesterday.  I can't post a link that works because you have to be an online subscriber to read it.  It's called "Is this the end of broad-based BEE?"  Khumalo, like me, is somewhat nonplussed by the instant promotion to a level 2 if you are 51% black owned.  He writes (edited a bit)

If a large company is 51% black owned it  becomes a level 2 without measuring its contribution to management control etc. How can this possibly make sense? Surely this is taking us back to the days when ownership was the only relevant measure of whether or not, and to what extent, South African corporates were contributing to economic participation by black people..... We are essentially back to pre-2007 when BEE was all about giving shares to a few high-profile black individuals and doing nothing about the inequalities that permeate every aspect of South African society....... It seems to me this change spells the end of broad-based BEE and implies the reversal of all the difficult progress that has been made against tremendous resistance.

Again I apologise to Andile Khumalo for not putting up a link to this article.  But you can read more about him here.  And I apologise to anyone who takes exception to me reading the Sunday Times, I actually don't want to but I've got to know my local newspaper seller who told us that he makes R4 (four rand) a paper and sells about 20 papers a week.  I pay him R50/paper which is double the cover price and feed him every week - he also gets a Christmas bonus.  He's the only reason why I and others in my neighbourhood support him - Iqbal can get knotted I refuse to read any of his publications.

Back to Andile - he's spot on here.  You're not going to solve South Africa's woes by changing the ownership structure of businesses.  bolshie bob could argue that by changing the ownership structures where companies are majority black owned that you will be able to influence societal change.  We all know that bob is just a deluded commie - this will not happen in the short term and we need short term gains.  People like Andile will become "investors" in these massive businesses and will be paid a lot of money to tell the verification agencies exactly what they need to hear. And those businesses will continue as they have.

14 days people - 14 days to submit your comments.  And I've already written them for you.  Please submit the comments.  Our business future depends on it - and if davies gets away with this then he will make other amendments that will further erode the economy.  Everything you need to know is in this blog post.

 

Comments submitted to the DTI on the BEE Amendments (2 May 2018). Please send these to the dti

Here are my comments.  It took about a day to draft them.  The word document is here - please download these comments and make all the changes you want, but most importantly send the comments to Jacques Manus.  The dti claims that they received 550 comments on the the revised codes and they probably ignored all of those that suggested their amendments were ridiculous.  I would like to get a factor of 10 out to the dti.  If they publish a document that we know ignores these comments then I will embark on a campaign to get this administrative active reviewed under PAJA.   

Comments on BEE Amendment – gazette number 41546

Attention: Jacques Manus

The dti Campus

77 Meintjies street

Sunnyside, Pretoria, 0002

02 May 2018

E-mail: [email protected]

Dear Mr Manus

Thank you for affording us the opportunity to comment on the proposed amendments to the current generic B-BBEE codes of good practice.  The 2013 codes have been given four years to make their mark within the business community.  In some cases they have been successful and in many cases not – in fact they have resulted in large numbers of companies falling off the BEE radar altogether due to their complexity and the priority elements.  I welcome the Department of Trade and Industry’s willingness to amend the codes to reflect current economic and political challenges but will take the opportunity to provide the department with an overview of the challenges facing many companies in the implementation of the revised codes and their allied industry charters.  It is hoped that the DTI will consider these comments as being constructive as they are intended as such.

This response has been divided into three sections.

• Specific comments on statement 000
• Specific comments on statement 300
• General comments. These are based on the experience that many companies have gone through in attempting to comply with the revised codes

Statement 000

Use of the flow through principle for enhanced recognition

This is a fair amendment – no comments are submitted under this

Paragraph 6.3 under statement 000, specifically promotion of 51% black owned companies (using the flow through principle) to a level 2 and 100% black owned companies to a level 1

I  speculate that black-owned companies alerted the department of trade and industry to the complexity and expense of compliance under the revised codes.  This is perhaps the reason why the minister has decided to exempt those companies from adhering to each element.  I  would like to draw the following to the minister’s attention

• As the number of 51% black owned companies increases – as they will, so will the requirement to comply under the codes disappear.  This means that procurement (which is the cornerstone of empowerment in South Africa) becomes obsolete.  If these large black companies are no longer concerned about empowerment performance then they will make use of service providers who themselves do not need to comply with any scorecard.  These same majority or totally black owned companies will not make any contributions to supplier and enterprise development as well as socio-economic development.  In short there will be a greater drive to get 51% black owned using schemes that the Commissioner will not be able to keep up with.  The empowerment process eventually disappears, and the social and economic ills of the current South Africa remain
• I refer you to paragraph 3.4 of ”South Africa’s Economic Transformation: A Strategy for Broad-Based Black Economic Empowerment”. Specifically paragraphs 3.4.1 and 3.4.2

3.4 Key principles

3.4.1 Black Economic Empowerment is broad-based.

Societies that are characterised by racial or ethnically defined wealth disparities are not likely to be socially and politically stable.  The process of BEE seeks to accelerate the deracialisation of the South African economy and fast track the re-entry of historically marginalised communities into the mainstream of the economy.

3.4.2 Black Economic Empowerment is an inclusive process.

A more equitable economy will benefit all South Africans, individuals and enterprises.  The process of BEE is an inclusive one, and all enterprises operating within South Africa can, and indeed should, participate in this process.  This strategy will be implemented throughout all sectors of the economy and is not limited only to those enterprises that derive income from government procurement or those where the sector is regulated by government.

The revised BEE codes (in paragraph 2.2 of statement 000) states ”In interpreting the provisions of the codes any reasonable interpretation consistent with the B-BBEE Act as amended and the B-BBEE Strategy must take precedence”

Promotion of large enterprises to levels that render them immune from any form of BEE performance under the remaining elements appears to deviate from these two principles contained in the strategy.  Promotion on the basis of ownership is narrow-based and excluding those companies from scorecard criteria is not inclusive.  I  submit that this is an unreasonable deviation from paragraph 2.2 of the revised codes and paragraphs 3.2.1 and 2 of the strategy document. 

• I refer the minister to the conclusion of the president’s state of the nation (delivered on 16 February 2018). Please consult this website for a complete transcription of the speech.

Together we are going to make history.  We have done it before and we will do it again – bonded by our common love for our country, resolute in our determination to overcome the challenges that lie ahead and convinced that by working together we will build the fair and just and decent society to which Nelson Mandela dedicated his life.  

As I conclude, allow me to recall the words of the late great Bra Hugh Masekela.   In his song, ‘Thuma Mina’, he anticipated a day of renewal, of new beginnings.   He sang:

“I wanna be there when the people start to turn it around

When they triumph over poverty

I wanna be there when the people win the battle against AIDS

I wanna lend a hand

I wanna be there for the alcoholic

I wanna be there for the drug addict

I wanna be there for the victims of violence and abuse

I wanna lend a hand

Send me.”

 

We are at a moment in the history of our nation when the people, through their determination, have started to turn the country around.   We can envisage the triumph over poverty, we  can see the end of the battle against AIDS.  Now is the time to lend a hand.   Now is the time for each of us to say ‘send me’.

Now is the time for all of us to work together, in honour of Nelson Mandela, to build a new, better South Africa for all.

The minister, by excluding every company with the requisite levels of ownership from attempting to contribute to the welfare of all South Africans is not keeping with the message of hope that the president offered a beaten and battered South Africa.

Suggestion

Perhaps it might be an idea to promote a 51% black owned large entity to a level 8 and 100% owned to a level 7.

Start-up and join venture certificates

The clarity is welcomed.

Youth Employment Service

The inclusion of the YES is welcomed.  It is more welcomed if all companies irrespective of ownership are incentivised to make use of the service.  There is no doubt that the inclusion of YES in a BEE scorecard environment will result in a number of positive developments for the programme and for black economic empowerment.  It is somewhat perplexing that the minister would see fit to set onerous targets for companies to meet in order to comply. 

As the minister has learned if you set unreasonable targets then such noble schemes like the YES will fail at the outset.  The minister’s withdrawal of full compliance with paragraph 11.2.1.2 is very welcomed.  However I beg the minister to consider the feasibility of setting any type of restriction other than the YES targets themselves.  Paragraph 11.2.1.2 refers.  The minister has already decided that significantly black owned companies need not concern themselves with the YES promotion because they have already achieved an unfair advantage by way of their ownership.   It stands that the companies that would benefit the most would be those that have between 0 and 50.9% black ownership.  Setting priority element targets in order to gain the advantage is a dampener on the programme at the outset.  I return to the likelihood that large black owned entities have already alerted the minister that compliance with the codes is both expensive and onerous.  The targets set in 11.2.1.1 are counterproductive and will result in the YES suffering.  That the minister has seen fit to set an even larger financial target for black further education bursaries makes the compliance a tall task and not likely under the current Zuma-torn economy.  Also consider that the likelihood of meeting the priority level under procurement will become reduced as BEE scores start dropping significantly – demotion under this sub-element is an inevitability.

Suggestion

Drop all priority element targets for a company to gain the benefit of achieving and over achieving the targets under YES.

Amended Code 300

It is not known where the minister got the figure of 6% of payroll for the spend on skills development of black people, it probably comes from the original target of 3% of payroll – which is a more affordable target.  The revised target is simply not achievable in terms of Rand spend.  When considered in the context of what constitutes skills development of the code it appears that compliance can only be achieved by sending black staff on a number of courses which will take them out of the workplace.  Academic qualifications are a small part of a person’s ability to fulfil a function in the workplace.  In effect the code does not encourage work excellence which will weigh against any employee’s potential to advance in an organisation.

A positive consequence that has resulted from the revised code is that more black staff members are embarking on learnerships etc because their salaries can contribute a large amount to meeting this 6% target. 

By setting a target of 2.5% of payroll on bursaries for 4 points the minister is surely expecting failure.  He would do well to assess the cost to the average small, medium and large company and then consider whether companies are able to begin to afford a fraction of that amount.  Under the amendment this target only applies to companies with 50.9% black ownership or less.  The minister may know that these expenses are direct expenses and have the potential to threaten the profitability of almost every company wishing to comply with this target.  The table below are figures derived from a number of annual reports and should be seen as an illustration of the cost.

The cost per point is unlikely to induce companies to support this programme.  This could result in not meeting the 50% average across all three priority elements.  This has a potential impact on meeting the targets under 11.1.2.1 of statement 000.  Thereby threatening the success of the YES.

Company	Salary bill	Target spend (6%)	Target bursary spend (2.5%)
Standard Bank	14 796 000 000	887 760 000	369,900,000
MTN	6 709 000 000	402 540 000	167,725,000
NASPERS	8 738 000 000	524 280 000	218,450,000
AECI	2 976 000 000	178 560 000	74,400,000
FirstRand	10 620 000 000	637 200 000	265,500,000
Telkom	9 861 000 000	591 660 000	246,525,000
Nampak	3 535 000 000	212 100 000	88,375,000
JSE	405 000 000	24 300 000	10,125,000
Nedbank	9 349 000 000	560 940 000	233,725,000

Suggestion:

Drop the target to no more than 0.5% of the leviable amount. You would have a far greater uptake and it would generate much better goodwill with the government’s potential voters.

Paragraph 2.1.1.3. 

Changing the word disabled employees to people could have a very positive impact on skills development of black disabled people.  Other BEE codes have used the work people in place of employees.  Skilled disabled people have a better chance of gaining meaningful employment.

Paragraph 3.4

The clarification is welcomed.

Paragraph 5.8

Please remove this paragraph.  It negates all training that a black person may receive in a foreign branch or country.  If the object is to skill up black people I  cannot assume that only South Africa is able to skill up its own people in a bubble.  People could go on training overseas and gain vital skills that might meet the minister’s industrialist programme as an example.  If the intention of black economic empowerment is to provide skills to black people then surely best practices developed in a foreign country must contribute to the achievement of this goal.

General comments

Removal of priority elements

The BEE Commissioner has in all probability got her finger on the pulse on the uptake of these BEE codes.  Many companies who have not opted to extend ownership to black people are unlikely to get to a better level than a 7 or 8.  It does not serve the future of black empowerment to continuously punish these companies to the extent that they will either never improve their score or it will decrease.  If empowerment as a programme is designed to improve the lives of black people across the board then any genuine programme must be considered and rewarded.  The priority elements are a deterrent to the programme’s success.  A cynic would observe that they have been put in place as a punishment for not meeting high levels of black ownership.  It would be in the minister’s favour to conduct a poll on employees to establish whether they are happy to be employees and not specifically shareholders.  The poll should also consider the value of the shares in the average company and whether these shares are actually worth the black person’s investment to own them.

Suggestion: 

If empowerment is to succeed then the priority elements must be scrapped. 

SANAS

There are, at last count, 70-odd verification agencies (please see SANAS’ webpage for the total number of active BEE verification agencies.   It’s estimated that these 70 agencies are servicing in the region of twenty thousand companies (Editor note - there are 69 active agencies, here's the latest list).  There is a ridiculous bottleneck.  SANAS is solely to blame here as they have the set the requirements to become a verification agency at such a high level that there is no incentive to increase this number.  In fact it appears that the number of verification agencies is steadily decreasing. The loss of IRBA has had a detrimental effect on the issuing of BEE certificates.  Some other method or issuing authority needs to be created to meet this demand.

The Minister should become more available to those companies that are compelled to comply with the BEE codes – not only those who are exempt.

There is a perception that the minister has a closed-door policy when it comes to discussing challenges faced by businesses in the country.  This policy become very entrenched under the last president resulting in an atmosphere of resigned hopelessness.  The Ramaphosa administration has ushered in a certain positivity where it is felt that all people in the country can contribute to its future, not a select few.  I would encourage the minister to open dialogue with the business community and start taking business into his confidence and hearing their concerns as this programme’s success relies on them.  We have seen in Namibia that their NEEEF scorecard is being modified to meet business’s concerns.  It is possible to achieve empowerment’s goals by considering all perspectives.

I thank you for the opportunity to submit these comments and hope they are received in a positive light, as this is the intention.

Paul Janisch (BEE Consultant)

 

YES, the YES is a priority, but not at the price bolshie bob has set

It seems to have started with this article, although I would like to believe that my play in one act really clinched the deal.  Bruce Whitfield wrote

The Department of Trade and Industry (DTI) has added an unexpected new financial requirement to companies that participate in the Youth Employment Service (YES). It threatens to undermine its ambitious goal of getting one million young people to gain workplace experience within three years.

The DTI will require companies wanting BEE recognition for their participation to contribute 2.5% of their company’s payroll to bursaries before they can qualify for benefits under its codes.

About 100 companies have signed up for the initiative but YES CEO Tashmia Ismael says some are concerned that the new financial requirement places an unreasonable burden on firms. “The word deal-breaker was used by some companies,” Ismael said, “They are telling us this will influence the decisions they make.”

The YES campaign had anticipated the funds it raised in the early stages of the project would provide it with a kickstart to encourage smaller and medium enterprises also to open their doors to interns on short term work experience contracts. The 60 day DTI consultation process means a delay for the implementation of the project until June. “It’s not going to fly,” one CEO told me on condition of anonymity. Large companies are expected to engage actively with the DTI over the changes.

 Not that such journalism has ever swayed our esteemed Stalin disciple from straying off the path of completely destroying the economy.  But this time it might just have.  Last night I got an email from my friend Thinus with this article attached.

The Department of Trade and Industry (DTI) has agreed to remove an onerous bursary target previously set as a precondition for any firm seeking to receive empowerment credit for their participation in the newly launched Youth Employment Service (YES) initiative. In an unusual step, the department made the adjustment in the middle of a 60-day public-comment period.

I don't trust bolshie bob at all.  So I had to check - and it's true!

Preliminary comments received since the Gazette on 29 March 2018, are indicat-ing concerns regarding the proposed qualification criteria “11.2.1.2” which re-quires entities to score full points on the 2.5% target for “Skills Development Ex-penditure on Bursaries” in order to qualify for the Y.E.S BEE recognition.

the dti views the participation in Y.E.S to be in line with the objectives of B-BBEE policy and has keen interest that there be maximum impact resulting in empowerment of young South Africans. In order to create certainty and ensure rapid take up in Y.E.S, the dti has agreed to delink the Y.E.S and the Bursary target of 2.5%. This means that the Bursary contributions will not be a precondition to obtain BEE recognition as a Y.E.S participating entity.

This is a significant victory for business. I think it suggests that the presidency is listening to the challenges faced by business in South Africa.  bolshie bob lives in a red bubble, he seems to think that business has all the money in the world to subsidise his fantasies, perhaps Cyril has reminded him that he can't rule by decree.

However the underlying message here is that this 2.5% of payroll target is too high.  If the comments suggested that this was a dealbreaker then what these comments are saying is that the 2.5% of payroll is too much money.  And it is too much money.  This kind of money doesn't exist in the economy at the moment.  It might have been a better idea to set targets as a percentage of staff.  If you want an idea of how much money we are talking about take a look at this post from 2014.  These figures are from about 2012.  Standard Bank would need to spend about R400m on bursaries.  Even a mid size company would have to spend well into the millions.  And don't forget that black business doesn't have to contribute to this at all.

Comments are due by the 28th of May this year. My comments will be posted on this blog by next week.

Company	Salary bill	Target spend (6%)	Target bursary spend (2.5%)
Standard Bank	14 796 000 000	887 760 000	369,900,000
MTN	6 709 000 000	402 540 000	167,725,000
NASPERS	8 738 000 000	524 280 000	218,450,000
AECI	2 976 000 000	178 560 000	74,400,000
FirstRand	10 620 000 000	637 200 000	265,500,000
Telkom	9 861 000 000	591 660 000	246,525,000
Nampak	3 535 000 000	212 100 000	88,375,000
JSE	405 000 000	24 300 000	10,125,000
Nedbank	9 349 000 000	560 940 000	233,725,000

 

Rob Davies - Act 1 Scene 1 - the demise of white monopoly capital. A play in one scene

[Enter Post Title Here]

The scene – a room in a prime office in Meintjies Street Pretoria.  A nondescript bearded man in a Mandela shirt is reading the news online whilst he fondles his made-to-scale replica of Marx’s gravestone.

Man (muttering) – who the hell is Alan Hirsch anyway?  What does he mean the president needs to bear in mind that “more certainty is needed about policies on mining, land and black economic empowerment to encourage new investment.” There’s plenty of certainty, we have conducted empirical research – there is absolute certainty that the white monopolistic capital will fall and the economy will be nationali…………

The phone rings

Man – Davies.

Secretary – Minister, I have Twusi Vala on the line for you.

Twusi – hello is that bolshie bob, I mean minister davies?

Bolshie bob, emphasising the uppercase – it’s Minister Davies to you Mr Vala (under his breath – if I ever get my hands on that blogger who gave me that name, I’ll……..)

Twusi – listen minister I have a problem.  I own 100% of my business.  I was born in Hammanskraal and I employ skilled white people and foreigners and I can’t get a BEE certificate because my turnover is over R50m.  My clients don’t want to know me.  I’m non-compliant.

Bolshie bob – you know that you could implement all the other elements in the scorecard and get a good score – your ownership and management etc look  good.

Twusi – listen minister, I didn’t join the struggle to be poor.  Those elements are just too hard to implement.  They cost too much money and take much time.  Anyway how I am supposed to train black people if I only employ whites and foreigners?

Bolshie bob – our intention was always to favour you but only up to a poi……………………

Twusi – I don’t care. This is not fair – fix it otherwise I will raise this at the highest levels of government, I mean the ANC

The man returns to the article he was reading.

Bolshie bob – doesn’t this Alan Hirsch know that the Chinese are breaking down the doors to invest here – what policy uncertainty is this?

The phone rings again

Bolshie bob – Davies.

Secretary – Minister, I have Rivian Veddy on the line from Durban.

Bolshie bob – Rivian, so good to speak to you again

Veddy – cut out the small talk comrade minister.  I didn’t join the struggle to be poor.  I’ve been subsidising the rural house of zoomer for years. All I want in exchange is all the lucrative contracts in KZN.  This fucking Nene is now putting the brakes on my supply chain connections.  I need a BEE certificate.  I turnover close to a billion (that SARS knows about).  How the hell am I going to get that level 1 that I faked, I mean declared up until now.  Now it’s about checking financials and shit like that.  Have you seen how your revised codes have marginalised Indians?  I have a family to support and they are worth shit on your new scorecard.  The monarch from the rural house of zoomer is now demanding more cash and I can’t get this out of the state contracts that I am entitled to.  Get me a certificate now or I’ll take it up with the highest echelons in government, I mean the ANC.

Phone goes dead. Davies starts looking through his red rolodex.  The phone rings again

Secretary – Minister, I have Tendai Preneur on the line for you.

Bolshie bob – Mr Preneur, we’ve not spoken since Malusi naturalised you. 

Tendai – naturalised at great expense minister.  There isn’t a single verification agency that will recognise me as black now – in the past it was an affidavit.  Now I go for a verification and they tell me I’m white.  White!! Me!! – the closest thing I ever came to white was when I took that farm in Mazoe.  Now that bob, is he a relation of yours – what with you having the same first name, has been booted out of government in Zim I need to make my fortune here.  This is unacceptable.  Malusi does not come cheap and I’m still white!!!

Rattled the bearded man scrolls through his rolodex and calls his secretary.

Bolshie bob – please get the awesome awdoz on the phone.

Secretary – I think you mean the Acting BEE Commissioner, Minister

Boshie bob – that blogger again! if I ever get my red claws on him.  Yes her – I wish to meet the Acting BEE Commissioner urgently.

Five minutes later a knock is heard on the door.

Bolshie bob – come in.

Awesome awdoz – Minister, you called for me.

Bolshie bob – yes Commissioner.  We have a problem here.  I have just taken three phone calls in five minute, black business is revolting because they can no longer comply with the BEE codes because they are too hard or too complicated……..

Awesome awdoz – or it just takes too long to get a BEE certificate?

Bolshie bob – Exactly.  When we put these revised codes in place we designed them to make it almost impossible for white companies to comply so that we could give black business a hand up.  I never expected that these black businesses would get so much business and then turn over more than R50m.  That wasn’t the plan, they aren’t supposed to be emulating these white monopolistic capitalists.

Awesome awdoz – these white businesses are devious.  Do you know that they have found a way to get around the 51% ownership rule using the modified flow through principle.  Try as I might to discourage this behaviour they have carried on regardless. 

Bolshie bob – have you seen that some of these companies are doing better under the new codes than they did under the old codes.  This is an untenable situation – we need to punish them more.  Do you have any ideas

Awesome awdoz – we must get rid of the modified flow through principle resulting in instant promotion to a level 2 immediately.  But we can't leave it at that.

Bolshie bob – what else did you have in mind?

Awesome awdoz – let’s just promote large black businesses that turnover more than R50m to a level 2 or 1 so that you can appease your constituents.

Bolshie bob – awesome idea awdoz, I mean Commissioner (if I get my hands on that blogger).  But let’s not make it too easy for the white monopoly capitalists to get to that 51% black ownership level through some nefarious scheme.

Awesome awdoz – we could remove the modified flow through principle and insist that large companies undergo an ownership verification.  There’ll be no modified flow through principle then.

Boshie bob – exactly.  But why should we stop there?  I see the president has launched the Youth Employment Service.  Let’s bring that into the scorecard. Hell, whilst we are at it I think we should also get white business to fund tertiary education.  We need to make it a little costly so that they rapidly become financially unviable.  Do you see it Commissioner – we’ll crush white businesses with paperwork and expense.

Awesome awdoz (pondering) – I’ve got an idea.  How about we split up the skills development spend into two sections.  Half to be spent on black staff and the rest on bursaries. 

Bolshie bob – awesome plan aw… I mean Commissioner.  Maybe we should sweeten the deal a little. Not split it halfway – perhaps 3.5% on black people and 2.5% on bursaries.  Do you see the brilliance in your plan?

Bolshie bob does not wait for an answer

Bolshie bob – the 3.5% of payroll figure can be made up of internal spend and salaries.  The bursaries are a raw cost – straight off the bottom line.  I’ve heard that this will cost Standard Bank about R400m a year.  They’ll have to raise their bank charges to make up this shortfall.  We’ll create a black bank that doesn’t need to worry about these expenses that will undercut the large institutions.  We will be rid of white monopoly capital in a short time.

Awesome awdoz – splendid idea, those concepts had been bobbing in my mind for a while.  You’ve banged the nail on the head there Minister.  But what about the Youth Employment Service.

Bolshie bob – yes, the YES.  Hmmm – those white monopoly capitalists have been very reluctant to hire the black youth, that’s why our universities are full of disgruntled students.  Can we not tie the YES into this in some way?

Awesome awdoz – how about this for an idea?  We incentivise the white monopoly capitalists to embrace certain YES targets and they might be promoted a level.  They’ll never get to the levels that black businesses are automatically promoted to anyway – I say let’s leave them to employ the youth and black business can continue doing business.

Bolshie bob – I like that idea.  But we can’t make it that easy.  We need to put in a few punitive caveats………….

Awesome awdoz (jumping off the couch) – they can only be promoted if they get all the points for the bursaries!!!!

Bolshie bob – by Stalin, you’ve got it.  And the promotion to an extra level will be very attractive to 51% black-owned businesses too should they ever want to get to a level one.  We'll be seen as very fair and reasonable.

Awesome awdoz – thank you minister I’ll get onto drawing up the amendments to the BEE codes.  I suppose under Cyril’s government we’ll have to send them out for comment.

Bolshie bob – I suspect that we’ll have to read and consider the comments too. Sometimes I miss the last president.  Now if I could just get my hands on that blogger – I’d send him off to Siberia for a winter holiday……

The curtains come down to no applause – the play started four hours late and the audience had long gone home before the performance started.

Here we have a dominant political party with absolutely no clue how to retain its dominance

This is a short post but it will be followed up by a longer one.  bolshie bob published this document for comment.   

A few features

1. No more modified flow through for enhanced recognition as a QSE or EME.  This was to be expected.
2. Large enterprises (turning over more than R50m) who are more than 51% black owned using the flow through principle are now level 2 - and 100% level 1
3. They have added in  feature with benefits for making use of the youth employment service.  Don't mind that so much
4. They've split skills development up where companies can spend 2.5% of their payroll on bursaries for black people at higher education institutions.

There are a few other things but 2 and 4 take the cake.  Let's start with 2.  Black economic empowerment initiatives are now NO LONGER a black problem.  This a white issue.  Skills development etc - please, that's for the bourgeois whites. Black businesses don't need to worry about any of that stuff.  Why have they done this - simple the anc (back to lowercase) government need to get the eff off their backs by demonstrating that they too can be racists but perhaps in a more institutional fashion.  I ask the question - how is this country ever going to get over itself if it doesn't learn this everyone is responsible for it.  

And 4 - how much more blatant could you be?  They have no idea how to pay for university fees so they award BEE points for it.  Oh don't forget that black large businesses don't have to worry about this.  No! the education of the black youth who come out of a school system that has largely failed them, is not a black issue.  I probably wouldn't take such exception if it wasn't for the fact that the target is 2.5% of payroll - for Standard Bank with would be about R400m.  

We have sixty days to comment.  We need to stick together here - this is inequitable.  We've been run roughshod in the past because we didn't stick together.  If Cyril (clinging onto uppercase) wants to get us out of the hole that zuma put us into - he'd better come up with a better plan, this is not going to solve it

Send your comments here.  And don't not comment - corporate apathy has got us into this hole and there's not much ground left to dig a deeper hole

E-mail: [email protected]
Or
Attention: Jacques Manus
The dti Campus
77 Meintjies street
Sunnyside, Pretoria
0002
c/o BEE Unit
Private Bag X 84
Pretoria
0002
Enquiries: 012 394 5469