Paul Janisch

A reader writes. QSEs are falling by the wayside. Compliance is now out of the question

First Paul writes

These emails are very appreciated.  I sense that a largish court case could make its way in her direction soon. They are going to have to something about these codes – another verification agency told me that all the QSE’s they’ve verified have come up non-compliant.

Then the reader says

Yes I am seeing that a lot too. I am working on analysing my procurement spend for our rating, and I am seeing a large number of suppliers that were compliant QSE last year are now non-compliant or else level 7 or 8. A number of suppliers are just not bothering to get a certificate. Many of our generic suppliers have fallen several levels, and of course practically every certificate I have is invalid according to the Commissioner because it was issued against the old codes after 01/05/16.

Next year when all the old codes certificates have worked their way out the system and all certificates will be revised codes, I think everyone’s ESD score will look terrible, causing levels to drop significantly. It will become a vicious circle, dragging further down each year.

I would actually be delighted if someone takes her / the whole Commission to court.

Yes dear reader you are absolutely right.  If you look at the companies who have come up with a level one under the revised codes then you'll see that their procurement scores are high - and that's because procurement is measured using suppliers' old codes scores.  This is a very sound observation.  With scores dropping so significantly and the appetite for bolshie's bullshit waning we are looking at the somewhat early demise of empowerment.  awdoz can scream from the roof tops and the dti can claim racism and anti-transformationist behaviour  whilst the anc declares that white monopoly capital is the cause of all South Africa's ills.  (As an aside I saw dooso primero's cavalcade on the highway - he really does favour German colonialist vehicles.  What surprises me is that he only needs 17 and half of the traffic department.  He obviously is a very secure man basking in the love and adoration of his public.)

They can ruminate and swear and cry foul as much as they like, once you've lost the trust of the public you cannot legislate to get it back.  This is where bolshie bob is now - well almost.

What I don't understand is the endgame.  What is this commie hoping to achieve here?  Is he pushing for BEE's ultimate failure so that he can start nationalising all the businesses - or tightening the requirements to run a business so that all the anc cronies can take 51% of everything.  That's what the EFF would do.  My Cape Town area connection suggests that bolshie's intention is to exclude all less-than-51%-black-owned QSEs out of government procurement.  It's his way of ensuring that black owned businesses have a free reign on government business.  My experience shows that the smaller businesses in this country are far cleverer than bolshie thinks they are - they will survive, after all they employ the most people in this country.

This is why I am convinced this government is the most useless government that South Africa has ever experienced, and I'm talking ever.  The Nats were fascists that looked after their own through legitimate and nefarious means.  These morons have only got half of that right (and a handful of cronies is barely your own)  - if anything they have made life worse for their people.  It's wonderful to have a Ferrari that you don't deserve because it came through corruption - but not so wonderful to drive it on roads that are no longer maintained because you've killed the tax base.  

I don't expect them to listen to me, how can you listen to some white ponce who calls you a fucking idiot at every turn.  But I do have a vested interest in this country succeeding because my family has been here for hundreds of years. I have nowhere else to go.  If this country is to succeed then all of us need to make an effort of providing opportunities for the whole population.  You don't go about it under a cloud of red delusion.

 

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bolshie bob wants to revitalise apartheid legislation

They say that those in power eventually revert to the ways of their former opponents or oppressors. It was Pete Townsend who carved those immortal lines "meet the new boss, just like the old boss" into rock history in 1971.  This is an application of "the more things change, the more they stay the same".  bolshie (sad commie) bob has published a document for comment.  The document has a number of lofty ideals that include To specify Standards for Accreditation for a Rating Agency and To set Standards that will govern the B-BBEE Verification Industry.  It prescribes certain minimums of levels of skill and competence for practitioners - which will automatically exclude many in the industry (specifically that person who shoots his mouth off about things that he truly has no competence to speak of).  That's honourable and I see where bobby brown is headed there.  However he has taken a giant step backwards when it comes to who can play in the verification industry (this possibly might include consultants).  A leap so far back that it spans a distance of at least 106 years.

Our learned red man has proposed the following (page 15)

The rating agency in terms of this Statement must meet the following criteria:

8.7.1 To comply with the relevant Verification Methodologies as amended
8.7.2 To be verified as a Superior Contributor to B -BBEE  Level One 1 to Three 3 Contributor with at least 51 % Black Ownership utilizing the Flow Through Principle as per the Amended Codes of Good Practice within 12 Months of the final publication of Statement 005.
8.7.4 The B-BBEE Verification Professional Regulator will assess and analyse the B -BBEE Verification Certificate and Report of the Rating agency inclusive of all supporting documentation and evidence.
8.7.5 A Rating Agency needs to be verified against all 5 elements of the scorecard regardless of their size (EME, QSE or Generic - and start-ups)

And if you don't meet 8.7.2 

8.7.3 If the above is not adhered to Accreditation is automatically lost.

What the minister is proposing is that certain jobs that operate in the private sector are reserved for a certain class of company. In other words if you aren't 51% black owned as a minimum then you need not apply.  Simply put this is apartheid endorsed job reservation (here is an old Black Sash document on job reservation written in 1963) and it starts with a small industry like BEE verification and then extends to other industries.  What's stopping them from telling IRBA that all auditing firms may only be registered with them if they are 51% black owned.  Can they prevent other professions from belonging to critical societies or organisations because they don't meet an apartheid style criterion? Will they start allocating licences to operate based on racial grounds? They can and they will.

We've tried to stop this flagrant disregard for the constitution and the rule of law before, to no avail.  The mining industry stood up to zwane because he threatened the security of the industry.  And they will continue to do so.  davies is not in the same league of denseness as zwane but his systematic destruction of the economy through his badly thought out policies has gone unchecked, and for far too long.

You've got less than 60 days to submit your comments.  It's your livelihoods that are at stake here - do something about it.

Interested parties are requested to forward their comments in writing for the attention of the B-BBEE Unit to either of the following addresses:
1. Email - [email protected]
2. the dti Campus
77  Meint ies street, Sunnyside Pretoria, 0002
c/o BEE Unit
3. Private. Bag X 84, Pretoria, 0002
Enquiries: 012 394 3518.

What was that Pete?

DTI taking over verification, over my section 22

The news that the DTI planned to bring verifications in house was sent to me yesterday.  I immediately phoned Gerhardus Burger (who is no longer at IRBA) and we had a little chuckle.  The problem I had yesterday was that I didn't know who actually said that they would can verification agencies.  Lo and behold BDLive reported the following this morning

THE government will take control of the black economic empowerment (BEE) verification process to drive the creation of 100 "black industrialists" over the next three years.

Verification agencies will be downgraded to become "empowerment advisers" so that the private sector does not issue verification certificates to itself, the Department of Trade and Industry said on Thursday.

The department is aiming to address frustrations over the perceived slow pace of black economic empowerment (BEE), especially business ownership, and to correct empowerment policies seen to benefit "the few" and spur "rent-seeking".

The department would stimulate the creation of "black billionaires and millionaires" across all sectors of the economy, Deputy Trade and Industry Minister Mzwandile Masina told the first Black Industrialists’ Stakeholder Engagement forum at the Industrial Development Corporation’s (IDC’s) offices in Sandton on Thursday.

The department’s director-general Lionel October told the forum that BEE verification had become a "fly-by-night" business. The department was establishing a Broad-based BEE Commission to speed up empowerment processes in line with "instructions received from the executive".

Mr Masina, former national convener of the African National Congress Youth League, said BEE verification agencies undermined the government’s development goals.

It would seem that both Lionel and Masina said it.  That's one for the books.   If you read the whole article then you'll see that this is just political posturing - my experience of Lionel is that he probably believes what he says, but this Masina-vent is talking not as a minister but as an ANC propagandist, and if you consider that he comes from the youth league then sense, logic and forethought are completely irrelevant.  Viz

Mr Masina criticised the Treasury for being out of step with the process of empowerment. "National Treasury is not in the space of transformation but in the space of the public purse — this needs to change. We will continue to pursue National Treasury and the government to make sure transformation takes place," he said.

Black industrialists had to do business with the rest of Africa, and take part in the entire productive value chain, Mr Masina said. "We want set asides for black people — we see it in a lot of countries, why not South Africa?"

Here is the deputy minister criticising Treasury who control the PPPFA.  We assume that Nene is not going to budge on the PPPFA just as Pravin didn't, the DTI would know this.  So now they are purporting to be champions of elite black industrialists.  I think he was talking to an audience that wanted to hear what he had to say.  Good DTI bad Treasury

Let us assume that they actually go ahead and do this, forcing about 300 verification agencies to become "empowerment advisers" and not "fly by night" operators (with a substantial reduction in jobs).  They would need to justify this in terms of section 22 of our Constitution (that the government rarely consults when it legislates).

Every citizen has the right to choose their trade, occupation or profession freely.  The practice of a trade, occupation or profession may be regulated by law.

What Masina is actually doing is arbitrarily denying a few thousand people the right to work in a profession/occupation they have chosen.  I am almost sure that you cannot terminate this with the stroke of a pen.  I am even more convinced that if they do then there will be a legal challenge.

The second part of my scenario suggests that they succeed under section 22 and go ahead with the DeTrImental Verification Agency.  This is what we know we can expect.

• Sheer incompetence.  I'd love to say that it's beyond anything you can imagine, but the DTI continuously plumbs depths of incompetence so we can definitely imagine it
• Under staffing (coupled with incompetence)
• Yearlong backlogs.  Maybe that's too short.  Think CIPC which is adequately staffed
• More incompetence
• Longer backlogs
• Very few certificates being issued
• Rampant corruption
• Even more incompetence
• Incompetent corruption
• More backlogs

Eventually business is going to have to continue without BEE certificates because they just can't be issued.

I don't think we should take Masina's comments seriously.  It would however be nice if he could speak as minister and not as an ANC cadre, but that is wishful thinking.

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Less than R10m turnover and an EME, I don’t think so

This is an email from the procurement department of a big company that was sent to me. I forwarded it onto Gerhardus Burger, IRBA's BEE guy,  because the company wanted SANAS-accredited certificates and not IRBA ones. The italicised paragraphs are Gerhardus' responses.

Please be informed that as one of OUR supplier (sic), I request you to forward me your company's new, valid BEE certificate.

For entities with an annual turnover of less than R 10 million I require a letter written by the registered Auditor or Accountant confirming that the entity earns an annual turnover of less than R 10 million for the previous financial year (based on which financial year end?). The letter must be signed, dated and contains the Accounting Officer's practice number.

The only Sector Code that requires a "letter" is the AgriBEE Sector Code. The other Sector Codes and the "generic" 2007 Codes require EME certificates, not letters. The threshold is R10m revenue, not turnover – in terms of the Amended Codes, which are not effective yet. The Amended Codes provide no authority / mandate for anyone to issue EME certificates. If YOUR COMPANY is subject to the FS Code for their own B-BBEE certificate, which is based on the 2007 Codes, then why do they require their suppliers to apply the Amended Codes?

In case YOU have decided to apply the Amended Codes, and not the FS Code, then I would like to know why they do not apply the Amended codes appropriately, by requesting suppliers only to provide YOU with an affidavit, as stated in Par 4 of Statement 000 of the Amended Codes?

If you need an EME certificate, then you need to apply the 2007 Codes, which threshold is R5m revenue. There are different thresholds for different Sector Codes.

For Entities with an annual turnover between R 10 - R50 million I require a BEE certificate from their SANAS Accredited BEE Rating Agency to confirm the rating

For Entities with an annual turnover of over R 50 million I also require a BEE certificate from a SANAS Accredited BEE Rating Agency.

In terms of Statement 005, B-BBEE Approved Registered Auditors are also authorised to issue B-BBEE verification certificates, since the end of 2011. Why is YOUR COMPANY not aware of this yet?

Also, i.t.o. the Amended Codes, par 5, a QSE that is at least 51% Black Owned, is also exempt from measurement and only has to provide a sworn affidavit.

It would seem that this company (and it is a large one and subject to the FSC) is now requesting BEE certificates in terms of the revised bollocks codes. You'll notice that Mr Burger splits hairs in a variety of places, but the reality is that he has to. The auditing profession is regulated and subject to international guidelines, IRBA has become very fastidious in its definitions and framework for this reason. Split hairs aside he makes some very valid points – if you want a BEE certificate then it must be issued by a third party. The EME requirement under the revised codes is an affidavit, not a certificate issued by a VA or BAR. It is for this very reason that IRBA has informed its BARs that they may not issue EME certificates under the revised codes. And this is half the complication. The various IRBA BARs that I know will not only not issue revised code EME certificates, they won't accept EME affidavits either. And seeing that BARs outnumber VAs significantly it's fairly safe to say that that few companies will accept affidavits.

The second issue (other than SANAS) is that this large company has adopted the turnover thresholds of the revised codes. This is very confusing for their suppliers for a variety of reasons.

Firstly – to the best of our knowledge the brains trust at the dti (a department with 100% vacancy) hasn't actually published a QSE scorecard

Secondly – no sane company is going to attempt using the new codes because they don't make sense

Thirdly – Rob is a nasty communist

Fourthly – his department is incompetent

Now that I've expressed that…………………….

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Does the Mining Charter have any teeth? Written by Allan Reid via BDLive

It's not often that I post an entire article. This is one of the most thorough analyses of the Minerals Charter. It was written by Allan Reid, who is a director and head of mining at Cliffe Dekker Hofmeyr. It was lifter wholesale from BDLive this morning. I have marked those points that I think are still relevant.

AS MORE and more mining companies are put through their paces during charter audits by the Department of Mineral Resources, the outcome of the participation process for the Mineral and Petroleum Resources Development Amendment Bill assumes greater and greater importance.

Compliance with the Amendment of the Broad-Based Socioeconomic Empowerment Charter for the South African Mining and Minerals Industry (known as the Mining Charter) and its precursors has been and remains a material concern for mining companies in South Africa, especially its provisions for black economic empowerment. However, as matters stand, a breach of the charter alone cannot result in the cancellation of a properly granted mining right.

Will the bill, if enacted, give Mineral Resources Minister Susan Shabangu the power to cancel a mining right in the event of noncompliance with the charter?

Clause 2.9 of the charter provides that "every mining company must report its level of compliance with the Mining Charter annually, as provided for by section 28(2)(c) of the Mineral and Petroleum Resources Development Act". It is interesting that neither clause 2.9, nor any other clause of the charter, refers to the scorecard attached to the charter. The purpose of the new scorecard is therefore unclear. Moreover, the ownership element requires only a "yes" or a "no" response, is given no weighting whatsoever and there is no indication in either the scorecard or the charter of the consequences of a "no" response under this column. The scorecard is consequently too vague for legal efficacy. It is only under the provisions of section 47 of the act that the minister has the authority to cancel a mining right. Section 47 does not refer to noncompliance with the charter. Although it does refer to conducting mining operations in contravention of "this act", by no interpretation can the charter be considered as being covered by the definition of "this act" and, consequently, section 47(1)(a) cannot be applicable to a contravention of the charter.

Clause 1(zA) of the bill seeks to overcome this enforcement difficulty by extending the definition of "this act" to include not only the charter, but also the Codes of Good Practice for the South African Mineral Industry and the Housing and Living Conditions Standards for the Minerals Industry. In addition, it seems likely that a section 25(fA) will be added to the act, specifically requiring the holder of a mining right (but not a prospecting right) to comply with the charter. This would appear to empower the minister to institute the cancellation provisions of section 47 for any noncompliance with the charter, the codes or the standards.

The charter, the codes and the standards are first and foremost documents of policy. They were not intended, nor were they drafted as instruments of legislation. Moreover, their content is sometimes contradictory and uncertain. Consequently, and leaving aside the possibility that the charter is itself ultra vires, giving these documents the force of primary legislation would be unconstitutional for vagueness as contravening THE RULE OF LAW PRINCIPLE OF THE CONSTITUTION. It is regrettable that the department has ignored the criticism of the Supreme Court of Appeal and seeks to give policy the force of legislation. It opens up a whole new area of uncertainty within the act. This is particularly so for mining companies which, under previous versions of the charter, received credits for black economic empowerment deals concluded by them.

Under the present Mining Charter, such companies can claim such credits only if these transactions were concluded before the act came into force. This is absurd given the fact that such transactions were done specifically to earn credits for purposes of the act. Clause 2.9 of the Mining Charter gives the department the ability to take into account, in its monitoring and evaluation function, the effect of material constraints that may result in a company not achieving its compliance targets.

Whether the department's changing of the rules by which mining companies must play would constitute a material constraint is unlikely. More likely, however, is that the Constitutional Court will have the final say in whether the charter does have teeth.

The italicised, boldened and underlined sentence rings ever truer for Rob's latest codes. The Rule of Law Principle of the constitution that is referred to above is discussed by the Institute for Accountability in Southern Africa (IFAISA) – Advocate Paul Hoffman's public interest group.

Defining the rule of law has proved to be a policy laden and tricky affair since time immemorial. The most comprehensive and internationally acceptable definition is that of the World Justice Project, which is dedicated to advancing the rule of law around the world. As used by the World Justice Project, the rule of law refers to a rules-based system in which the following four universal principles are upheld:

• The government and its officials and agents are accountable under the law;
• The laws are clear, publicized, stable and fair, and protect fundamental human rights, including the security of persons and property;
• The process by which laws are enacted, administered, and enforced is accessible, fair and efficient;
• Access to justice is provided by competent, independent, and ethical adjudicators, attorneys or representatives, and judicial officers who are of sufficient number, have adequate resources, and reflect the makeup of the communities they serve.

Now go back and take a look at gazette number 36928 and compare it to the four principles contained above. These codes cannot pass the first three universal principles. And again I have to ask the question, why are we tolerating this? The miners aren't tolerating this vagueness anymore, they are willing to go to the Constitutional Court for clarity on the "once empowered, always empowered" principle. They are up against the MRD who claim "once empowered, not always empowered". There was an article a few years ago where Susan Shabangu callously told the press that if a black shareholder exits a mining deal then they need to do another one. There'll be more on this once empowered principle in my next post.

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