Archive for category Charters
Dear Minister
Posted by Keith in BBBEE Knowledge, Charters, Fronting, Sarcasm, True Empowerment, Verification, politics on March 9th, 2011
Dear Minister,
Please advise urgently.
My client is a QSE BEP. If he follows the BEP scorecard his ED target is R22 500 because ED is based on leviable amount. His SED target is R11250.
If he follows the codes of good practice his ED target is R2800 because we will use indicative profit and R1400 for SED.
If he follows the BEP scorecard he will need to pay R33 750 for both ED and SED, but if he follows the codes his cost is R4200 – a differential of R29 550.
Since the dti and SANAS are still seeking clarity, apparently now from the DG, and you have not any statement either, I need to know if the dti will condone my client following the codes that most suit him. The precedents have of course been set and we all know that SANAS will not regard this as a non-conformance and dti will not withdraw the certificate…….
On the other hand I’ve got some clients who are NOT in the construction sector but tend to like the lower adjustment for gender so are going to follow the construction/BEP codes. Is this also okay?
I know of a company that signed the final gazetted forestry charter but wants to follow AgriBEE and will use generic until that happens. Is this ok?
Now that I think of it, another client who has a turnover of over R1billion would like to follow the QSE scorecard for tourism. Also, a difficult client (you know how clients are) likes the Construction generic ownership element, the freight transport management control (for QSEs), the codes for EE, the QSE codes for Skills, and forestry for the other elements. Can I please have special permission to change the codes to suit my difficult client? He also wants to use a verification agency that had a pre-assessment letter in Feb 2010 but has now expired.
Another client would like to use ArcelorMittal as their verification agency. According to SANAS, ArcelorMittal has been accredited (for legal metrology, specifically weighing instruments), and the client feels that since ArcelorMittal, like SANAS, has no BEE certificate, they are a good organisation to do their BEE verification. Is this possible?
Minister, in any event we know that the dti/BEE Council will never be able to identify and really does not care about fronting, but being law abiding I’d like your approval to recommend fronting to my clients, who are being hamstrung by my honesty.
Yours sincerely
Keith
FSC gazetted as per Section 9(5) of the act
Statement by Keith Levenstein, CEO of EconoBEE.
The dti minister, Dr Rob Davies has issued a new draft of the Financial Services Charter. The FSC is gazetted in terms of 9(5) of the B-BBEE Act. This means that the public has time to comment on the charter, and the minister can shortly – in as little as 3 to 4 months time issue the charter as a sector code. When it becomes a sector code it will apply to all in the financial services industry – banks, insurance companies, brokers, bond originators etc. Until it is gazetted as a sector code, those affected companies will use the code of good practice.
The FSC is being gazetted in two phases, and only phase 1 has now been gazetted.
A detailed scorecard will be published in phase 2.
One of the controversies around the gazetting of the codes was the ownership level, where targets have been set at both 15% (direct ownership) and 25% (indirect ownership). 25% is the target used by the codes of good practice.
The FSC creates the concept of a QSFI – as opposed to a QSE. A QSFI is a qualifying small financial institution with an annual turnover of less than R35 million or investments of less than R50 million. QSFI’s must choose 5 of the 7 elements.
The EME concept remains – turnover of less than R5 million.
“We welcome the issuing of the FSC. It removes confusion about the status of the sector codes. The phrasing shows that the FSC is now becoming more true to the codes – which was not the case with older drafts. The differences are based on specific differences in the financial sector, which is exactly the purpose of the sector codes. We hope that this will encourage true transformation, and at the same time eagerly await the reconciling of the PPPFA with the B-BBEE codes as this will remove the last major hurdle in implementing empowerment and B-BBEE properly.
We turned away business
Getting and customers and keeping them and making profits is as important to us as anyone. We received a request from a client to produce their EME documentation. As part of the process we ask the client to supply their turnover and industry. It turned out at the client is in the built environment (the generic term for quantity surveyors, architects and other professionals involved in the construction industry, but not construction itself).
The EME threshold for EMEs in the built environment is not R5 million, but R1.5 million. We had to go back to the client to confirm that their turnover is this case was below R1.5million, which it was not. The client was still quite keen for us to produce the documentation, but we knew that this was wrong, and explained the new situation to the client – that it would have to produce a scorecard and get it verified based on the construction sector codes. We obviously agreed to refund any monies paid to us, but would hope that the client would return in the near future to attend a training course or ask for consulting to help build up their scorecard.
Further comments on the new mining strategy
Posted by Keith in BBBEE Knowledge, Charters, True Empowerment on July 2nd, 2010
I still feel that the new mining transformation strategy falls short of broad-based aspects. They don’t emphasise all the other elements sufficiently, and there are still too few objective measurements.
They do concentrate ownership – the target is for 26% of the mining industry to be in black hands by 2014. This is not unreasonable. When analysing targets I always look at demographics, and the facts remain that whites make up 10-15% of our population. The target for mining is for 74% ownership of mining assets to be in white hands, because only 26% is to be in black hands.
Look at it again: The policy is for 10% of the population to hold 74% of mining assets in the country. If there can be a criticism of the new policy many will say that this is far too generous. The policy is for 85% of the population to hold 26% of assets. So, from the viewpoint of a member of the population in the privileged group, i.e. one who is part of the 15% and is expected to hold ownership rights of 74%, this is extremely generous. From the viewpoint of a member of the population in the non-privileged group, i.e. one who is part of the 85% and is expected to hold ownership rights of 26%, this does not go nearly far enough.
The saddest part of all is that the non-privileged group has so far not come close to achieving those targets – ie. 26%. It will be a huge strain to achieve that targets by 2014, which is why the targets are not far higher, as many would expect.
Question to ask: Why has it been so difficult to reach targets? How can we ensure that targets for 2014 will be reached?
Some of the answers are self-evident: The owners of mining assets are those that have historically owned mining assets: 10-20-50-100 years ago mining houses were dominated by white families, and those families remain shareholders in mining assets today. Mining requires a lot of money – one cannot start a mine with little finance, and a spade. It only works only on huge economies of scale. Unfortunately, the non-privileged group has also traditionally had no access to finance, and with a low disposable income stills struggles to raise finance.
To even reach the 26% target will be very difficult due to lack of finance, or the knowledge and track record of knowing how to raise
There are of course huge opportunities for the privileged group, and anyone who has access to finance.
New Mining Charter released
Posted by Keith in BBBEE Knowledge, Charters, True Empowerment on June 30th, 2010
The minister of mineral resources has released the latest mining charter. See http://www.buanews.gov.za/news/10/10063015151001
My only comment before I get down to studying it in great detail is: Why on earth can the mining charter not fall under a charter as contemplated in the B-BBEE codes of good practice?
The new charter still has no relevance to the B-BBEE codes: It was produced and is controlled by the department of mineral resources. It does not use a scorecard. It does set some targets, but nowhere as clear as the B-BBEE codes. The B-BBEE codes allow for charters, so why can’t the mining charter be aligned to the codes and gazetted? Cynics will say that the dti is too slow. Cynics will say that the B-BBEE codes are not good enough for the mining industry. My cynic will say this is the same governmernt we are dealing with and there is no reason why different departments and ministers should not be consistent. If the dti is not good enough, why is it managing the rest of the codes. If is good enough why does the dept of mineral resources not ask the dti to do the job? If the dti’s mandate does not apply to the mining industry why not? If the B-BBEE codes do not apply to the mining industry, why can’t they. If the mining industry has a better set of codes or transformational policies, why does the rest of South Africa not adopt it, and the dti then follow the mining industry?
The main point here is consistency, and by not being consistent the government causes confusion and this fosters excuses to not comply with any of the legislation.
And guess what? The level of compliance remains extremely low.
Article in Business Report
Posted by Keith in Accreditation, Charters, Verification on February 1st, 2010
I’m quoted in today’s Business Report. (http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=5333926).
The articles discusses the problems of a small number of verification agencies that have to verify potentially 500 000 companies.
It also raises the issue of how a company in a gazetted sector code can obtain a valid certificate since there are no agencies accredited to verify those sector codes.
We have asked the same question of both SANAS and the dti.
Their answer is below: (Hint don’t look below – they didn’t bother to respond).
The big question – extension or no extension
Posted by Keith in Accreditation, BBBEE Knowledge, Charters, Verification on January 29th, 2010
Today is the last working day that “non-accredited” verification agencies are entitled to verify BEE certificates.
According to the minister’s last notice in July 2009, from end of January only accredited agencies or those in possession of a valid pre-assessment letter will be able to issue valid certificates. Prior to this “non-accredited” agencies were entitled to issue verified certificates.
There are currently 27 accredited agencies and 8 agencies in possession of a pre-assessment letter. Of those 8, 5 have letters expiring in February.
This small group is expected to perform verification of the entire population of companies that want a verified certificate. It takes an individual analyst at least a day, and sometimes a lot longer to perform verification.
At the same time no agency is entitled to verify scorecards of companies in the tourism, construction, forestry and transport industries because they have their own sector code, and no agencies have been accredited by SANAS for those sector codes.
What does this mean? The agencies will never be able to handle the expected load, or else the expected load will be far less (resulting in lower compliance). Half the economy will be unable to even get a verified certificate due to no agencies being accredited to do the job.
In July 2009 the minister issued a notice extending the period to end January 2010.
Is he going to give another extension? Will he this time choose to define what constitutes a “non-accredited agency”?
Tourism Sector Code Salient Points
Posted by patience in BBBEE Knowledge, Charters on September 18th, 2009
The Tourism sector code is based on the Codes of Good practice, however it has some differing weighting points, targets and definitions. The Exempt Micro Enterprises have a reduced threshold of R2.5 million and not R5 million. They enjoy automatic BEE level 4 and those, which have more than 50% black ownership, are elevated to a Level 3. The Qualifying Small Enterprise (QSE) threshold is between R2.5 million and R35 million, whilst the Generic threshold is above R35 million. The Tourism sector code has a two-phased approach, points and targets for 2012 and 2017
The main acclamation of the Tourism sector code is the prominence of skills development, which we believe should be the foundation that will spearhead Broad Based Black Economic Empowerment. The sector certainly took heed of Zuma’s emphasis on training and skills development as the cornerstone of transformation in the country. The skills development element now has 20 points, which is the highest on the scorecard until 2012. The sector code recognises the skills shortage in the country and that all the other elements of Broad Based Black Economic Empowerment can easily be achieved if the nation has skilled employees.
The reduction on the ownership element weight and targets affirms the need to shift focus from the ownership element to other elements of true empowerment. Ownership targets for the period up to 2012 for both QSEs and Generics was reduced from 25% to 21% and ownership fulfillment, net value and the bonus points were removed. The weighting points dropped from 28 to 25 for QSEs and from 23 to15 for Generic Companies. However there was a regression on the preferential procurement element, which was reduced from 20 to 15 points and Enterprise development, which was slightly reduced from 15 to 14 points.
Socio-economic Development points increased from 5 to 8 and included two additional indicators. A drive towards the inclusion into the mainstream economy of the black unemployed school leavers without work experience was included. Enterprises in the sector are encouraged to employ black new recruits with no prior work experience and the target is 10% of all new recruits. Furthermore if the enterprise is a TOMSA (Tourism Marketing South Africa) levy collector it earns 3 additional points.
EconoBEE assist companies to understand the B-BBEE codes and to produce and improve their scorecards through workshops, EconoBEE V3 Scorecard software and BEE managed services.
No more BBBEE Excuses – Why wait for a BEE charter?
Posted by Gavin in Charters, Scorecard points on August 24th, 2009
BBBEE, is a brilliant act. It consolidates, objectively the performance of various elements to determine how compliant a business is. With such a fantastic system many businesses still use the BEE charters as an excuse.
This is an extract from the SA CORPORATE REAL ESTATE FUND Unaudited Interim Results And Distribution Declaration
EMPOWERMENT AND TRANSFORMATION
There are certain elements of the DTI codes that the Fund is unable to comply
with due to legislative restrictions that are placed on the Fund via the
Collective Investments Schemes Control Act. The Fund will obtain an official
BBBEE rating once the Property Sector Charter has been gazetted under Section
9(1) of the BEE Act.
In terms of its internal review and rating process that has taken place, the
Fund has made positive progress, particularly in the category of preferential
procurement.
The BEE scorecard never intended a company to earn all their BEE points (at least at this point in the process), it intendeds them to earn as many as they can and then over the years improve that score. Preferential Procurement governs this in that a supplier is likely to get business if they have the highest score which in some industries is lower than others.
It is a terrible excuse to wait for a Property Charter and not get a scorecard. Why choose not to produce a scorecard. The only practical sollution is, earn as many points as they can and then if the property charter is gazetted show a significant improvement in their score. In any event the BEE Codes of Good Practice are clear, they must use the Code of Good Practice until their property charter is gazetted.
I see this ultimately as an excuse, not to transform, rather than a genuine attempt at true transformation.
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