Archive for category General
Journalists!!!!
Posted by Keith in BBBEE Knowledge, General, Marketing, True Empowerment on July 5th, 2010
Sometimes journalists annoy me! There is a story on ITweb (http://www.itweb.co.za/index.php?option=com_content&view=article&id=34554:telkoms-empowerment-shrinks&catid=118&Itemid=66) discussing Telkom’s empowerment credentials. Their one big empowerment investor, The Elephant Consortium has sold its shares. The headline of the story is “Telkom’s empowerment shrinks.”
Now, most journalists spend their time moaning about these ownership deals, and criticising the enrichment of some people. Yet, when an opportunity presents itself, the journalist chooses to put a negative spin onto the fact that Telkom has lost some of its black shareholding. One would think this is a good opportunity to suggest that Telkom spend more time, effort and money on the other 6 elements.
In the meantime the journalist did not analyze the affect on the Telkom scorecard of this sales of shares: Since the consortium owned shares for 5 years, the recognition of ownership after loss or sale of shares comes into place. Their scorecard will not be too badly harmed. In any event they only earned 15.39 points on ownership, out of 73.21 points. It will be very easy for Telkom to remain a level 4 company. They only earned 5.3 points on ED, so achieving full marks on ED will automatically help them reach level 4, despite losing all ownership points, which will not happen anyway.
A better approach by the journalist could have been – “New enterprise development opportunity for small IT firms looms now that Telkom has to make up points lost on the sales of shares!!”.
The cost of BEE compliance
Posted by Keith in Accreditation, BBBEE Knowledge, General on July 5th, 2010
Many people ask us what the cost is of becoming B-BBEE compliant. It is a bit like asking “How much does giving your children a good education cost?.” Most people will agree that a good education is an investment in your children’s future and not a cost at all.
We can identify various types of costs in becoming BEE compliant. Costs depend on the size of business, the type of business and the level of compliance required.
These are direct costs and indirect costs:
Direct Costs:
1) The cost of a consultant
2) The cost of obtaining your verified certificate
3) Direct costs in earning points
4) The cost in time and effort in carrying out the activities needed to earn points
Indirect costs:
The cost of getting BEE compliance wrong
1) The cost of a consultant:
A business needs to learn about BEE, in order to implement BEE properly. This could be a little as a R1200 training course, to multiple seminars. On-going consulting, for the first couple of years is usually a good idea, and can cost from R1500 per month to R5000 for a large business.
2) The cost of obtaining your verified certificate:
Verification agencies charge based on the annual turnover of the company and expected time and difficulty of performing the verification, including taking into account the number of employees and branches. Verification costs start at R6000 going to R50000 for large companies and much more for giant corporations. This is an annual expense.
3) Direct cost in earning points:
Some elements – enterprise development and socio-economic development have specific targets, based on spend compared to net profit after tax. A small business (QSE) needs to spend 2% of net profit after tax in order to earn 25 enterprise development points, and 1% of net profit after tax in order to earn 25 socio-economic development points. If a company makes R1million net profit after tax, it will need to spend R30000 to earn 50 points on enterprise development and scico-economic development. If it spends less it will earn points pro-rata, Skills development requires the same small company to spend 2% of its total payroll on training.
4) The cost in time and effort in carrying out the activities needed to earn points:
There are costs in producing a strategy and collecting documents to be verified. Procurement has no financial target but requires a company to collect BEE scorecards from its suppliers and to calculate its procurement spend with each supplier. This is a time consuming task for large companies but could be quick, easy and no cost for small businesses that have one large supplier with a good BEE score.
Some costs, like assisting enterprise development beneficiaries can be offset against direct costs (see (3) above).
5) The cost of getting BEE compliance wrong
BEE, like your child’s education should be an investment and achieve its goals. A good BEE strategy and implementation should achieve more sales and profits for the business and a higher equity value for the shareholders. If it does not, then at best you have wasted lots of money, and at worst the business itself is at risk of failing.
Getting it wrong could imply that the business has not reached the level of compliance required by customers, or that the level is lower than the opposition that will get more business to the detriment of your business. It could imply that the overall strategy was wrong, and costs the shareholders money or equity that does not give the required return on investment. For example if the shareholders sell equity to a black partner, but do not earn the maximum points, or price the deal to low.
Conclusion:
The above all depends on the size of the business and the importance attached to BEE by the company shareholders and directors. A business with an annual turnover of less than R5 million needs only to produce a document stating this. If produced by an accountant, consultant or verification agency this is about R750 – once-off expense, though many business people have learned how to write up the required documents – effectively at no cost.
Referees vs SANAS re-visited
Posted by Keith in Accreditation, General on June 28th, 2010
After watching the Germany/England match with its atrocious refereeing, I have to take back what I said about SANAS. I asked tongue-in-cheek if SANAS accredited FIFA referees. However SANAS are not as bad as the referee, or as bad as FIFA that refuses to investigate or overrule any referee decision. I think the result – Germany winning – was the right outcome as in my opinion Germany were the better team, but referee mistakes leave a bitter taste in the mouth.
I have never been a soccer fan – I personally enjoy watching rugby more, but I fully support the World Cup in South Africa. However the matches, and the irritating prima donna players and poor refereeing, and very aggressive FIFA attitude has not succeeded in converting me to a die-hard soccer fan. After the World Cup is over I’m not going to be a follower of Ronaldo, Messi, etc
The analogy to B-BBEE is right here: Just as I think that FIFA should do everything in its power to bring soccer to the people, and get even more support, the same goes with government, dti and B-BBEE. We need to do everything in our power to show the benefits of BEE and encourage everyone to be as positive about BEE as possible. We should give support to those organisations trying to become compliant. Government should lead the way by encouraging/rewarding companies rather than making life even more difficult for them. And yes, SANAS, or the new accreditation agency appointed to replace SANAS must do a better job.
Does SANAS accredit football referees?
I’m amazed how how different referees handle different games. Many of us believe that the Bafana Bafana vs Uruguay game was badly refereed. The Uruguyan player was offside before he took the ball into the penalty area and was fouled by our goalkeeper. The referee saw it the other way. Another referee never penalised Thierry Henry for handball in the game against Ireland and instead awarded a goal.
There is very little consistency about refereeing decisions. Even the same referee will see different players differently and award a free kick or even a red card, when a bit later on, he will have no problem with a similar incident.
The players now know very well how to play the ref – how to fly theatrically through the air in the hope of getting a free kick. How many times do you see both players claim the free kick, or the throw-in or the corner?
How many times have you seen a referee reverse his decision? The players crowd around him and argue for ages, but he will not even look at the big screen and even if he has made a mistake, is unlikely to reverse the decision, even if he knows he had mad a mistake. The biggest concern is refereeing is inconsistent, and referees do not always apply the law properly.
The only conclusion I can come to is all referees have been accredited by SANAS. That would explain a lot!!!
Update – SANAS B-BBEE Scorecard
Posted by Keith in Accreditation, General on May 4th, 2010
Christinah of SANAS called me to discuss my request for their scorecard. She said they used to have a scorecard, self assessed, but when the minister issued his notice that self assessment would not be valid after August 2009, they discontinued self assessment as they were not sure how to proceed. The feel they are in a difficult position because of a conflict of interest with the verification agencies and would not want to favour one agency over another. She promised to raise the issue again with her CEO, and see how they can find a way to produce a BEE scorecard.
NONSENSE:
SANAS are the organisation responsible for accrediting agencies. If they don’t know how to get their own scorecard, they don’t deserve to be the accreditation system for BEE. Christinah kept referring to the BEE unit (presumably of the dti) who they look for to guidance. Strange, when we talk to the BEE unit, they refer us to SANAS.
In any event, there can be no conflict of interest with SANAS choosing an accredited agency: They will have to put out a tender looking for an agency. They will indicate in the tender the exact requirements and the method of rating and then choosing an agency. e.g. lowest price, BEE credentials, proximity to their offices. The tenders will be opened in a transparent manner, and the tender awarded fairly. If they have a complaint or appeal against the agency doing the work, they can do this without involving the personnel of the BEE accreditation division at SANAS. The R-47 document clearly explains to verification agencies how to avoid conflicts of interest. Since SANAS use the R-47 they surely know how to avoid conflicts of interest.
More relevant is the BEE division is a very small part of SANAS. SANAS also does work with Calibration Laboratories, Legal Metrology, Certification Bodies, Medical Laboratories,Inspection Bodies, Blood Transfusion Services, Proficiency Testing, Pharmaceutical, Testing Laboratories, Veterinary. Verification agencies have managed to appoint their competitors to do their verification for them, so there is no excuse for SANAS not to produce its own scorecard.
Where is Government’s commitment to B-BBEE?
Posted by Keith in BBBEE Knowledge, General on May 3rd, 2010
The codes ask measured entities to produce a scorecard based on the codes of good practice. The driving force behind the scorecard is to enable the measured entities’ customers to benefit from a scorecard produced by its suppliers. It is entirely voluntary to comply! No one will be breaking the law if they do not produce a scorecard.
In the case of government: Do government agencies, department, public enterprise NEED a scorecard? The law here is ambiguous. Government is definitely included in the transformation process. Section 11 of the B-BBEE act – Strategy for broad-based black economic empowerment states that the strategy must “provide for a co-ordinated and uniform approach to broad-based black economic empowerment by all organs of state, public entities, the private sector, non-government organisations….”
Procurement from government is almost entirely EXCLUDED from the procurement calculation. Most companies will not ask for a scorecard, for example from the constitutional court as any spend is excluded from their procurement calculation because the Constitutional court is on schedule 1 of the Public Finance Management Act. Spend from other government/local authorities e.g. a rates from a local council appears to be excluded because that local authority is a statutory or regulated monopoly, so the customer will not ask for a scorecard.
Code 000, paragraph 3 of the Codes of Good Practice lists the entities that are measurable under the codes:
3.1.1 all public entities listed in schedule 2 or schedule 3 (parts A and C) of the Public Finance Management Act
and
3.1.2 any public entity listed in schedule 3 (Parts B and D) which are trading entities which undertake any business with any organ of state, public entity or other Enterprise
Is the government enterprise therefore EXEMPT from BEE? These are the terms we often hear. No one is exempt! Some companies may be regarded as exempt micro enterprises (EME), but that does not automatically make them “exempt”. Similarly a government enterprise is never exempt other than if it is an EME, and it is only “exempt” if it produces a valid EME certificate.
Must government therefore produce a scorecard for each division, aspect of government? They will not be breaking the law if they do not supply a scorecard/certificate on demand, and this is irrelevant if procurement from that department is EXCLUDED or not.
Now we have over 12000 valid certificates from companies that CHOSE to produce a scorecard – and none would have been breaking the law if they had chosen not to. We have no certificates on file from government departments, local authorities etc. We do have certificates from SAA, TELKOM, ESKOM, SABC.
We don’t have certificates or scorecards from ACSA, the Presidency, the dti, or any dti organisations such as the Competition Commission, CIPRO, NEF. We have not seen certificates from NERSA, ACASA. The dept of Manpower whose director general, Mr Jimmy Manye, is very vocal about the slow pace of transformation has also not moved very fast in producing their own BEE certificate. The City of Johannesburg has no scorecard. The City of Cape Town, run by the official opposition has no scorecard. The SA Reserve Bank has no BEE scorecard.
The above organisations will say that they are “exempt” – which is not true. Procurement from them may be excluded. None are exempt! Like every enterprise in the country they do have the discretion of not producing a scorecard. They have used that discretion. Not much of a commitment!
Finally, we have yet to see a certificate from SANAS or The BEE Council.
Why use EconoBEE for your EME requirements?
Posted by Keith in BBBEE Knowledge, General, Interpretations, Marketing on April 29th, 2010
Most people know that if their annual turnover is less than R5million then they are classed as an EME – exempt micro enterprise. They believe that they are exempt from BEE and do not need to take any action. They hope that their customer will recognize them as being exempt and that they will win the business they want.
This is unfortunately not true. An EME is generally, but not always a business with a turnover of less than R5million. Some industries, e.g construction have changed those thresholds.
More importantly it is not sufficient to tell your customer that you are exempt or expect them to guess!
You need to tell your customer why you are an EME, and you need to prove this, usually by means of an auditors letter/certificate.
Why use EconoBEE? We will help phrase the document/letter you need to send your customer. We help explain to your customer why you are exempt and how it will assist your customer in continuing to do business with you.
Most importantly, we will talk to your customer if he is not satisfied and give him all the documentation he needs to convince him that you have given him the right information. There has been the odd occasion that a company has rejected our EME pack. In all cases, we work on the side of our client to convince the customer to change his mind. In every single case we have won the legal issue, and satisfied the customer.
We know of businesses that have tried to explain their EME status to their customer, failed to convince them and lost the business. It won’t happen with us. We will satisfy and convince your customer!
A Nobel Prize for Economics
Posted by Keith in BBBEE Knowledge, General, Scorecard points, True Empowerment on April 13th, 2010
Someone asked me if I really thought B-BBEE was a good, well thought out policy. I had just finished explaining to him about the scorecard and the various calculations needed and he was feeling a bit overwhelmed. He did not ask if I thought it has been implemented well, just if it was a good policy.
I reflected a bit and then explained:
How do you measure empowerment in a company? Do we just ask each company if they are empowered, and based on their very subjective answers decide if they are empowered? In the case of B-BBEE the architects of the policy realised than a subjective answer would not be fair, and difficult to evaluate. They decided on a scorecard. The higher the points earned, the more empowered the company would be. To give an analogy: Who is the better rugby team? In the last World cup, the British press thought it was England. South Africans thought it was South Africa. Would either side have been objective? When we played in the final, South Africa scored more points, in a game with specific rules, and adjudicated by the referee. At that point it was agreed that the Springboks were best. The Bulls have scored more points in the Super 14 final in the past two years and are therefore the best Super 14 team. In economic policy this was quite a step forward – to find a way to objectively measure companies via a scorecard.
The next point I had to make was that the scorecard fairly represented “empowerment”. If the scorecard was based on only ownership, it would not have encompassed all aspects of empowerment. The authors of the B-BBEE codes realized this and looked at all aspects of economic and social activity. By taking into account all seven elements, they took a further step forward. They decided upon indicators within elements which will give an even more accurate measure of empowerment.
The man I was speaking to initially felt intimidated by the amount of calculations. I pointed out that the architects and designers of the policy had managed to identify less than 40 indicators with associated targets, which is not a huge amount of data to gather and calculate. However this is sufficient to very accurately and objectively evaluate a company’s empowerment performance.
I am in awe of the design of B-BBEE as an economic policy that so effectively measures empowerment. I concluded my meeting by stating that the overall design of the B-BBEE codes, the indicators, weighting, and broad sprectrum of data gathered is worthy of a Nobel prize!
The DTI Lashes out at Solidarity
Posted by Gavin in BBBEE Knowledge, General on March 25th, 2010
The Department of Trade and Industry has for the very first time defended its policies on B-BBEE by lashing out at Solidarity. This is of course very good news from an empowerment perspective because the DTI has now shown clear support for this policy and an intention to implement it correctly. A lot of credit can be given to the DTI for taking this very important step.
===
The Department of Trade and Industry (the dti), has noted media reports
regarding the findings of trade union Solidarity research that Black
Economic Empowerment (BEE) has led to a remarkable increase in black
ownership on the Johannesburg Stock Exchange (JSE), as well as ownership
of insurance policies.
the dti is particularly concerned about these reports, as they do not
address the issue of direct ownership which is critical when measuring,
the level of transformation.
Department’s BEE Chief Director Ms Nomonde Mesatywa, says it appears
that the survey focuses on measuring indirect ownership through pension
funds, medical schemes and insurance polices, etc.
According to her, unlike the finding of Solidarity, government has
conceded a maximum of 40% in terms of measuring indirect ownership.
“In relation to the Solidarity findings of 23.8% it is still far
below the 40% mark in terms of the Mandated Investments Exclusion
Principle, where 15% of direct ownership (unencumbered) is still
required. The actual direct ownership in the JSE listed companies is
still encumbered; therefore it is premature to suggest that the
implementation of BEE has contributed more to the development and
promotion of a black middleclass than is recognized” she said.
Mesatywa added that BBBEE is about more than just ownership of the JSE
and that other elements need to be considered.
“We need to consider the other elements like employment equity,
skills development, Enterprise Development, Procurement etc as well. The
effective implementation of B-BBEE must be measured holistically by
utilizing the Balance Scorecard of Codes of Good Practice, thus a
research on one element can not presuppose that there has been
sufficient empowered and that the lives of black people across the
spectrum has significantly improved”
Last month at the inauguration of BBBEE Advisory, Deputy President
Kgalema Motlanthe, said that the pace of transformation has been
painfully slow. This statement has been amplified by the recent study
commissioned by Business Unity SA which revealed equality in the upper
echelons of corporate SA has not yet been achieved, as Blacks and women
continue to be under-represented in all directorships and top executive
leadership positions of the JSE-listed companies.
The department is in a process of doing a follow-up on the BBBEE
baseline study that was done for 2007/8 in measure the impact of BBBEE
three years post the gazetting of the Codes of Good Practice.
===
The Department of Trade and Industry (the dti), has noted media reports regarding the findings of trade union Solidarity research that Black Economic Empowerment (BEE) has led to a remarkable increase in black ownership on the Johannesburg Stock Exchange (JSE), as well as ownership of insurance policies. the dti is particularly concerned about these reports, as they do not address the issue of direct ownership which is critical when measuring, the level of transformation. Department’s BEE Chief Director Ms Nomonde Mesatywa, says it appears that the survey focuses on measuring indirect ownership through pension funds, medical schemes and insurance polices, etc. According to her, unlike the finding of Solidarity, government has conceded a maximum of 40% in terms of measuring indirect ownership. “In relation to the Solidarity findings of 23.8% it is still far below the 40% mark in terms of the Mandated Investments Exclusion Principle, where 15% of direct ownership (unencumbered) is still required. The actual direct ownership in the JSE listed companies is still encumbered; therefore it is premature to suggest that the implementation of BEE has contributed more to the development and promotion of a black middleclass than is recognized” she said. Mesatywa added that BBBEE is about more than just ownership of the JSE and that other elements need to be considered. “We need to consider the other elements like employment equity, skills development, Enterprise Development, Procurement etc as well. The effective implementation of B-BBEE must be measured holistically by utilizing the Balance Scorecard of Codes of Good Practice, thus a research on one element can not presuppose that there has been sufficient empowered and that the lives of black people across the spectrum has significantly improved” Last month at the inauguration of BBBEE Advisory, Deputy President Kgalema Motlanthe, said that the pace of transformation has been painfully slow. This statement has been amplified by the recent study commissioned by Business Unity SA which revealed equality in the upper echelons of corporate SA has not yet been achieved, as Blacks and women continue to be under-represented in all directorships and top executive leadership positions of the JSE-listed companies. The department is in a process of doing a follow-up on the BBBEE baseline study that was done for 2007/8 in measure the impact of BBBEE three years post the gazetting of the Codes of Good Practice.
A Julius Dilemma
Posted by Keith in BBBEE Knowledge, General on March 2nd, 2010
Most people I know agree that proper transformation is necessary in South Africa. We still have a long way to go to improve the situation for our population. The playing field are still not level!
Recently it was reported that Julius Malema is a partner in a company that won tenders worth R140 million in Limpopo. If indeed this report is correct, then most people will feel outraged by this report. Most will agree that this is not the type of transformation that we need or that anyone had in mind for the new South Africa. A new word has even been created in South Africa: “tenderpreneur”. The respected businessman Bobby Godsell has criticized tenderpreneurs where businesses add no value to a transaction.
Now there are two types of transformation or empowerment that are used in South Africa – the tenderepreneurs and the true broad-based. No other solutions have been proposed and interestingly enough all major political parties, including the official opposition have policies around transformation because they all recognise the need for transformation. There are only two choices: Tenderpreneur and broad based black economic empowerment. B-BBEE if implemented properly can achieve all that we want in South Africa. Tenderpreneurs will make a select few very wealthy and do nothing for the population at large.
I repeat – there are only two choices. If, like me, you agree that the tenderpreneur approach is wrong, then the only viable option is B-BBEE. The opposite of B-BBEE is making Julius wealthy! There is only one way to beat that option – by implementing B-BBEE so well that tenderpreneurs lose all their business.
Lets therefore try to implement broad-based black economic empowerment properly and grow the economy for everyone. Let’s build up our BEE scorecards, make a serious effort to help the less fortunate. We as South Africans ARE a caring nation – we just sometimes get carried away by our emotions and passion. Let’s direct that passion to where it can help. Let’s follow the B-BBEE codes, let’s support South Africa. Let’s get more positive.
Let’s make B-BBEE the only viable alternative to B-BBEE.
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