Interesting aspects:

The long awaited BEE Amendment Bill has again been delayed. It was initially reported that it would be submitted to parliament some weeks ago. Current reports are that the bill is with the State Law Advisors. Thereafter the portfolio committee will hold public hearings. The chances that it will be enacted into law this year law are now diminished.

The council also reported on the proposed revisions to the codes. Note: once the revisions are gazetted they will be open for public comments and only after that process will they become a final code of good practice. This takes up to a year. It has already been reported that the codes will be reduced to 5 elements.

Controversial features:
EMEs and QSEs that are 100% black owned will be level 1

EMEs and QSEs that are more than 50% black owned will be level 2

The above is going to be quite controversial. Currently EMEs (exempt micro enterprises – annual turnover less than R5 million – depending on industry) have been regarded as level 4, and EMEs that are more than 50% black owned are level 3. All QSEs currently need to produce a scorecard by choosing 4 elements. The proposal by the BEE Advisory Council is to exempt all black owned businesses from BEE requirements if they are EMEs or QSEs. The highest level of compliance is level 1, and any 100% black owned QSE business is automatically level 1.

This takes us way back to the bad days of narrow-based BEE – where the only criterion was black ownership. We liked broad-based because it supported the economy, employees, skills, enterprise development and society via socio-economic development. We disliked narrow-based because it only looked at black ownership, and it was a major cause of fronting and corruption. We accepted the slight benefit given to black owned EMEs, as it was seen as enterprise development.

We are very unhappy with a blanket dispensation given to all black owned QSEs to exclude them from BEE requirements. It will encourage fronting and it is counter productive to the aims and objectives of the B-BBEE Act.

Background:
There is some background to be taken into account. The PPPFA (Preferential Procurement Poicy Framework Act, the act governing all statement procurement and tenders, had never fully followed B-BBEE principles or the codes of good practice. Tenders were adjudicated on the basis of black ownership and management only. There had been calls for many years to align the PPPFA with the B-BBEE act, i.e take into account the B-BBEE status of the service provider – using broad-based principles. Finally in 2011 the finance minister issued new PPPFA regulations to take B-BBEE into account. This caused an out cry from some black businesses – that they would lose out on business because they either did not have a good BEE status, or that other “white” owned businesses were able to compete by also obtaining a good BEE status. As a result, when the new PPPFA regulations came into effect on December 2011 to align the PPPFA with B-BBEE, the finance minister issued an exemption to all SOEs (state owned enterprises) allowing them to continue their old methods of evaluating tenders. This exemption is due to expire in December 2012, and makes nonsense of government’s intention of streamlining and reconciling all government regulation in line with BEE principles.

There has obviously been a lot of lobbying by vested interests to solve the PPPFA problem. The finance minister cannot easily continue issuing extensions, and the big parastatals cannot be seen to be going against BEE principles. For example even though Eskom also has this PPPFA extension it continues supporting B-BBEE principles. This has obviously been a problem for many black owned businesses that refuse to obtain a better B-BBEE level than their opposition.

The solution to the above problems is now contained in the revised codes. According to the BEE Council, majority black owned QSEs are to be exempted from BEE. It’s an elegant political solution, but is going to harm true transformation.

Remember that QSEs (companies with an annual turnover of generally less than R35 million) make up the majority of businesses in South Africa. At the same time we note there are too few black owned businesses – especially QSEs, and we do encourage the creation, development and support of black owned businesses. A black owned QSE can easily reach a high BEE level, and if it has a turnover of say R20 million, it can be argued that it has as much a duty to contribute towards true empowerment by obtaining a good and valid BEE certificate as anyone else. It was acceptable to give a small benefit to black owned EMEs – level 3 instead of level 4, but to give a 100% black owned QSE a level 1 is too much.

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

The context is he was talking about was the employment equity act, and he is very well briefed on the B-BBEE codes.

He knows that companies earn BEE points by employing black people in various management, and sometimes non-management positions. Many companies will specifically try to find a certain profile person in order to improve their BEE scorecard. We ourselves always tell our clients that they will earn more points, if they were to employ a higher percentage of black people in certain management categories.

At the same time we tell our clients that for example a black female in a particular category will earn them more points, and therefore they should try to find the best person for the job, but be aware that they will earn or lose points based on their decision.

From the black person’s viewpoint, we can easily direct a particular person to where there are opportunities. We know that for example most construction companies would be keen to interview a black female civil engineer. We would not hesitate to advise a person on how best to market themselves to get a good job. At this very moment I have 1300 CVs in front of me from people who are desperate for a job as a junior admin clerk – a very sad state of affairs. I’d like to employ every single person, but obviously cannot.

Let’s look at Jimmy’s comment.  The number of coloured people in the Western Cape is generally higher than the rest of the country, just as we would expect more Indians in KZN than the rest of the country. I would have no hesitation in advising a coloured person who is unsuccessfully looking for a job in Western Cape to look further – specifically target regions and companies than have poor employment equity scores.

Is this what Jimmy meant? Is this what Jimmy said? Please watch the video and decide if it leaves out the context.

Also decide if the context is as I have described.

Congratulations today must also go to the department of trade and industry – and the specific people how guided the original act through parliament, and then spent many years developing the codes. In researching this article we looked back at the draft codes of 2005 and 2006 and compared them to 2007. It is very instructive to see how they progressed and improved to the final stage.

Congratulations must also go to the tens of thousands of companies that are making an effort to comply and have produced their own scorecard or verified certificate. While there is a long way to go, some progress is being made towards true, and broad-based empowerment. Many companies are spending a lot of money on skills development. Many are working very hard on enterprise development. Corporate social responsibility is still being implemented and helping the poor and poverty stricken.

Yes, there is a long way to go, but our first fight was to get everyone to start thinking broad-based. The ArcelorMittal deal, on which we were the first to comment has turned out to be the catalyst, or the final straw to narrow-based to making the whole of  South Africa realize that broad-based was the way to go, and that broad-based was always the policy of the dti. We are now seeing the politicians calling for broad-based. The SACP has also condemned narrow-based, in favour of broad-based.

Most companies – our clients are very happy to follow broad-based once they know what it entails.

It’s taken some time, but we are getting very excited that broad-based is the winner.

“The minister said the reviewed Mining Charter represented collaborative work among stakeholders under the auspices of Mining Industry Growth, Development and Employment Task Team (MIGDETT).”

I wonder why the dti was not represented?

Section 10 of the B-BBEE act makes it compulsory for organs of state and public entities to take into account the B-BBEE status of the supplier in setting up preferential procurement policies. Virtually no public entity is doing this. Those that do not are in breach of the constitution.  A tender, license or disposal of state assets can only be awarded to a business if government takes into account the B-BBEE status of the tenderer. The act states further “..and as far as is reasonably possible apply any relevant code of good practice issued in terms of this act.”

Although the act does not give a clear definition of “take into account” or ” reasonably possible apply”, and does not state how it should be applied, what is clear is that every state entity MUST at least ask for a valid  B-BBEE certificate, and should give their own reasonable interpretation of how they are going to apply the codes to their particular tender or license.

Any government agency that does not do this is in breach of the act and therefore in breach of the constitution.

The act was signed into law in January 2004, and the Codes of Good Practice were gazetted in February 2007, so government has had more than 3.5 to implement its own policies.

There is no discretion at to whether or not government applies this clause.

Once they do, the affect will be that all organs of state will be asking all suppliers for their valid B-BBEE scorecards. This will result in focusing government on broad-based issues, rather than the old, discredited and annoying narrow-based method that they currently use.  It will result in more compliance and improved transformation.

Some time back a survey was done by Consulta Research, purporting to show that government has made enormous strides in B-BBEE. That survey was flawed. They forgot the ask the only question that should have been in the survey: “Can you please give me your B-BBEE scorecard or B-BEE certificate.” That would have shown that private enterprise leads the way over government – in most cases the relevant government department or enterprise does not even know what B-BBEE means.

Government and departments have no scorecard, and neither do they ask for a scorecard when you may want to do business with government. If I want to do business with many of the large corporations MTN, Vodacom, FNB – the will ask for my B-BEE scorecard. This polite request, not always an demand has been sufficient for many thousands of businesses to work towards achieving a B-BBEE certificate. If government has to ask the same, the incidence of compliance would increase – probably double overnight.

Instead government chooses to focus on other areas, in contradiction to the B-BBEE codes. The debacle over ArcelorMittal is a case in point. Governmentis interested in 26% black ownership, which has almost nothing to do with B-BBEE. ArcelorMittal would want to get a B-BBEE certificate because their customers are asking, and ArcelorMittal has been promising this for years! Instead ArcelorMittal want to allocate 26% of their shares to meets government’s requirements, but this goes nowhere to helping ArcelorMittal get a scorecard.

Instead of furthering B-BBEE, and supporting those companies that have made a sincere effort, goverment is hindering B-BBEE.

I understand his frustration – we have the same frustration with companies that refuse to make any effort, while publicly stating that they support the initiative. Our clients lose points if their suppliers do not comply.

The confusion comes when Jimmy Manyi states “His department is planning on introducing a clause into the BEE act which would allow governmen to terminate or refuse contracts of companies that do not comply with the law by June next year.”  The article further states “He said it was his job as the DG of Labour to ensure that this happened.”  The fact remains that the B-BBEE act is administered by the department of trade and industry, not labour. I need to ask “Who is running B-BBEE – dti or labour or treasury?” In the case of employment equity, the department of labout is certainly responsible, but this forms only a small part of the BEE scorecard.

Jimmy Manyi wants to allow government to terminate or refuse contracts that do not comply with the law.  The irony is that government currently does not follow the B-BBEE act. Treasury has been trying for some time to reconcile the PPPFA – the law that government does follow the the B-BBEE act, and it probably will not even be enacted by June 2010. It may well happen that the revised PPPFA makes it mandatory to follow the B-BBEE act, but this will be the responsibility of Treasury, not the DG of labour.

Another issue is that the B-BBEE act is based on a scorecard, so it is not feasible to state categorically that a company complies or does not comply. A key point of the B-BBEE scorecard is levels of compliance. Surely the new clause proposed by Mr Manyi should be based on levels of compliance? In any event it is compliance with the principles of B-BBEE, not the law. The act as is stands makes B-BBEE mandatory only for government and government enterprises, not companies. The dti believes that the cascading effect of each company asking every other company (their suppliers) for a scorecard is a good way to go about ensuring B-BBEE levels of compliance.

Ironically again the enterprises that should become compliant, and which Jimmy Manyi should be concerned about, are the many government enterprises that do not have scorecards, or have very poor scorecards. SAA is a level 8 – pretty poor for the national carrier. The PIC does not even know they need a scorecard!

While I have no problem in ministers and DGs condemning companies for not having a scorecard or not complying with any act, the message that is going out is totally confusing, and contradictory.

The problem with this approach is it encourages those who want to find an excuse to delay their implementation. They will now say they want to wait until the revised act is gazetted, or they want more information before thinking of implementing transformation. I know it is an excuse, and they should be condemned for this, but they will use confusing reports, such as the DG’s comments to justify their inactions.

I do support his call for government to refuse to do business with companies that do not have a BEE scorecard, my problem is that he is sowing confusion.

There are lots of issues we, South Africans, or even the world population does not agree upon. There are some that are absolutely certain to raise blood pressure and yield a response that you maybe may not have made in the light of day.

Issues such as rugby/sport, religion and politics are top of the list. If I said I think the KZN Sharks are useless, I know some people would disagree vehemently, and some would get quite rude and aggressive. If previously they were very placid, then when a big issue confronts them and they become aggressive, what can we say about those people? Are they placid or aggressive?

Now to racism and other “isms”: How do we judge whether a person is racist? If the person is derogatory towards a group of people, is he a racist? If he is derogatory to one person,  but applies his logic to all people who belong to that group, is he a racist. If he makes nasty comments about Jews, based on his experience with one Jewish person, is he anti-semitic?

I’d tend to say that all the above is racism, sexism, anti-semitic etc depending on the particular group who is insulted, or feels insulted. I would think that even if a person states he is not a racist or anti-semite  (”some of my best friends are black/Jewish”), his actions at some point or another may prove otherwise. These actions/feelings could be deeply embedded in one’s psyche.

Now to Julius Malema, He tends to rub many people up the wrong way, particularly white people. Recently, in welcoming Caster Semenya he condemned white people in also not coming to the airport.  The interesting point is how they reacted. Many made rude comments about Julius, his mother, his racial group.

A common comment was “We were working”. Who is the “we”? All white people, therefore excluding black people? Many whites fell into the trap that Julius, maybe inadvertently, had set. Their reaction proved the point that Julius is always making. They responded with rude, racial comments right back to Julius.  Disagreeing with a person does not make you a racist or anti-semite, or even a Bulls or Western Province supporter . Making comments about the group as a whole does make you a racist etc.

The point is the reaction of many people brought out their true feelings. I guess it’s not easy to hold back when he makes very aggressive comments. In a strange way he brings the worst, and best out of  people, and in some cases proving his point. If this is by design or not – it does not matter. It is the reaction of the person that counts, and how I and others perceive that reaction.

Comments?

Personally, I see no problem with the appointment as long as she is the best candidate in the market. I have always supported the notion that BEE should make good business sense.

This appointment should send a strong message to those who think BEE is applied blindly on the basis of colour. BEE is about a progressive nation where every race is given an opportunity to contribute towards economic growth.