HAS Trade and Industry Minister Rob Davies set out to bring broad-based black economic empowerment (BBBEE) to a shuddering halt? He will deny it, but a closer reading of the amended proposed BBBEE codes of good practice, gazetted on October 5, points in exactly that direction.
The original intention of the government’s BEE policy was to engage as many black South Africans in the country’s economy as part owners of businesses as quickly as possible. A target of 25% equity ownership was the initial goal. But, since very few blacks possessed the wealth necessary to achieve that, private sector companies found it necessary to create a variety of vehicles through which to achieve the government’s aim. Needless to say, this led on many occasions to existing shareholders complaining that they were being suckered into giving away a quarter of the value of their investment for no discernible return.
The government supported its policy plank with a large stick: companies that failed to comply would find it increasingly difficult to secure government contracts or participate meaningfully in its procurement programme. Codes of good practice were introduced that needed to be verified by approved agencies, thus creating a new industry and yet another level of bureaucracy and costs in a country supposedly dedicated to removing red tape.
These codes have now been significantly amended and, if accepted in the latest guise, will have the effect of ensuring that great swathes of companies (and maybe some parastatals) will be severely penalised. For example, a company seeking to qualify to tender for government work must demonstrate a category four compliance level. Everyone, says Paul Janisch, a specialist in the application of the codes, has forgotten that this process is entirely voluntary and depends on private sector goodwill for its success so far.
Taken at face value, the new codes will immediately condemn noncompliant companies to level-six status, thus making them ineligible for state work or to supply private sector companies reliant on state work. A company wanting to retain its level-four rating will have to execute remarkably smart actions.
The extent of racism evident in the amended codes is breathtaking. For example, they require that 100% of all socioeconomic development contributions go to black people. That means any company donating money to an orphanage that cares for whites and blacks must expect that contribution to be disallowed in its totality for the purposes of calculating its standing in BEE codes. Since it is estimated that between 450,000 and 600,000 South African whites (anecdotally 800,000 from some sources) now live below the poverty line (between 10% and 18% of the white population), the effect of this could be devastating.
Perhaps this is a good thing. Perhaps it is time the naked racism applied by a government that hides behind a veil of nonracism is finally exposed for what it is. But there are many other aspects deserving of equally searching examination. The starting point is to ask what experience Davies has of working in commerce. From what I can gather, the answer is none. He’s either been an extended university student or a paid party official. And he is, by the way, a dedicated communist which might explain why his knowledge of the real world is so myopic.
Does he, for instance, know how difficult it is to register for value-added tax (VAT) when your company falls below the VAT radar? It’s pretty well impossible — but a VAT number is a requirement to qualify for government work of any kind.
Does he realise that he is encouraging "fronting", the practice so excoriated by the government? Black-owned companies whose turnover is less than R10m can now bid for work on behalf of white companies that would otherwise not even get on the scorecard.
Then there’s the ownership issue, which counts for 25 points out of the 105. Many foreign-owned multinationals simply won’t hear of diluting their control. Does Davies want them to pack up and leave?
What these amended codes will achieve if they aren’t altered will be to bring the BEE programme to an end. Very few, if any, companies will qualify as a level-four participant. That will rule them out for most government work. So they will scale down or go out of business.
Those wanting to comment on the latest BBBEE codes have until December 4. For advice: www.caird.co.za/Paul_Janisch.aspx.
IN JULY, after a damning report from the auditor-general on municipal management incompetence, Finance Minister Pravin Gordhan announced that the Treasury would henceforth exercise a tighter grip on municipal activities.
Late last month, the public protector issued a report on an investigation into speculative billing for municipal services by the BaPhalaborwa municipality. She had been asked to intervene by Sefapane Lodge, a tourist facility, in an argument that had developed between it and the municipality.
In a nutshell, lodge manager Keith Macvicar was upset when he discovered his monthly charges had escalated dramatically — from R3,300 for water in March 2010 to R23,390 in December 2010. That’s a cool seven-fold increase. A company employed to "read" the meter claimed it had done so but the information wasn’t used. Residents are entitled to ask why this work is subcontracted anyway, and why the readings are arbitrarily discarded.
The municipality claimed two water meters had been removed. The ground was dug up to discern any pipes that might suggest the previous presence of water meters. None were found. A lot of other lies were uncovered in the process.
The public protector found that the municipality failed to deal with the complaint properly and said this amounted to maladministration. She requires an audit.
Given Macvicar’s earlier response to what appears to be a clear case of gross overcharging, it would be unwise for the executive mayor (what a grand title for the boss of a dorp) to take a cavalier approach to this matter.
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