Tag Archive | BEE

Employment Equity Bill sets BEE targets

…..article July 26….

Minister gets tough on B-BBEE…. 

At the same time as Minister of Employment and Labour, Thulas Nxesi, tabled in Parliament the new Employment Equity (EE) Amendment Bill proposing that new BEE targets for business and industry should be set, the Department of Labour (DoL) appears to be acting as if the legislation is already in place.

Already government has been making overtures to the public in general on what the employment changes will be and how they will be implemented giving full details of the proposed outcomes of the parliamentary process.

This is all happening before Parliament can even meet to debate the Bill, both the Department of Labour and the Commission for Conciliation, Mediation and Arbitration (CCMA), recently announcing in a joint statement that that they  have teams touring the country to educate the public “on the new amended labour law processes and targets involved”.

Hold on

Opposition parties have objected to such premature announcements, stating that such a move will only hurt further an already troubled investment climate.    DA leader John Steenhuizen has stated that the setting of targets and quotas is “racial bean counting” and has queried the constitutionality of such proposals, even if they are set “after discussion with industry sectors”.

After nearly three years of beating about the bush with a draft Bill for discussion, its sudden tabling in final form would seem to come at a most inopportune time.   Commentators note that business morale is understandably low in the light of COVID 19 restrictions, unemployment figures are at the worst since the Great Depression and any new investment is only on a distant horizon.

Low punch

It is also difficult  to understand why Cabinet would chose this particular time to damage even any fertile territory for investors wishing to buy in at the bottom of the opportunity curve.   Some worry that the persistent clash over labour policy in the upper echelons of the governing party maybe to blame for its sudden introduction, the Bill being tabled just as Parliament was closing for a short recess.

The heavy-handed approach appears to be an attempt to use the parliamentary majority to rubber stamp what the COSATU power base has always wanted  from NEDLAC negotiations on BEE outcomes. The route was chosen some eight years ago by the trade union movement and to many the EE Amendment Bill is merely part of a pre-destined process.

Even major businesses, banks and mining houses, reading between the lines, seem to have accepted the Bill’s inevitability and seem also to have been mesmerised into the  acceptance of a status quo governed by agreed targets and have agreed also with Minister Nxesi that that such are not “quotas”.

The DA disagrees and calls the target proposals “racial”.  From the perspective of inequality in the workplace, the EE Bill will also bring in mandatory training of employees, meaning that companies will have to focus on their training and development which the mining companies have already accepted publicly in statements. They note to their members in a circular that they will not get government business unless they meet both the employment “targets” and get certification on the new training requirements.

 War talk

“We are not waiting for this Bill and the process has started already,” said soft-spoken Thembinkosi Mkhaliphi, Director of Labour Relations and top man in government as the draft Bill went up on the DoL website.

Nice guy that he is most of the time, Mkhaliphi is fully aware that the well-known quartet of laws, the Basic Conditions of Employment Amendment Act, the Labour Relations Amendment Act the Employment Services Act ,and the soon-to-be, it appears, the Employment Equity Amendment Act is all that it is needed to tame the private sector on any labour matter, particularly if either quotas or targets are legalized.

To many in the older generation, putting people into quotas is one short of putting then into cattle trucks and calling them “targets” is merely the use of synonyms.

One realizes that the mining industry is wearisome after some five years of argument with such obdurate politicians as the past minister of mining, Zuma’s Mosebenzi Zwane.  Probably, and understandably so, mining captains wish to get on and at least get back to mining whatever the labour environment, accepting that compulsory training is certainly morally acceptable.

Racial facts

Whatever the current situation is, an explosive report suddenly appeared recently in the labour environment. A report of the Commission for Employment Equity (CEE) showed that after 20 years whites still dominate top management positions in the private sector.  In top management, 65.5% of positions are held by whites, 15% by Africans, 5.3% by coloured persons and 9.7% by Indians.   This ammunition was devoured by the labour camp and shortly after that, the EE Bill was tabled.

The final results of the discussions between all parties apparently is that the new Bill gives the Minister the authority to set employment equity targets for employers across the economy; that the wording of the Bill proposes fines of up to 10% of turnover for failure to meet gazetted targets, with the State having the powers to disqualify firms from “working with government” for failure.

Enough said

The department has said the targets will be set at sectoral level after consultation with business and it will be up to companies to implement these according to conditions laid down in the Bill. “A company that does not meet the target must have a justifiable reason. If it does not, then it is not in compliance with the law.”

In terms of timing, using the law would seem to be the final route taken by the Department of Labour as the only way the CEE figures as published can be changed.

For Tembinkosi Mkhaliphi, also previously acting director at NEDLAC, this is the end of a long journey and the beginning of a new adventure.   When asked by Business Day, during an interview at NEDLAC in 2019, whether NEDLAC was relevant to the labour movement, he answered that indeed it was.

“The issue of the national minimum wage and the strike ballot and the amendment of the Basic Conditions of Employment Act were all implemented at NEDLAC” he said, endorsing apparently the value of the entity to both himself and COSATU.

Railway line

Looking back, the EE Bill  indeed began its journey twenty years ago in draft form at NEDLAC.  In 2003, President Mbeki, in his opening address to the National Assembly in February 2003, said that legislation would be finalised for a strategy for Broad-Based Black Empowerment, which was the formalisation of partnerships and ‘charters’ with the private sector the use of a ‘balanced scorecard’ approach to gauging success.

Everybody got to work, and redress was not only found acceptable but necessary.   Now, in 2020, things are to change further, says Minister Nxesi in his Bill, but this must be in the knowledge that argument is bound to arise that whilst human rights treaties endorse the redress measures as promoted by B-BBEE,  whether to enforce black empowerment at law with targets is acceptable.

Latest moves

In a virtual  interview last week, in a well-tempered and firm tone,  “It is recognised that B-BBEE was operated on the premise that there should be no involvement of government enforcing transformation in terms of target setting and it had left it to companies themselves to set their own targets and goals”, he said, “but we have got nowhere”.

He continued, looking straight at his camera,” It has been government’s role to monitor these targets over the last 21 years but nothing has happened that should have happened and no real significant change has taken place”,  inferring that the Minister’s Bill would do this.

The other side

Martin Kingston, vice-president of Business Unity SA, has said on the side lines that the Bill has been two years in the making and that business will indeed be involved in setting targets. “The Minister has to consult with each sector and the consultation process leads to agreeing targets, which go to NEDLAC, a process that is already currently underway with retail and mining”.

No doubt, Parliament will allow for hearings in the new session starting 18 August and full details of BUSA’s view will be expressed although they will obviously be happy with concessions given to small business.

The DA’s shadow minister of labour, Michael Cardo, has been more vocal, stating, “This Bill will have the effect of choking SA’s barely breathing economy and its will  be opposed tooth and nail. These numerical targets imposed by ministerial fiat are quotas in all but in name.  The minister has no business in ramming them down the throat of employers.”

Next stage

Tembinkosi Mkhaliphi has repeated in a subsequent virtual media briefing that consultations on the new amending Bill, then still a draft, had already been conducted with the mining, banking and retail sectors. He did not elaborate on the responses, however.

The Bill does, however, propose the reduction in regulatory burden upon small employers, since those with less than 50 employees will no longer have to report on their employment equity targets, irrespective of their turnover, Mkhaliphi said .

He put forward a different view. He said that with B-BBEE, “target setting is not new except that now government comes into the picture”.   It’s a question of give and take, he said, admitting that the proposal in the Bill to lessen the burden on small business “was to sweeten the carrot”.

Kicking it along

Mkhaliphi said in conclusion that he realised “not everyone at NEDLAC was happy with the Bill.”

Indeed, it does seem, from a parliamentary viewpoint, a total contradiction that in the light of President Cyril Ramaphosa’s recent commitment that government was making “structural economic reforms that will ease regulations for investors”, that the Cabinet has now approved a Bill for tabling in Parliament which raises the bar by a whole number of regulation notches – and difficult ones at that.

The Bill will now be scheduled for meetings into the next session of Parliament to commence mid- August.

Posted in Agriculture, BEE, Finance, economic, Justice, constitutional, Labour, Trade & Industry0 Comments

25.1% is maximum BEE control, says DTI

DTI upbeat on implementation of BEE codes…..

lionel october 3

In a report to Parliament on the amended BEE Codes of Practice and their implementation as from 1 May 2015, Lionel October, Director General of Department of Trade and Industry (DTI) and his B-BBEE staff team, emphasised that the generic scorecard was aligned to government’s key priorities. He also said the State had no ambitions to take their target on black control beyond 25.1% of ownership.

Supplier Development is new title

DG October said the main emphasis of the codes had now switched to greater emphasis on what was previously termed procurement – now referred to as “supplier development”. This approach was more in alignment with the National Development Plan (NDP) objectives, DG October said, simply because that was the main direction needed to empower the development of black enterprises and build the economy on a stable growth path.

“In fact the German auto industry working with the German Chamber of Commerce had established a fund

BMW-Werk Südafrika

in South Africa”, he said, “for financing, training and building expertise in black businesses to supply the auto industry”.

There was considerable discussion on this by members and DG October said that there had been a general recognition in business and industry of the word “must” had replaced “may” in terms of B-BBEE requirements; that level four had to be reached for incentives and in general now “certainty” had been restored to the business environment on BEE issues, he felt.

Five “Elements”

The generic scorecard now had five elements, he said, which all companies, except those micro-exempted, had to comply with for recognition. All employment equity and management control had now been merged into one of those elements, now termed “management control”.    Sector codes were now to be aligned by 1 Nov. 2015, as set out in Code 003.

He said that “in response to public submissions” the import exclusion principle would be maintained and that the definition of an “empowering supplier” in the context of code alignment was a compliant entity which could demonstrate that its production and/or value adding activities were taking place in this country.”

DTI said that that “deviations of sector codes in terms of targets must be over and above those of generic codes and companies that derive more than 50% of revenue from sectors where there is already a sector code must be measured in terms of that sector code.”

DTI has no doubtful intentions

George Washington, having cut down the cherry tree, with his fatherIn general, DG October said in response to questions from MPs about the amendments, it had been his impression that business seemed to accept there were no political mala fides on the part of DTI; just a wish to get on with the planned NDP growth path which required the co-operation of business and industry on black empowerment.

The funding of Sector Charter Councils was a “joint responsibility between government and the private sector and entities must report annually on their B-BBEE status to sector council who will in return reports to the BEE Commission”, DTI said.

New sectors in the sights

Sector codes were being considered for the tourism, which had reached the stage of gazetting for public comment; “alignment” was being reached in the construction, integrated transport, ICT, financial services and chartered accountancy sectors; the property and forestry sectors had reached gazetting stages and marketing, advertising and communication were with their appropriate ministries for approval.

DG October mentioned the fact that the manufacturing industry stood alone as there were so many different sectors but over a period, aspects would be dealt with such as the film industry and textile and clothing industry.

DTI concluded their input to the meeting by advising that a technical assistance guide to B-BBEE was in process and DTI were in the process of finalising the B-BBEE verification manual.

Recent faux pas

rob davies2Opposition members asked how it was that DTI went so wrong with the question of  downgrading the pointing system for employment schemes and why it was that the Minister of Trade and Industry, Dr Rob Davies, had to retract that portion of the amendments which were not gazetted for public comment.

Chairperson Joan Fubbs intervened at this point, noting the Minister had taken the blame, had apologised for the mistake and could do no more than admit that DTI had been wrong.

DG October added that at a DTI workshop on the subject with “some stakeholders” this direction had been considered as a good option for broader rather than narrow empowerment but it had now been recognised by DTI that “they had gone down the wrong route as far as investor confidence was concerned”.

DTI had now reversed everything with the promise that this would not occur on the agenda again.

Better ideas could come

It had also been realised that such a move could also destroy imaginative plans for black management control such as that pitched by Standard Bank where 40% shareholding went to staff who could have representation on the board; 40% went to recognised BEE shareholders and 20% went into community organisations and trusts.

In answer to direct questioning by MPs, DG October confirmed that by the term “black”, DTI translatedlionel october this as African, Coloured, Indian and Chinese. He also confirmed that all these groups, if foreign and not South African citizens, were excluded.

More than 25.1% “unrealistic”

DG October, when asked by ANC MPs whether the 25.1% target for black ownership was realistic and fair considering that the demographics in South Africa demonstrated a far larger proportion of black people, he said that 25.1% could be considered as a “basic critical mass to engender a solid forward movement”.  To go any further would be unrealistic, he added.

In Malaysia, he said, local ownership was considered fair at 30% and other African countries as high as 50%, but he felt that in South Africa, where the need for the transfer of skills and training from large to small companies, especially through supplier development by state utilities and large businesses, was essential, this was a fair percentage assumption and which called for co-operation and fairness between all parties, all bearing in mind “a pretty hideous past”.

Redress of the past in all preambles

joan fubbsAt this point, Chairperson Joan Fubbs referred to the South African Constitution, reading out the clauses which not only stated that all were equal despite race colour or creed but that discrimination was possible if it was fair and she reminded MPs that redress of the past was “fair”.

She asked for all “not to isolate clauses in the Codes to determine personalised interests but get on with job of re-aligning communities that had been excluded from ownership for over 300 years”.

One ANC MP asked that the focus on big businesses be less emphasised and that DTI rather spent considerably more time with the job of developing ownership of black small business, which he stated could be “the power house of South Africa”.

He called for legislation that enforced government and public utilities, “as custodians of state power” to set an example on supplier development since, he said, one could hardly expect the private sector to follow suit, if the SOEs did not lead the way on this issue.

Incentives needed, not law says DTI

DG October said such sort of things were “impractical in the real world” and said the main challenge was a phased process of change which now had the support of many in positions of power in business. He also emphasised that B-BBEE had to tie in business and industry with incentives rather than with the law.

When asked about his recent public statement that he had set DTI’s target to produce “100 black industrialists”, he was referring rather to 100 black industrial leaders “financed and supported by DTI initiatives”.

Other articles in this category or as background
BEE comes under media scrutiny – ParlyReportSA
Rumblings in labour circles on BEE – ParlyReport
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA

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DTI does flip flop on BEE codes

B-BBEE codes changed on “management control”…

Rob+DaviesA  lack of understanding of the effect of B-BBEE Codes on business and the industrial environment, despite a workshop on the subject, was demonstrated when the department of trade and industry (DTI) amended its own amendment in a matter of days on the point scoring issue in terms of broad- based employment share ownership schemes.

More emphasis has been placed in the Codes generally on procurement from black business, now referred to as “supplier development”.

As you were…

However, the minister of trade and industry, Dr Rob Davies, confirmed in a statement that the second amendment corrected the changes as far as employment schemes were concerned and any such changes would not be retrospective on deals already done, such earlier deals continuing to reap the same benefits under B-BBEE Code pointing as before.

Control is everything

Minister Davies said that DTI still had a think tank operating on how further to make BEE in generalplan BEE more effective insofar as pressure on business was concerned to effectively ensure that management, control and ownership by black persons was increased.  His task team appointed would report back by the end of the month. He repeated this in his budget vote speech.

DTI completely avoided established government procedure by issuing an “explanatory notice” to a gazetted publication on B-BBEE procedures by announcing a completely new aspect on the rules on B-BBEE award-pointing, in this case termed as “amending guidelines”, thus avoiding the issue of public comment.

Most worrying was the fact that minister Rob Davies failed to make any reference to this in his earlier introduction to DTI’s strategic plan to Parliament a week before, subsequently presented to the portfolio committee on trade and industry by DG Lionel October and then to the select committee on economic affairs in the NCOP.

Forgot the union movement

Just as as business leaders were, so was the trade union movement, many of whose members are part of share employment schemes, options or not, and are therefore touched on the issue of reduced profit and dividends.

As far as not mentioning this in a budget vote speech, which was an excellent opportunity to inform business, there is fine line, say opposition members, between failure to disclose to Parliament and avoiding a contentious disclosure to Parliament that that might compromise a negotiation but in this particular case of changes to B-BBEE, the matter  appears to have only involved some members of cabinet and certainly none of the large spectrum of stakeholders involved. It all came as a big surprise.

The minister has published two further notices on the amended B-BBEE Codes regarding the second phase now implemented. The Chamber of Mines was yet another body caught by complete surprise, thinking that their relationships, in this case the minister of mineral resources, were far better than they actually now seem to be. There seemed to be a vacuum in communications.

DTI has now reported to Parliament on subject

To the rescue...

To the rescue…

DTI, in the form of DG Lionel October, has since reported to Parliament on the subject of the amended B-BBEE Codes of Good Practice and explained that Minister Davies had admitted that DTI had taken the wrong route with all good intention “to take a narrower view on black management control” but now had apologised for the descision, now reversed, on this aspect of the pointing system. All is reversed, retrospectively as well.

A full report is with our clients with further comments by DTI on the Codes and their application as revised “after the event”.     This analysis of DTI’s presentation will be archived to this website in the course of time.

In the meanwhile, we note that there is useful extra-parliamentary political comment on //www.polity.org.za/article/da-geordin-hill-lewis-calls-for-debate-in-parliament-over-elitist-bee-codes-2015-05-08

Other articles in this category or as background on this website

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All not well in the trucking industry

Call that corruption exists

trucksIn answer to a call made by the portfolio committee on transport on the state of the trucking industry in South Africa, it became evident from responses by the department of transport (DoT); from the Road Freight Association (RFA) and examples given by an independent small operator, that large truckers dominated in an industry in an unfair manner that was rife with corruption.

Mawethu Vilana, deputy director-general DoT, said that going back to 2002/3, the department had begun an exercise to look at how to provide opportunities and also broaden the space for participation by smaller operators in the road freight sector. It became clear that smaller entrants lacked finance; that an “unscrupulous broking sector was part of the industry” and generally there was a lack of skills and know-how in the trucking industry generally due to poor provision of training facilities and an industry which was undercapitalised except but a few large operators.

DOT not playing proper role

Vilana admitted that when it came to black empowerment opportunities, the main player was the department of trade and industrydot logo (DTI) and not DoT, DTI having the BEE verification control system in their court, DoT playing virtually no part in either reform of the industry or the development of SMME’s.

On the subject of crime, little could be done about bribery and corruption, Vilana admitted under questioning by parliamentarians, unless legislation was beefed up with proper powers and a full, properly constituted investigation carried out into the industry.

Road users must pay

roadsHe also admitted that permit fees were high because of the principle of “user pays” which had been adopted by government “since road truckers caused great damage to the road system.”

Gavin Kelly, RFA said his association had 385 members, with 109 affiliates and 40 associates representing different levels of possible enforcement and ability to develop skills and training but complained of massive permit fees (the last being 412%); large levels of corruption amongst government officers and no value being added by the government’s road agency to the industry in general.

RFA also stated that there appeared to be no proper government road freight strategy and single government officials determined policy without ministerial approval.    Kelly said “no real consultation exists between the state road agency and the industry” and it was the RFA view that DoT “was just going through the motions.”

Trucking group says market closed

One medium sized operator, Tramarco, said that despite heavy investment in trucks and bearing in mind the “ever rising price of

tramarco site

tramarco site

fuel”, it was almost impossible to break into the transport business to obtain long-term “tangible” contracts from major mining groups and state utilities.   They appeared to feel “safer” using old contacts and larger companies and quite clearly favours were being granted, they said.

Their spokesman said that the entire industry was dominated by a number of large trucking groups and smaller entrants were effectively “locked out” of the industry because the industry was either not regulated properly.

AARTO somewhat dubious

They also said the licensing AARTO system was not working properly; there was a lack of legislative enforcement; too many corrupt officials had too much power and there appeared a lack of interest by large companies generally to uplift smaller operators, little interest in encouraging training and building the trucking job market.

Tramarco said that no favours or finance was called for by the medium and small sized companies but merely a fair chance to compete for tenders.   They called on government to provide leverage within its own government departments, state utilities and with industry to break up monopolistic habits and encourage more black empowerment opportunities.

“Large groups and utilities make lots of statements on freeing up the market but nothing happens”, Tramarco said.

MPs demand better skills development

MPs demanded of DoT that concrete steps be taken to assist small entrepreneurs and to provide proof of a record in the area of skills development. “It was clear that little had been done by the DoT in this area”, said one ANC member.

Opposition members said they were convinced that DoT “had no meaningful understanding of what the situation was on the ground.” One MP said the City of Cape Town had provided a solution by cutting the bigger contracts into smaller parts, supplying smaller quantities and increasing the number of entrants slowly. He called on DoT to start thinking of similar solutions on a national scale.

Roads to nowhere

Ruth BhenguChairperson Ruth Bhengu told DoT that the meeting had been called because an examples had been given to parliamentarians whereby “large companies gave small companies short-term contracts and rates that would not take them anywhere and businesses that were desperate could not only pay for their trucks but could not maintain them, the business going ‘broke’ as a result”.

There was also an immoral business broking sector emerging, she felt.

Vilana of DoT said there was nothing government could do to protect such entrepreneurs and that this was the nature of the industry which was high capital risk with a road system that was deteriorating.

The committee found this all very unsatisfactory and called for further meetings with DoT stating that these matters had to be resolved and that the challenges facing the trucking industry were to be investigated further. Also cross-parliamentary meetings with public enterprises and trade and industry committees were to be called. DoT was told it would be re-called for further reports.

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