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Small businesses: you are on your own – EconoBEE Newsletter – 21 October 2014

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Small businesses: you are on your own

I’ve always been involved in small businesses. They are exciting, entrepreneurial, challenging.

Most big businesses started out as small businesses.

Stats are hard to find, but reports are that small businesses have a larger share of economic activity than big businesses, and employ they more people. In today’s economy where a big problem is unemployment, we need to look to create more small businesses which will employ people.

Small business has no strong voice in the economy. Yes, there is now a minister for small business development , but most associations, chambers of commerce talk on behalf of big business. 

Small business has little representation in politics and the economy – maybe because we are head-down in work and do not have the time, or interest in lobbying, or finance to hire law firms and other associations to represent our interests. We, small business, are a bit too independent to want to join too many organisations. As an aside that’s probably why you don’t find too many small businesses involved in collusion activities that the Competition Commission so frowns upon. I seldom bump into my competitors, much less do I have any interest in setting prices or methodologies in the industry. 

The result is small business is not heard enough by those who run our economy, yet they expect us to solve the problems they caused.

The QSE codes were launched on 10th October.  Sadly there has been little press coverage. We managed to get some press releases, radio and TV interviews, but mainstream media has largely ignored these, very stringent codes. So, too have the thousands of small businesses out there. Big business is not concerned if QSEs struggle to become compliant. They have their own problems. Trade unions have different issues. 

The QSE codes have a period for public commentary. The minister was supposed to give a 60 commentary period – but the notice has stated 35 days to 14th November 2014. We are challenging this notice period, but if small businesses do not put in their comments, the minister could just as well have offered no commentary period.

Small businesses – you are on your own

Why is the minister steamrolling the QSE Codes?

The proposed Amended QSE Codes were published on 10th October.

In the notice the commentary period is stated as being from 10th October 2014 to 14th November 2014 – a period of 35 days.

This is contrary to Section 9(5) of the B-BBEE Act 53 of 2003 which states:

(5) The Minister must, before issuing, replacing or amending a code of good practice in terms of subsection (1)-
(a) publish the draft code of good practice or amendment in the Gazette for public comment; and
(b) grant interested persons a period of at least 60 days to comment on the draft code of good practice or amendment, as the case may be.

This is a problem: the commentary period should have extended to at least 9th December.

It is interesting to note that the notice of 10th October refers to section 9 of the act, and not section 9(5) of the act. Whatever the motive, the proposals are only a draft and the public has a right to use all of the at least 60 days to comment. This is a big draft, containing not only the QSE codes, but also codes for equity equivalents, development of sector codes,  specialised enterprises and sale of assets.

We have written to the dti requiring them to issue a notice in line with the act giving us at least until 9th December to comment.

We wonder why the minister only gave us 35 days to comment? Was it to steamroll these new codes? We have been complaining that the codes  have been unacceptably delayed. If the commentary period closes in November there might have been time before year-end for the dti to read and react to the hundreds of comments they will receive.

Now they have to allow us until 9th December: more comments will be received, and they will not have time to finish the process before year-end.

Once again we only see delays. The dti cannot override the delays by removing our commentary period.

In the meantime we are working hard at giving our well-thought-out comments. This is an important policy to all small businesses. The proposed QSE codes are controversial. We encourage all affected to read the proposed codes, our blogs, attend courses and also submit a comment.


Undue haste after long delay

The revised B-BBEE codes were issued as a draft on 5th October 2012. At the time the QSE codes were not included. The dti kept saying that the QSE draft codes would be released shortly. In October 2013 the dti released the final amended codes, again without the QSE codes.

The October 2013 codes gave a transitional period of 1 year before the amended codes would come into affect.

In March 2014, the minister extended the transitional period by a further 6 months to 1st May 2015. This means that by May 2015 generic companies would have had knowledge of the drafts for nearly 3 years, and the final codes for 18 months before having to implement them. No generic should be able to say they did not have enough time to react.

QSEs – small businesses – on the other hand have been treated very poorly. By their nature QSEs are small, often under work pressure without the sklls to manage large swathes of legislation. QSEs are very important in our economy. Many generics started out as small businesses. QSEs are the engine of the economy that employs people. This is why there is now a ministry for small business development.

As important as BEE is to the country, so is every small business. If we kill small business, we close down the economy.

QSEs did know that there were going to be changes to the codes but they did not have any detail. The amended codes of 2013 did indeed give some inkling of some of the rules around QSEs. QSEs that are at least 51% black owned did have certainty, but any other QSE with less than 51% black ownership had very little idea of what the codes were going to say. Our research shows that this will affect 83% of all QSEs – the remaining 17% being 51% or more black owned that will be automatically level 2 or level 1. As an aside this is an interesting statistic – only 17% of QSEs are black owned which certainly justifies the need for more transformation.

On the 10th October 2014, more than 2 years after the draft generic codes were issued, QSEs were finally given their own codes as a draft. In 2012 generics were invited to give comments, and a 60 day commentary period was given. The dti minister obviously consulted and read all submissions and took a year to reissue the final codes. QSEs on the other hand have been given 35 days to comment.

As shown above generics were given 2 months to comment on the draft, then 18 months as a transitional period to 1st May 2015, after the finalisation of their codes. QSEs are already being told, that they will have no transitional period. They will be following their QSE codes as from 1st May 2015. This ignores the fact that the dti must read all submissions and reissue the codes as a final QSE code. This ignores the fact that the minister should have given 60 days of public commentary, not 35. Can we even be sure that the minister will read the public comments before steamrolling the codes into final codes – probably sometime in February 2015, giving the long suffering QSEs exactly 2 months to react before 1st May 2015?

To summarise; generics had sight of the drafts 30 months prior to implementation, and final codes 18 months prior to implementation.

The 83% of QSEs that are affected by the codes have sight of their draft 6 months prior to implementation and will probably only see final codes 2 months prior to implementation.

As a QSE I’m quite depressed. As a supporter of transformation I’m even more concerned that most QSEs will simply give up on B-BBEE. Since most businesses needing to comply are QSEs, this presents a major threat to transformation.As a supporter of growth in the economy, I’m terrified.


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EconoBEE Newsletter
 21 October 2014

In this issue

  • Small businesses: you are on your own
  • Why is the minister steamrolling the QSE Codes?
  • Undue haste after long delay
  • Amended QSE Codes

In other news

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