Comments on the draft MAC charter, gazette 39175

Introduction
It is impossible to give a proper and detailed critique or constructive suggestions on a document that is riddled with errors.

The biggest concern is the stakeholders themselves seem to have no real interest in supporting the process.
In particular we note that the letters of support from the stakeholders form part of the gazette, and rationale for a specific MAC charter. Those letters are indeed included in the gazette, so it is incumbent on us to comment on them as well.
We called each of the organisations supporting the charters, and received the following responses:

1) ACA: We received abuse and a flat refusal to send us their BEE certificate (recording of telephone call to FD is available).
2) ASA: has no certificate, and has no plans to obtain one.
3) SAARF: has no certificate, and has no plans to obtain one.
4) PRISA: Sent us their EME BEE certificate after numerous requests and reminders.

In terms of the B-BBEE Amendment Act, the BEE status of the above organisations is the only measure of their commitment to BEE. On questioning the above organisations they explained how difficult it is to become compliant, (which we know is not true). However their excuse will be used by their members which will result in less transformation.

Our viewpoint is if the drivers and stakeholders of the charter have no interest in themselves “walking the talk”, they will be poor at implementing their own charter. They will not be able to produce the required reports required by Code 000, statement 003. If the line ministry has relied on support from the signatories in the gazette for its own support as required by 3.1.10 of statement 003, it will be severely embarrassed.

Specifics
We are going to list only a few issues. This does not mean we support all other clauses.

Page 13 of code (page 17 of gazette):
The objective of a sector code is to make it more applicable to that industry and solve specific issues in the Codes of Good Practice. For example one of the most crucial areas relates to procurement, particularly 3rd party media procurement. The MAC charter ignores this. It goes further by changing the definition of inclusions and exclusions of procurement. This is contrary to 3.3.2 of statement 003.

For example:
According to the draft charter: “6. Procurement spending where there is a natural monopoly.” is EXCLUDED.

According to the Codes of Good Practice, 5.5 of Code 400 “Monopolistic procurement: all goods and services from suppliers that enjoy a monopolistic position” is INCLUDED.

Page 14 of the code:
It is quite embarrassing that the code even states as an exclusion “10. All Value-Added Tax payable”. While this is true, all auditors know that VAT is not an expense, but a liability. The Codes of Good Practice already define Taxation as being an exclusion (6.1 of code 400).

The EME threshold of R1m for PR practitioners sets a new record, far lower than BEPs or Tourism companies, and must be adjusted.

Pages 17 and 22 of the code:
A total of 138 points (including bonus) is available for a generic, as opposed to 105 points for a QSE! Even though the generic scorecard is more stringent than QSE, points for QSEs will be similar or even lower than generics. Why does the charter want to add more red-tape and make life far more difficult for small businesses? Does the charter wish to close down QSEs? A one man PR firm that has a turnover of R1.1m is now a QSE, and will struggle to reach even level 8.
40% black ownership, compared to 25% for the Codes of Good Practice. Has the charter council obtained empirical evidence or other scientific data justifying a 60% increase in ownership targets from that approved by the Codes?

Pages 19 and 20 of the code
Skills shows 30 points available – including bonus. ESD shows 42 points available – excluding 4 bonus points. The least the charter could do is be consistent.
 
Page 21 of the code:
What does “promote responsible behavioural changes in line with Government’s strategic objectives” even mean? How will it be evaluated? What are the criteria? Where is the report showing “sound economic principles, sectoral characteristics or empirical research” as required by 3.1.8 of statement 003?

Conclusion:
Charter is badly worded and contains errors. Logic is poor, and based on the old letters from stakeholders supposedly supporting the charter, shows a serious lack of interest in genuine transformation in this sector.
The pace of transformation in the media, advertising and communication sector has been too slow. This proposed charter will slow it further.
The charter should be scrapped permanently, and money spent on this could be better spent on education of South Africa.

Prepared by: Keith Levenstein
CEO, Econoserv SA cc
www.EconoBEE.co.za
4th November 2015

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