EconoBEE Newsletter – 24 May 2007

True Empowerment

True empowerment is about the people who can benefit the most. That is why we like the 7 elements. It covers charities to employment and emphasises skills training and entrepreneurial development. No one item is the be all and end all of BEE. If it was it would defeat the objectives of BEE. If BEE was only about putting money into enterprise development it would fail, because regretfully many new businesses DO fail. If it was only about charity we would become a socialist state and our economy would fail. The various elements make BEE broad-based and go towards improving society and indirectly the economy. Without an equitable society we would have an unstable country.

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True Empowerment vs Bad Empowerment.

Most people agree that transformation must take place. The difficulty is how to ensure that it is done with the best intentions and benefits the people who need it most, as a long-term sustainable strategy.

There are many examples of bad empowerment, and fortunately many of true empowerment. In our opinion bad empowerment is the eNatis System. In 2002 a company, Tasima, formed specifically to handle the National Traffic Information System, won the tender. Tasima is a consortium of arivia.kom, Face Technologies, Thutukani Technologies and Webcom Consulting. The tender had been put together some years before, and obviously concentrated on the consortium’s BEE credentials. I am aware that this pre-dated the B-BBEE act and codes of good practice. While the credentials of the consortium were probably quite good, the management of the company is run by ex-Arivia.kom people. Strangely enough this results in poor employment equity! The biggest problem is the poor quality of work produced by Tasima. Having been in the IT industry for many years, it is obvious that they failed to stress test the system, failed to size the system properly or even plan it properly. This whole project is not “rocket science” – it is a simple IT system that uses only about one billion records (not a lot relatively speaking). There are about 2500 users – again not a huge system – compare this to Google’s database and users.

The contract started in June 2002 and ends five years later on 31st May 2007 – 2 weeks from now. They only tried to go live in April 2007, with just one month to go before the end of the contract. The fact that in the middle of April they suddenly realized that they need a new data server is inexcusable – any competent database administrator would have known that a billion records should be managed by multiple servers to spread the load. I feel for the licensing departments whose staff have to bear the brunt of irate members of the public who are frustrated beyond words just to get a car registered or to book a drivers license. It has been reported that some staff are not turning up for work due to the stress caused by the non-functioning of the new system.

Who has benefited from this “BEE” project? The consortium (black owned), management (mainly white males), and some black staff manning the call centre who also have to endure the abuse of their users. What is going to happen to Tasima after the contract expires? Are they likely to win any other tenders. What about their staff? Is Tasima a sustainable, viable business? I think not – a case of bad empowerment.

On the other hand, Pick ‘n Pay has assisted some of its staff to open and operate a bakery business.

Pick ‘n Pay’s Support Bakery BEE Project is an innovative upliftment initiative that provides training and employment for countless numbers of people. The highly motivated Support Bakery team supplies all Pick ‘n Pay’s in-store bakeries with freshly baked products, earning a percentage of their daily production costs. Since 2004 the project has grown substantially and continues to give Pick ‘n Pay quality products.

This is true empowerment – in the area of Enterprise Development.

Pick ‘n Pay supports this enterprise development project by purchasing from the new bakery (they make the most outstanding biscuits) via Preferential Procurement. The business is thriving, and providing excellent service to its customers. What will happen to the bakery? Most likely it will thrive, find new customers, employ more people, earn profits for its shareholder and bonuses for its staff – a case of true empowerment.

Pick ‘n Pay released an article in their Pick ‘n Pay Talk which describes the Support Bakery Enterprise Development Project in more detail.

Narrow Based BEE is the easy way out

I spoke to one of the mining companies and they proudly offered me their annual report. Being a BEE consultant I quickly browsed to the Broad Based Black Economic Empowerment section of their annual report.

It looked very well typed and they had made an effort to make sure that their BEE Status was inline with that of their competition. The problem is – the Mining Charter has been gazetted within an act and it is Narrow Based. This company had written a very good description of what they had done, but in Narrow Based terms.

Their narrow based terminology made no mention of true empowerment. They had also left out all of the great projects that they very proudly support – ranging from sponsoring schools to helping support the communities that are reliant on their mines.

They used a Narrow Based BEE Scorecard (in their case it is inline with the mining charter). They have only taken into account the ownership of the company. They need a black owned investment fund. Then they need to sell the shares. They gave a large discount on the shares which made the transfer go through without any problems. The banks are happy to lend the money because its practically paid for with the large discount. A simple sale of a small percentage of the shares would more than cover the debt owing to the banks. They also went for a small staff trust which now owns a small part of the company.

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Labour Minister disappointed about non-compliance of EE Act

Labour minister, Membathisi Mdladlana, is disappointed about the slow pace of implementation of the EE act. Please see the report from BUANews.

He has a point. Pace of reform is still too slow. What he does not take into account is the complication of transformation, and the conflicting methods that government is still using to implement BEE. He makes the statement “If every company properly implemented the Employment Equity Act, or even moved further than what the law stipulates, it Act would eventually become redundant”, and again I agree with him.

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Tax Amnesty

I would like to remind all readers that the small business tax amnesty expires at the end of May 2007. If you are behind on your tax and financial returns, you should consider applying for the amnesty. Please speak to your accountant/tax advisor for the correct advise.

SARS does have the right to refuse your company amnesty, but if they do grant you amnesty, they will insist on you providing accurate financials from now on. We have always made the point that a successful business has up to date accounts and keeps their accounts up to date. Experts state that if your books are out of date you stand a greater than 50% chance of your business failing.

EconoAccounting is the division of EconoServ that aims to help clients keep their books up to date. Our EconoAccounting product is an easy to use accounting system for small businesses. Accounting/bookkeeping really need take you no more than a minute or two per day to be 100% up to date. Our import feature that allows you to import your bank statements directly into EconoAccounting and auto-allocate facility ensures accurate and up to date accounts, even if you are not an accountant, or have no accounting training.

For more details please visit or call me on 0861 11 3094.

Hilary Levenstein

EconoBEE in Cape Town and Durban

We are hosting another workshop in Cape Town this week (24 May 2007) which filled up fast. We will be hosting another workshop so if you do want to attend the next Cape Town workshop please book now before you miss out. We are also presenting a workshop in Durban next month (14th June 2007). We are still running workshops every Tuesday morning in our offices.

EconoBEE Scorecard

Our EconoBEE Scorecard is simple easy to use BEE Scorecard Rating software. The software is ideal for companies who need to become BEE compliant and need a BEE scorecard. With the recent gazetting of the BEE codes self rating is becoming a favoured form of scoring companies because of the simplicity involved in using EconoBEE Scorecard. EconoBEE Scorecard has been used successfully by thousands of companies. These companies have also benefited greatly from the detailed explanations offered by the software.

EconoBEE Scorecard is inline with the current Codes of Good Practice (gazette no.29617).

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