Submission to the dti re B-BBEE Amendment Bill – Gazette 34845 dated 9th December 2011
Submission to the dti re B-BBEE Amendment Bill – Gazette 34845 dated 9th December 2011
NOTE: Extracts from the Amendment Bill are written in italic, our comments are below.
1) Our comments are not intended to be insulting towards anyone, and we know that the people at the dti, SANAS, IRBA and other organizations are dedicated and concerned people. Nevertheless we would be failing in our duty if we had to base our submission on how much we like the people and how nice they are. Let us take that as a given:
2) In principle we support any activity that advances transformation.
3) The Amendment Bill repairs many errors/shortcomings in the existing B-BBEE Act 53 of 2003.
4) We will give a QUALIFIED support to some of the sections in the Amendment Bill but do not support it as it stands. The reason for our qualification will become apparent in this submission. In summary, we have become quite disillusioned with the performance of the government, minister, the BEE Advisory Council and the BEE unit of the dti with regards to broad-based black economic empowerment. These organs of state have performed very poorly in implementing the BEE codes. The Amendment Bill, to some extent is an excuse by these organs for their poor performance. If we see them make a meaningful effort to rectifying their shortcomings prior to parliament voting on the Amendment Bill, we will give it our support, subject to the points below.ner
5) In any event we are very concerned that the Bill will not be passed due to the bad press that B-BBEE generally receives, and which is hardly ever refuted by the dti. We were therefore very impressed to see that the minister, just before Christmas put out a statement correcting the erroneous media reports about the definition of “black”. We note that the source of the error was The New Age newspaper in an interview with Andile Tlhoaele of Inforcomm , a SANAS accredited verification agency.
6) We are therefore going to give a detailed submission, covering most of the problems we have encountered with the intention of assisting the minister in answering questions from other organizations, most of which will be negatively inclined towards B-BBEE. Already Afriforum have indicated that they will oppose the Bill. Unless the minister and government can put their viewpoint, with appropriate evidence before parliament, we suspect that the Amendment Bill will not be passed without the type of media frenzy that accompanied the POSIB. We have made every effort to give true and accurate information to the press and political parties. Without the support of the dti, we will fail. This will be to the detriment of empowerment and transformation, which we know is the driving force behind economic growth. Politically it will be the driver behind Manguang in December 2012.
REASON FOR TRANSFORMATION
7) According to the latest report by the Commission for Employment Equity, 73.9% of top management posts are held by white people. A recent survey of the top 100 companies on the JSE concluded that 18% is directly held in black hands, but could be inflated up to 28% if mandated investments were taken into account. What was not taken into account was how many shares earned full economic interest, and the value of the outstanding debt. Even if 28% is the correct figure, it proves that black people are not able to fully participate in the economy at any level close to white people.
8) Existing Act:
The Preamble to the existing act is very instructive:
WHEREAS under apartheid race was used to control access to South Africa`s productive resources and access to skills;
WHEREAS South Africa’s economy still excludes the vast majority of its people from ownership of productive assets and the possession of advanced skills;
WHEREAS South Africa’s economy performs below its potential because of the low level of income earned and generated by the majority of its people;
AND WHEREAS, unless further steps are taken to increase the effective participation of the majority of South Africans in the economy, the stability and prosperity of the economy in the future may be undermined to the detriment of all South Africans, irrespective of race:
AND IN ORDER TO-
- promote the achievement of the constitutional right to equality, increase broad-based and effective participation of black people in the economy and promote a higher growth rate, increased employment and more equitable income distribution: and
- establish a national policy on broad-based black economic empowerment so as to promote the economic unity of the nation, protect the common market, and promote equal opportunity and equal access to government services.
9) We submit that the above extract is not only 100% true, but accepted by the majority of the population. We note that the word “skills” appears twice in the first two paragraphs. One of the reported complaints by Afriforum is that the government is not doing anything about skills. This refutes their complaint.
10) The Codes of Good Practice, gazette on 9th February 2007 explained how companies could become compliant. There an many innovative areas in the codes:
a) It used a scorecard to objectively measure compliance.
b) It identified seven elements of empowerment ranging from ownership to socio-economic development, and included skills development as outlined in paragraph (8) above.
c) It recognized that different size companies have different challenges in becoming compliant.
d) The concept of EMEs, QSEs and Generics is unique, but caused it own challenges in fronting, where many companies deliberately used the wrong category.
e) It recognized that different industries have different challenges and created the concept of sector codes. This also created challenges that the sector councils are currently dysfunctional or completely non-functioning. Companies ignored the sector codes, and verification agencies even chose not to follow the sector codes. Without our intervention, the sector codes would be even more dysfunctional than they currently are. This is one area that we require positive action from the dti – see paragraph (3) regarding our qualification. We will discuss the sector codes later in this submission.
11) We have stated that the codes are brilliant in their outlook. However, we have to say that there are many areas of the codes that are not well thought through. We recognize that the Act and the codes are only 9 and 5 years old respectively, compared to for example the tax act which has evolved through many more years. There are areas of confusion in the codes. A good example of this is the concept of early repayment of invoices. Some verification agencies follow the 100% rule, other the 15% rule. We have requested the dti to issue guidelines, or directives on many occasions. In the case of the early repayment of invoices we received no less than two letters from the dti giving us the 100% rule, but some verification agencies continued for 4 years to use the 15% rule, costing their clients up to 13 points – 2 levels on the scorecard, without the dti taking decisive action.
12) We often have asked the dti (including SANAS as an enterprise owned by the dti) for a ruling or interpretation, and more often than not received no response other than an acknowledgement of our query. We have regularly complained that verification agencies are not following the verification manual or the codes, and have not received a response. There is a popular saying that justice delayed is justice denied, and this is very apt when a company continues to use an invalid certificate. We are well aware that a certificate means business, and a company that obtained business with an invalid certificate is getting an unfair advantage over its competitors. While we note that the Amendment Bill will sort out this issue properly, there was no reason that the dti could not have issued more explanatory notes, similar to tax directives issued by Treasury.
13) Had the dti created a knowledge base of frequently asked questions and made it publicly available most of the issues we encountered would have been sorted out sooner and without the bad feeling.
14) We are aware that the BEE Commission will be tasked with this duty, but once again we question why it had to come to a new act, when better implementation would have substantially solved the problem. Since the BEE Commission will also fall under the dti, we question why the minister believes that the BEE Commission will be able to issue interpretations better than the existing staff at the dti who have failed dismally at this task.
THE AMENDMENT BILL
15) The general explanatory note refers:
– To amend the Broad-Based Black Economic Empowerment Act, No. 23 of 2003 (the Act) in order to promote compliance with the Act by Organs of State and Public Entities and to strengthen the evaluation and monitoring of compliance with the Act;
– to provide for the regulation of verification agencies by the Independent Regulatory Board of Auditors;
– to establish the B-BEE Commission to deal with compliance of B-BBEE; to clarify the interpretation of the Act and to provide for offences and penalties.
a. We support the above, but note that the existing act, especially section 10 makes it obligatory for organs of state to take into account the BEE status of any organization in awarding tenders, licensing etc. This has tended NOT to be done, which has placed virtually every organ of state and state owned enterprise in breach of the act and the constitution.
b. We also note that Code 000, section 3 lists the organization to which the codes apply: It includes all public entities, state owned enterprises etc. We have been distressed to note that most state owned enterprises have chosen NOT to be measured under the codes. This includes the National Empowerment Fund, and even the BEE Advisory Council! On confronting them they explained that they are exempt due to code 600. (Code 600, Preferential Procurement does indeed state that procurement from an organ is of state that holds a monopolistic position is excluded.) This is very different from an organ of state being exempt from BEE.
c. We note further that to date, even SANAS has not produced a BEE certificate.
d. We are aware that the PPPFA has finally been reconciled with the B-BBEE Act. We welcome that the Amendment promotes compliance with the Act by Organs of State. We are very distressed however to note that on the date that the new regulations came into force the Minister of Finance granted exemptions to SOEs from following the regulations. It implied that SOEs could choose to follow the new regulations or ignore them. We again question why an amendment Act is needed when the existing Acts are perfectly clear. We make the point that the solution to many problems is NOT to issue yet another Act or Amendment. Our qualified support for this Amendment does not extend to forgiving the the dti or the dti minister for breaches of governance.
16) Section 1: Definitions:
(a) by the insertion before the definition of “black people” of the following definition:
“”B-BBEE transaction” means any transaction, practice, scheme or other initiative which affects, or may affect, the B-BBEEE compliance of any person.”
We support the above addition. We see it as giving force to BEE compliance. Too often people, especially the media use the word B-BBEE transaction just because a black person was involved. This definitions links the transaction to the B-BBEE score. Similarly people often talk of a BEE company, when that company has no B-BBEE certificate or compliance.
(b) by the substitution for the definition of “black people” of the following definition:
“”Black People” [is a generic term which] means Africans, Coloureds, and Indians who are citizens of the Republic of South Africa by birth or descent or who became citizens of the Republic of South Africa by naturalisation –
(a) before 27 April 1994: or
(b) on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date but were precluded from doing so by Apartheid policies:”:
This definition is identical to the definition when read in conjunction with the existing act and the codes of good practice. It makes more sense, and is better to define “black” in the act, rather than the codes of good practice. It must be emphasized: The definition of black in terms of an entity’s B-BBEE compliance HAS NOT changed. The press article, stimulated by The New Age was simply wrong. There seems to be confusion between the B-BBEE act and the revised PPPFA regulations.
(c) by the substitution for the definition of “broad based black economic empowerment” of the following definition:
“broad based black economic empowerment” means the sustainable economic empowerment of all black people, [including] in particular women, workers, youth, people with disabilities and people living in rural areas, through diverse but integrated socio-economic strategies that include, but are not limited to:-
(a) increasing the number of black people that manage, own and control enterprises and productive assets;
(b) facilitating ownership and management of enterprises and productive assets by communities, workers, cooperatives and other collective enterprises;
(c) human resource and skills development;
(d) achieving equitable representation in all occupational categories and levels in the workforce;
(e) preferential procurement, including the promotion of local content procurement; and
(f) investment in enterprises that are owned or managed by black people;”;
We support the change which is really only a more detailed explanation, but note it is hardly different to the BEE Strategy, that desperately needs updating.
(d) by the insertion of the following definitions before the definition of “Council”
“B-BBEE Verification Professional” means a person registered by the verification agency regulator and/or the South African National Accreditation System to conduct B-BBEE verification;
There has always been a problem in that a verification agency could be accredited but its employees were virtually free agents. Many of our clients were loathe to supply confidential company information to an employee of a verification agency. They realized that the agency has signed a confidentiality agreement, but felt that there was no recourse if an employee were to release that data. For example an accountant or lawyer could be reported to their respective boards, and potentially stripped of their accreditation, but a verification analyst had carte blanche.
“Codes” means the codes of good practice issued by the Minister in terms of Section 9 of the Act:
Codes are the phrase colloquially used to describe the Code of Good Practice
“Commission” means the B-BBEE Commission established in terms of section 15 of the Act:”;
We will discuss the B-BBEE Commission later
(e) by the insertion of the following definitions after the definition of “Council”:
“Department” means the Department of Trade and Industry:
“Fronting B-BBEE Practice” means a transaction, arrangement or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act or the implementation of any of the provisions of this Act, including but not limited to practices in connection with a B- BBEE transaction –
We support this definition of fronting but need to point out that this is very wide: It includes conduct that indirectly undermines or frustrates the objective of the act. This could be read to presume that a company that states “I will not get a certificate” is fronting.
(a) in terms of which black persons who are appointed to an enterprise are discouraged or inhibited from substantially participating in the core activities of that enterprise:
(b) in terms of which the economic benefits received as a result of the B-BBEE status of an enterprise do not flow to black people in the ratio specified in the relevant legal documentation:
(c) involving the conclusion of a legal relationship with a black person for the purpose of that enterprise achieving a certain level of B-BBEE compliance without granting that black person the economic benefits that would reasonably be expected to be associated with the status or position held by that black person:
(d) involving the conclusion of an agreement with another enterprise in order to achieve and enhance B-BBEE status in circumstances in which –
(i) there are significant limitations on the identity of suppliers, service providers, clients or customers:
(ii) the maintenance of business operations in a context reasonably considered to be improbable having regard to resources:
(iii) the terms and conditions were not negotiated at arms length on a fair and reasonable basis:
Whenever a statement is made that “it includes but is not limited to”, it opens the way to various interpretations
“knowing”, “knowingly” or “knows”, when used with respect to a person, and in relation to a particular matter, means that the person either-
(a) had actual knowledge of that matter: or
(b) was in a position in which the person reasonably ought to have-
(i) had actual knowledge:
(ii) investigated the matter to an extent that would have provided the person with actual knowledge: or
(iii) taken other measures which, if taken, would reasonably be expected to have provided the person with actual knowledge of the matter:
We like that the act defines “knowing” but note that ignorance of the law is no excuse so it is immaterial if a person undertook an action that he did not know to be correct. B-BBEE is a requirement, and is NOT as complicated as many people tend to think, so it is reasonable for a CEO to take reasonable steps to ensure that his business complies with the law.
We often come across situations where the company was “verified” by a non-accredited agency. Their excuse was they were not aware that the agency was not accredited. We have recently seen a situation where a company produced a certificate for its sister company. Both companies are owned and run by the same person. We state that this person should reasonably have known that one non-accredited company could not produce a B-BBEE certificate for its sister company.
“Local Content” means locally produced goods, services or works or locally manufactured goods which satisfy a stipulated minimum threshold for local production and content”:
(f) by the insertion of the following definition before the definition of “strategy”:
“Sector Charters” means sectoral transformation charters referred to in section 9 of the Act:”
(g) by the insertion of the following definition after the definition of “this Act”:
“”Verification Professional Regulator” means the Independent Regulatory Board of Auditors, a statutory body established in terms of section 3 of the Auditing Profession Act. 2005 (Act No 26 of 2005).”
16) Section 2 – Amendment of section 2 of Act 53 of 2003
(a) by the substitution for paragraph (g) of the following paragraph:
“(g) promoting access to finance for black reconomic empowerment! start-ups, micro and medium enterprises and black entrepreneurs. including in the informal black business sector”.
(b) by the insertion of the following paragraph after paragraph (g):
“(h) increasing effective black owned and managed enterprises, including SMMEs. and their access to financial and non-financial support”.
We have no problem in this clarification, which is in line with the B-BBEE Strategy.
17) Section 3: Substitution of Section 8 of Act 53 of 2003
The following section is hereby substituted for section 8 of the principal Act:-
“8 Remuneration and reimbursement of expenses”
Council members may [will not] be remunerated for their services jn accordance with the provisions of the National Treasury Regulations and, [but] will be reimbursed for expenses incurred by them in carrying out their duties, as determined by the Minister, with the concurrence of the Minister of Finance.”
We feel that the BEE Advisory Council has not performed to expectations. We understand that people should be reimbursed for work done, but there is no measurement of the quality of the work done. We would suggest that expense be narrowly defined to only include transport, accommodation and other limited direct expenses, not time.
18) Section 4. Section 9 of the Principal Act is hereby amended-
Amendment of Section 9 of Act 53 of 2003
(a) by the substitution for subsection (1) of the following subsection:
“(1) In order to promote the purposes of the Act, the Minister may by notice in the Gazette issue Codes of Good Practice on black economic empowerment that may include:-
(a) the further interpretation and definition of broad-based black economic empowerment and the interpretation and definition of different categories of black empowerment entities;
(b) qualification criteria for preferential purposes for procurement and other economic activities;
(c) indicators to measure broad-based black economic empowerment;
(d) the weighting to be attached to broad-based black economic empowerment indicators referred to in paragraph (c);
(e) guidelines for stakeholders in the relevant sectors of the economy to draw up transformation charters and sector codes of practice for their sector; [and]
We support the reference to sector codes, but note that it is no more than a clarification of the existing status quo. Once again we have to emphasise that the problems we have identified were as a result of lack of proper implementation of the existing Act rather than the real need to change or add to the Amendment Act.
We note that the Act has always allowed the minister to issue further interpretations and definitions, but feel that this is seriously lacking. We cannot recall the minister ever issuing interpretations on existing codes – other than regulations relating to for example issuing of valid certificates, SANAS, IRBA etc, or a proposal to change the codes relating to ED and SED.
By way of example as at today we are awaiting on the dti to issue a notice or gazette confirming that the new targets will come into effect on 9th February 2012 and how it will operate. With less than a week to this deadline, the gazette has still not be issued. We had repeatedly written to the dti explaining that we are hearing different views, from accredited verification agencies on how they will implement the new targets.
(f) indicators to measure local content: and
We support the local content clause, but note that it will become very difficult to measure, police and verify local content in a scorecard. We point out that while we feel B-BBEE is a simple task, many businesses find it quite a daunting task, and we would request that when the minister issues new codes relating to local content, it be done is a way that meets the objectives of the act, but is also simple to implement.
(g) any other matter necessary to achieve the objectives of this Act.”
We cannot support a blanket clause like this. The codes give the minister much leeway anyway. He does not need any more powers.
(b) by the insertion after sub-section (5) of the following subsection:-
“(6) A code of good practice remains in effect until amended, substituted or repealed in terms of this Act.”
This is obvious, but we support it if it is going to simplify any interpretation
19) Amendment of Section 10 of Act 53 of 2003
5. The following section is hereby substituted for section 10 of the principal Act: – “10 Status of Codes of Good Practice
(1) Every organ of state and public entity must take into account [as far as is reasonably possible] and apply any relevant code of good practice issued in terms of this Act in –
We support the removal of the phrase “As far as is reasonably possible”. Many Organs of state would pay lip service to the Codes, by for example saying “Attach your certificate”, but not take it into account further. Right now ICASA is reportedly only issuing licenses to companies that are black owned, and not taking the certificate into account at all. For example TOP TV, in the news recently, still does not have a valid B-BBEE certificate.
(a) determining qualification criteria for the issuing of licences, concessions or authorisations in respect of economic activity in terms of any law;
We give this clause our full support, and note that it has always been in place, but as noted above, never applied properly. We emphasise that many organs of state have ignored section 10 of the act, in some cases by even creating their own “charter” which confused many people. This includes the Mining Charter and the Petroleum charter.
(b) developing and implementing a preferential procurement policy;
(c) determining qualification criteria for the sale of state-owned enterprises; [and]
(d) developing criteria for entering into partnerships with the private sector; and
(e) determining criteria for the awarding of incentives, grants, and investment schemes in support of broad-based black economic empowerment.
We like that the Act allows incentives to support B-BBEE
(2) Subject to section 12A an enterprise in a sector in respect of which the Minister has issued a sector code in terms of section 9 may only be measured for compliance with the requirements of broad based-black economic empowerment in accordance with that code.
This is a clarification of the current situation. The existing act and codes are in full agreement. We note that section 4 of Statement 003 of Code 000 implies the exact same interpretation, but support the placement of this definition in the Act as opposed to the Codes, in the same manner that the definition of “Black” is now in the Amendment Act.
(3) Enterprises operating in a sector in respect of which the Minister has issued a sector code in terms of section 9 must report annually on their compliance with B-BBEE to the Sector Council.”
We support this, but again note that it was included in the Codes, and Sector Codes, but note that the Sector Councils are dysfunctional and we have yet to see one detailed report from even one sector council. We understand “report annually on their compliance” to mean that each company in the sector must supply their own verified certificates. This implies that each sector council has at minimum a database of all entities that belong to the sector, and keeps a database of valid certificates in that sector. In our experience the sector councils are not available for assistance or to issue guidelines.
There is no functioning central database of B-BBEE certificates, as required by 10.9 of Code 000, Statement 000.
20) Amendment of Section 11 of Act 53 of 2003
6. Section 11 of the Principal Act is hereby amended by the substitution for subsection (2) of the following subsection:-
“(2) A strategy in terms of this section must –
(a) provide for an integrated, co-ordinated and uniform approach to black economic empowerment by all organs of state, public entities, the private sector, non-governmental organisations, local communities and other stakeholders;
(b) develop a plan for financing broad-based black economic empowerment including the creation of incentive schemes to support effective black owned and managed enterprises:
(c) provide a system for organs of state, public entities and other enterprise to prepare broad-based black economic empowerment plans and to report on compliance with those plans; and
(d) be consistent with this Act.”
We support this section, but again note that financing has always been a problem. There are currently many organisations supporting enterprises including NEF, SEDA, Khula. It also has many programs like the black business supplier development program.
21) Insertion of section 12A in Act 53 of 2003
7. The following section is hereby inserted in the principal Act after section 12:-
“12A Transformation policy
(1) If requested to do so the Minister may permit organs of state or public entities to determine their own transformation policies, if the Minister is satisfied that this will advance the objectives of B-BBEE and the strategic imperatives in the South African economy.
(2) An organ of state or a public entity must apply any transformation policy made in terms of this section as if it were a Code.
(3) In the event of any conflict between a Code issued in terms of section 9 and a transformation policy made in terms of this section, the transformation policy prevails.”
We absolutely disagree with this clause: Government should not be allowed to choose to be exempted from B-BBEE. As mentioned previously the precedent has been set with regards to the PPPFA where SOE were exempted from the new regulations. This will become a political issue where a minister more senior than the dti minister will override the rules. Section 12 already allows the creation of sector codes, and the codes of good practice have checks and balances on the creation of those sector codes. We suggest that organs of state create their own sector code if required, and get it approved in the normal manner to which any other sector code is approved. If we allow an organ of state to set their own policy it will take us back to the days of contradictions and confusion in empowerment, like the PPPFA and B-BBEE act. In any event clause 12A (1) gives the minister far too much discretion “is satisfied that this will advance the objectives of B-BBEE”. The beauty of B-BBEE is it is an objective act and its scorecard can be empirically measured. It also seems extremely unfair that organs of state can be exempted from the requirements of B-BBEE when government should be the driver and leader of B-BBEE.
22) Repeal of sections 14 and 15 of Act 53 of 2003
8. Sections 14 and 15 of the principal Act are hereby repealed.
Section 14 is virtually replaced by section 24 of the Amendment bill, and 15 by section 25.
23) Insertion of sections 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, and 25 in Act 53 of 2003
9. The following sections are hereby inserted in the principal Act after section 13:-
24) “14 Cancellation of Contract or authorisation
Any contract or authorisation awarded on account of false information furnished by or on behalf of an enterprise in respect of its B-BBEE status may be cancelled at the sole discretion of the organ of state or public entity without prejudice to any other remedies that the organ of state or public entity may have.
We support strong action being taken against organizations. With regards to the B-BBEE certificate, we have concerns about one organ of state accepting a certificate and another rejecting it. We would want the BEE Commission and regulator of verification agencies to be included on this. It will ensure consistency. The ridiculous situation could arise in that one organ of state could reject a certificate while another accepts it. It requires an expert to be able to identify an invalid certificate, and this would be the role of the BEE Commission. There should be a central database of valid, and invalid or withdrawn certificates.
25) 15 Establishment and status of B-BBEE Commission
(1) The B-BBEE Commission is hereby established as a juristic person to function as an organ of state within the public administration, but as an institution outside the public service.
(2) The Commission is headed by a Commissioner appointed by the Minister.
(3) The Commission –
(a) has jurisdiction throughout the Republic:
(b) is independent, and subject only to –
(i) the Constitution and the law: and
(ii) any policy statement, directive or request issued to it by the Minister in terms of this Act;
(c) must be impartial and perform its functions without fear, favour, or prejudice: and
(d) must exercise the functions assigned to it in terms of this Act or any other law, or by the Minister, in-
(i) the most cost-effective and efficient manner: and
(ii) in accordance with the values and principles mentioned in section 195 of the Constitution.
(4) Each organ of state must assist the Commission to maintain its independence and impartiality, and to exercise its authority and perform its functions effectively.
We strongly support the creation of the BEE Commission. We have been calling for an office of a BEE Ombudsman for many years, to do the exact job that is described in this Bill. We note that it will be difficult to find skilled staff who will be able to investigate companies and their certificates. The BEE Commission will need forensic auditing expertise, business expertise, legal expertise. We are very concerned that it will take many months or years to set up and staff the BEE Commission, allowing the dti to use it as an excuse for not implementing BEE properly in the meantime.
26) 16 Appointment of Commissioner
(1) The Minister must appoint a person with suitable Qualifications and experience to be the Commissioner for a term of five years.
(2) The Minister may re-appoint a person as Commissioner at the expiry of that person’s office.
(3) The Commissioner, who is the Chief Executive Officer of the Commission, is responsible for the general administration of the Commission and for carrying out any functions assigned to it in terms of this Act, and must –
(a) perform the functions that are conferred on the Commissioner by or in terms of this Act;
(b) manage and direct the activities of the Commission: and
(c) supervise the Commission’s staff.
(4) The Minister must, in consultation with the Minister of Finance, determine the Commissioner’s remuneration, allowances, benefits, and other terms and conditions of employment.
(5) The Commissioner, on one month’s written notice addressed to the Minister, may resign as Commissioner.
(6) The Minister may remove the Commissioner from office for –
(a) serious misconduct or permanent incapacity;
(b) engaging in any activity that may undermine the integrity of the Commission;
(c) any other ground that justifies the removal of the Commissioner.
We see this as an important and difficult job and wish the commissioner the best of luck, and extend our offer to assist in whatever way we can.
27) 17 Functions of B-BBEE Commission:
(1) The functions of the Commission are –
(a) to oversee, supervise and promote adherence with this Act in the interest of the public:
(b) to strengthen and foster collaboration between the public and private sector in order to promote and safeguard the objectives of B-BBEE:
(c) to receive and investigate complaints relating to B-BBEE in accordance with the provisions of this Act:
(d) to promote advocacy, access to opportunities, and educational programmes and initiatives of B-BBEE:
(e) to maintain a registry of major B-BBEE transactions, above a threshold determined by the Minister from time to time:
(f) to receive and analyse reports as prescribed concerning B- BBEE compliance from organs of state, public entities and private sector enterprises:
(g) to promote good governance and accountability by creating an effective and efficient environment for the promotion and implementation of B-BBEE: and
(h) subject to this Act, to exercise such other powers as may be conferred on the Commission in writing by the Minister.
(2) Notwithstanding the provisions of any law, but subject to the approval of the Minister, the Commissioner may enter into an agreement with any other person, body of persons or organ of state, including but not limited to a special investigating unit established under the Special Investigating Units and Special Tribunals Act. 1996 (Act No. 74 of 1996). to perform any of its duties and functions under this Act.
We support the terms of reference as they will apply to the BEE Commission, particularly clause d (to promote advocacy, access to opportunities, and educational programmes and initiatives of B-BBEE), which is 5 years too late.
28) 18 Investigation by Commission
(1) Subject to the provisions of this Act, the Commission has the power, on its own initiative or on receipt of a complaint in the prescribed form, to investigate any B-BBEE transaction which exceeds a value determined from time to time by the Minister.
(2) The Commission may not investigate any matter that constitutes an administrative action, as defined in the Promotion of Administrative Justice Act. 2000 (Act No 3 of 2000) or may be reviewed on any ground permissible in law.
(3) The format and the procedure to be followed in conducting any investigation must be determined by the Commission with due regard to the circumstances of each case and may include the holding of a formal inquiry.
(4) For the purposes of conducting an investigation, the Commission may exercise the powers conferred upon the Companies and Intellectual Property Commission by sections 176 to 179 of the Companies Act. 2008 (Act No 71 of 2008) read with the changes required by the context.
(5) Without limiting the jurisdiction of the Commission, the Commission may make a finding as to whether any B-BBEE transaction involves fronting practices.
(6) The Commission may institute proceedings in a court to restrain the commission of any breach of this Act, including any fronting B-BBEE practice, or to obtain appropriate remedial relief.
(7) If the Commission is of the view that any matter it has investigated may involve the commission of a criminal offence, it must refer the matter to the National Prosecuting Authority or an appropriate division of the South African Police Services.
(8) The Commission may refer to –
(a) the South African Revenue Service, any concerns regarding behaviour or conduct that may be prohibited or regulated in terms of legislation within the jurisdiction of that Service;
(b) the Independent Regulatory Board for Auditors, any concerns regarding behaviour or conduct by a B-BBEE Verification Professional: or
(c) any other regulatory authority, any concerns regarding behaviour or conduct that may be prohibited or regulated in terms of legislation within the jurisdiction of that regulatory authority.
The common phrase justice delayed is justice denied applies to this clause. We support any legal, full investigation, but fear that due to pressure of work, lack of sufficient staff and the will to take the tough decisions, the BEE Commission will not be able to fully investigate all instances, and only choose high profile cases. The current BEE unit operates in this way.
29) 19 Finances
(1) The Commission is financed from –
(a) money that is appropriated by Parliament for the Commission:
(b) money received from any other source.
(2) The Commissioner is the accounting authority of the Commission for purposes of the Public Finance Management Act. 1999 (Act No 1 of 1999)
(3) The Auditor General must audit the B-BBEE Commission’s financial records each year.
30) 20 Offences and Penalties
(1) A person is guilty of an offence if that person knowingly –
(a) misrepresents or attempts to misrepresent the B-BBEE status of an enterprise:
(b) provides false information or misrepresents information to the Verification Personnel in order to secure a particular B- BBEE status or any benefit associated with the compliance with this Act;
(c) provides false information or misrepresents information relevant to assessing the B-BBBEE status of an enterprise, to any organ of state or public entity.
(2) A B-BBEE Verification Professional or any procurement officer or other official of an organ of state or public entity who becomes aware of the commission or of any attempt to commit, any offence in terms of sub-section (1) and fails to report it to an appropriate law enforcement agency, is guilty of an offence.
(3) Any person convicted of an offence in terms of this Act, is liable:-
(a) in case of a contravention of sub-section (1). to a fine or to imprisonment for a period not exceeding 10 years or to both a fine and imprisonment: or
(b) in any other case to a fine or to imprisonment for a period not exceeding 12 months or to both a fine and imprisonment:
(c) in the case of an enterprise, to a fine of 10% of that enterprise’s annual turnover.
(4) In addition, any person and/or entity convicted of an offence under subsections (1) or (3) of section 20 shall be banned from contracting or transacting any business with any organ of state and/or public entity, and shall be entered into the National Treasury register of tender defaulters.
We support this clause, but again state that unless the dti has the will to implement it, it will be worthless.
It may be instructive to give a short case study of the dti’s failure to support anti-fronting initiatives: We became aware on Friday 3rd February 2012 of a certificate purportedly issued by a company, Cape Lime (Pty) Ltd. It looked suspicious so we contacted that verification agency whose name appeared on the certificate – BEE Matrix.
“The certificate is definitely falsified, do not use. Thank you for letting us know.”.
On further querying if this had been reported they told us:
“The company is well aware that the certificate is falsified. It was reported to the DTI in 2011 and upon opening a case at the police station, they informed me that a case needs to be opened in Cape Town. After seeking legal advice, I was advised that it will be a waste of time – nothing will be achieved as the police will not waste time on something like this.
Obed de Swardt”
So, we have a situation where the dti were informed of fronting/falsification of certificate allegations in 2011. They took no public action – did not even send out a notification to agencies and consultants to inform them of the situation, and the verifications agency’s legal opinion is to take no action. This gives us no confidence that with new powers, the dti will do anything further, or that the police will decide that it is not a waste of time.
31) 21 Monitoring. Evaluation, and Reporting
(1) All spheres of government, public entities, and organs of state must report on their compliance with B-BBEE in their audited annual financial statements and annual reports under the Public Finance Management Act. 1999 (Act No. 1 of 1999).
(2) All public companies listed on the Johannesburg Stock Exchange must provide to the Commission –
(a) the report on their compliance with B-BBEE that is contained in their sustainability reports;
(b) any other prescribed information.
(3) All Sectoral Education and Training Authorities must report on skills development spending and programmes to the Commission.
Monitoring and evaluating compliance has always been a problem. A study in 2008, released in 2010, was significantly flawed, but used often by government to show that government had implemented measures for compliance. The true situation was that a tiny percentage of organs of state, then, and now had even bothered to obtain a certificate of compliance.
While we support better reporting, we are concerned that this will not happen. In any event, a central database of all certificates would remove the requirement that all entities report on their status. If there was a comprehensive database, that database could be data-mined and reported upon without further ado. We have experience in that our own database consists of more than 25 000 certificates and we have more understanding and knowledge of B-BBEE compliance, and fronting of this large population than the dti!
32) 22 B-BBEE Verification Professional Regulator
The B-BBEE verification professional shall be regulated by the B-BBEE verification agency regulator established in the Audit Profession Act. 2005 (Act No. 26 of 2005) as amended from time to time.
We support the move from SANAS to IRBA as the sole regulator. SANAS has not proven to be successful. We do hope that IRBA will be far better prepared and able to provide guidance to the verification industry. We have always believed that verification is best handled by professionals in the auditing/accounting professionals. Unfortunately we have experience of many professional accountants who willingly participate in fronting activities, or show incompetence with regard to B-BBEE. We hope that IRBA lays down strict standards.
33) 23 Interpretation of this Act
(1) If any conflict relating to the matters dealt with in this Act arises between this Act and the provisions of any other law save the Constitution and/or any Act expressly amending this Act, the provisions of this Act will prevail.
We like the sentiments of this clause, although it may be in conflict with the constitution. It implies that this act overrides any other act with regard to BEE or empowerment/transformation. It will ensure consistency across all spheres of government. It implies that the so-called Mining BEE Charter (Broad-Based Socio-Economic Empowerment) will have to follow this B-BBEE act. Our opposition to the proposed section 12 A of this Amendment Bill is based on our support of this clause. The Amendment Bill must either be consistent or not passed at all.
(2) Any person who is measuring B-BBEE compliance in terms of this Act must do so in a manner in which substance takes precedence over legal form.
This is a key principle in the codes, and is now moved to the Act, rather than the codes.
34) 24 Regulations
(1) The Minister may make regulations, guidelines and practice notes with regard to any matter that is required by this Act or that it is necessary to prescribe in order to ensure proper implementation of this Act
(2) Without limitation to sub-section (1), the Minister may make regulations in respect of –
(a) the conduct of investigations by the Commission;
(b) the information that any organ of state, public entity or private enterprise is required to provide to the Commission and the form and period of such reporting.
We do not have a problem with this clause if the minister actually makes use of it by issuing regulations, guidelines and practice notes
35) 25 Short title and commencement
This Act is called the Broad-Based Black Economic Empowerment Act, 2003, and comes into operation on a date to be determined by the President by proclamation in the Gazette.”
The codes are a good piece of legislation, as is the act. Implementation is the downfall. Unless the government make an effort to implement existing as well as new legislation transformation will fail. For example we are aware of the presentation by the dti of the proposed codes (generally outside of the scope of this submission) at the end of last year. On the face of it the new codes are an improvement over the existing codes. We have in-depth understanding of the codes and how they are applied by both business and government, and see that the new codes will serve little purpose that the existing codes already do. We have gone on record as saying the codes and targets are “too easy”, “too lenient”, but since few entities have even reached level 1, it is useless to change the codes dramatically, confuse the issue, confuse verification agencies, and get no support from the dti. It would be better to implement the slightly flawed existing codes than try to design new ones.