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The Quarterly Journal for a Transforming Nation

Transnet:

UNLEASHING A NEW PLAN

INSIDE: SMME – BANKS TACKLE CREDIT BUREAU DIFFICULTIES ICT: BEE NOT A TOOL FOR CHANGE CSI: OUTDATED FORM OF PLOUGHING BACK? BEE: STILL IMPORTANT FOR SOUTH AFRICA VOLUME 1 2011 ZAR 45.00


contents

INSIDE

20

90

2

Publisher's Note

6

Foreword

8

Editor's Letter

10

Contributors

12

Publisher's Details

13

Brian Molefe Speaks

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Rebranding Hits SA

20

Gauteng Transport Vision

25

Property Sector's Lopsided Ownership

28

Back on the Agenda

32

Cause for Joy

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BEE on Highroad

34

Film & Publications Board – Cause for Satisfaction

36

True or False – BB-Black Economic Empowerment

38

Tender Fraud to End

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88 “This is not a big issue in my or the banks’ life anymore. We are now reporting against the generic codes. It does not make 74 sense to expect people from such diverse backgrounds to agree,” Cas Coovadia, CEO of BASA. He was commenting on the tiff between banks and unions.


contents

INSIDE

State Now Serious on BEE – Expert

40

BEE Mergers on Hold

44

54

Local Government Training and Skills Development in South African Municipalities

46

Parks Tau – Mayor of Johannesburg

48

Kgosientsho Ramokgopa – Mayor of City of Tshwane

50

Mondli Gungubele – Mayor of Ekurhuleni

52

Patricia de Lille – Mayor of Cape Town

54

Zanoxolo Wayile – Mayor of Nelson Mandela Bay

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Is Empowerment Sustainable?

58

Unleashing Economic Change from all Fronts

60

64

28

4

Private vs Public Schools

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Criss-Crossing the Globe – Chris Hlekane

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Global IT Groups Dictate BEE Schemes

70

Changing the Advertising Sector

72

Tiff Dashes Hopes of Economic Slice

74

Reviving Neglected SMEs

76

Will NGP Change Lives?

78

Young, Up and Coming Businessmen

82

Wine Unshackles Black Sisters

88

Learning from Emerging Markets – Kuseni Dlamini

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Where are they now? – Don Ncube & Gaby Magomola

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“This will not be good for corporate mergers and acquisitions in South Africa going forward. Many deals will be delayed because of this. In 44 addition, there are still many things that are unclear in the new revisions, like the financing of transactions by banks, ” Stephan van der Walt, the head of corporate finance at Bravura.


PREFACE

A

publisher's note

s we approach the 18th year into our democracy, it has become clearer that South Africa has walked a fault-finding journey towards realizing a society that is truly reflective of her demographics both socially and economically. In this respect it remains vital to persist in engaging on debate about the issues that are affecting us as a nation while we continue to ask questions that trigger more dialogue in our quest to alleviate socio-economic ills which seem to overshadow and undermine the freedom of our nation. Without a doubt, we are too young a democracy to even think we have reached a point where the legacy of apartheid has vanished to the extent that righting the wrongs of our past has become irrelevant.   The time has come for us to acknowledge and embrace that we are a very diverse nation that has a history of systematic division enforced by law. This requires not only legislation and policies to redress these socio-economic imbalances of the past but also time, perseverance, and cooperation.   South Africa continues to face difficulty with regards to poverty alleviation, job creation, quality education, crime rate and proper human settlements. Some of these problems are not unique to our country but the combination, the conditions and the rate at which they manifest themselves may be. These therefore are not a problem that must be solved by any particular group or government alone but a problem that requires a collective effort by all those who profess a love for South Africa as they affect all of us. It is simple economics that the hungrier the majority of the people of a particular country are, the higher the crime rate. By the same token, it seems also quite simple to understand that the more people become economically active the more jobs we will have and the lesser the crime rate and lesser will be poverty. This is

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what transformation is about, changing people's lives for the better and to the benefit of the entire South African community. In the South African context the majority of the populace is black South Africans who have been marginalized in the past by a minority grouping. It is also on this basis that TransformSA quarterly comes to life.

We know therefore that we are unlikely to solve any of these challenges without acknowledging that transformation is necessary, because it is change. Transformation is inevitable, it is bound to happen, and hence we need to expect it, manage it so that the outcome is in our favour. Transform SA therefore provides a platform through which South Africans can learn about transformation in the South African context. This takes the form of economic and social transformation - black economic empowerment (BBB-EE), Small business development, women empowerment, youth development, community development and corporate social investment. Transform SA envisages fostering the relationship between economic and social transformation as these are interdependent in many ways. This also allows South Africans to understand black economic empowerment in the context of economic transformation rather than a simple get- rich-quick scheme. We also highlight the challenges that are facing various sectors in terms of transformation while we continue to discourage adversaries of transformation. I trust TransformSA will provide the much needed demystification of the transformation programme of our country. Thanking the TransformSA team, all contributors, subscribers and advertisers.

Saki Mabhele - Publisher


PREFACE

fore

word I

t is with a great sense of pride and optimism that I welcome you to the inaugural edition of TransformSA magazine. This comes at a time when we bear witness to immense challenges within the transformation space, charactirised by uncertainty yet offering numerous growth opportunities. It has been said that at times opportunity often comes disguised as an obstacle or as hard work. It is hardly surprising when one notes that some of the world’s greatest achievements were accomplished by people who endured seemingly insurmountable impediments on the road to great achievements. Likewise this is the same path that the transformation journey must travel on its way to becoming a success. For we know all too well the various criticisms that have been levelled at transformation; from the alleged failure of BB-BEE, to the ineffectiveness of EE legislation right up to the skepticism that the BB-BEE Act and its attendant Codes of Good Practice have been viewed with. It is these issues that TransformSA must seek to analyse and highlight in order to create debate that will hopefully lead to an egalitarian society. This has to be through engaging articles that seek to critically analyse our transformation endeavours, with writers and analysts who are well versed with the intricacies of the transformation agenda along with forums for readers to formulate their own views of the transformation project as they see it. Amongst others, the purpose will be to completely dissect transformation in various BBBEE transactions in an effort to evaluate how truly empowering are they. It is my wish to see TransformSA thrive for it is when we constructively engage on platforms such as this that we can have any hope of driving transformation in our society. Happy reading!

– B. Peter Vundla

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EDITORIAL

editor’s

letter This is the launch issue of 'TransformSA', South Africa’s new quarterly for a transforming nation, but it is also chock-full with excellent writing and journalism. 'TransformSA' will tell it like it is and without any fear or favour..

T

he magazine intends to be highly critical of sectors that are slow to change as well as run positive stories on South Africa’s transformation process. One piece in this issue that can be highlighted concerns a fresh angle the magazine has taken on the on-going fight between the banks and Cosatu over direct black ownership of these financial services institutions. That the deadlock between the parties over this issue will deny blacks economic benefits is an angle that has not been explored. True, if black direct ownership of banks is increased to 15 percent, the top four banks will have to restructure their current BEE deals. This can be costly for banks and it is not clear where about R25 billion will come from in these tough economic times. But on the other hand, increasing black ownership in the banks is also a business imperative that would allow blacks economic benefits they were denied for a long time. The article states that not much progress has been made in an attempt to resolve the banks/Cosatu deadlock in the past two years. The matter has been overtaken by other events. But there is also an encouraging story emanating from the manufacturing sector in the Eastern Cape. One manufacturing multinational giant has formed what is called a Rainbow Nation Club, which seeks to deal with racial tensions on the factory floor. This company has taken social corporate investment further and TransformSA hopes many corporates in the country could adopt this or any other progressive programme in the workplace. Other stories in this issue will no doubt delight and chill our readers too, like educationist Graeme Bloch’s deep descent into the private versus public schools debate and implications for transformation in the country. We think this all makes for a pretty special reading in this issue. Don’t you think? And as for TransformSA’s new fans, we urge you to go to the TransformSA website to download daily breaking stories on transformation. Enjoy.

One piece in this issue that can be highlighted concerns a fresh angle the magazine has taken on the on-going fight between the banks and Cosatu over direct black ownership of these financial services institutions.

– Mzwandile Jacks

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An Authorised Financial Services Provider

NOT JUST “ WE’RE COMPLYING. WE’RE TRANSFORMING OUR

tbsp /// beyond the line 33866

NEW HORIZONS

BUSINESS.

Edward Kieswetter, Group Chief Executive

Transformation is not a once-off event and at Alexander Forbes we’ve pledged ourselves to its continued journey. We’ve made great strides and proof of our commitment can be seen by our level 3 B-BBEE status, which we’ve retained for three consecutive years. There’s still significant work to be done but we’re well on our way towards contributing to the economic emancipation of black people.

Commitment beyond compliance.

www.alexanderforbes.co.za


contributors

PROFILES

Mthunzi Mdwaba is Vice President of BUSA, a governing body and member of the International Labour Organisation (ILO) and Management Board Member of the International Organisation of Employment, Geneva, Switzerland. A former Group Chief Executive Officer of Torque Holdings, and Deputy Chief Executive Officer of the Kelly Group, listed on the JSE. He was a leading team member in building Torque IT to be a world class, multi award-winning company, with clients in 27 countries within Africa. Torque was acquired by the Kelly Group in 2008. Mdwaba holds a BA, LLB from the University of the Witwatersrand. In 2004, he was awarded IT Personality of the year by the Computer Society of South Africa (CSSA). In 2009, Mdwaba was awarded BBQ Businessman of the year Award as well as overall Platinum Businessman of the Year and Topco Black Businessman of the year by the Metropolitan Oliver Empowerment Award.

Paul Berkowitz (Local Government Specialist) – is employed by Citydex, a specialist division of Empowerdex which specialises in municipal government research, analysis and consulting. His roles include product development, training and advisory services for municipalities. He is a graduate of the University Of Cape Town (UCT) with a B. Bus.Sci in Economics. He was an economics lecturer at the UCT before working for Econometrix as an economic analyst. In 2007 and 2008, he worked as an industry analyst at FNB Corporate Bank. In 2009 he joined the Centre for Applied Legal Studies, specialising in the analysis and research of water and sanitation issues in South Africa. This included government expenditure, service provision, municipal backlogs and consumer demand analysis.

Mdu Mkhonza is the President of the Black IT Forum (BITF). He also the chairperson of the KZN ICTe Cluster Board and is CEO of Akha-Unique Telecoms and Managing Director of NG Networks. Mkhonza is an activist. He’s been a member of many community/youth/professional organisations. He served as a member of the Statistics Council of South Africa, a member of the Cato Manor Development Association, the Lamontville Multimedia Centre and many others. He holds a number of qualifications: Secondary Teacher’s Diploma, BSc–Economics & Computer Science (Natal), Post-Graduate Diploma in Management (Natal), MBA- Information Management & e-Commerce (UKZN), Project Management (Wits), IT Management in Government (Wits), Information Technology Leadership (Wits), Principles of Business and Management (Wits) and Business Incubator Management (San Jose), Telocoms Mini MBA(Telecoms Academy). Graeme Bloch is visiting adjunct Professor at University of Witwatersrand Public and Development Management school (P+DM). He was DBSA education policy analyst. He taught in the education faculty at the University of Western Cape and was project manager for youth development at the Joint Education Trust.  He has worked as head of Social Development in the Department of Welfare and as Director of Social Development in the Joburg Metro. Before 1994, he was executive member of the National Education Crisis Committee (NECC) as well as the United Democratic Front (UDF). For his involvement in the democratic movement he was detained and arrested numerous times. He was banned from 1976-81. He is a graduate of the University of Cape Town where he specialised in economic history and in 2011 attained his second MA from Wits, in creative writing. He is a member of UCT Council, serves as director on Lafarge Education Trust, is on the Board of Equal Education, the Advisory Board of Elma Philanthropies and is a patron of Bitou10 in Plettenberg Bay. Bloch is also a judge in the Impumelelo Innovation Awards. Sibonelo Radebe has practised as a ‘political economy journalist’ for more than 10 years. His is a self-imposed protest title against the painfully embedded and anti-intellectualist news media industry tags. Having worked for leading business publications, Business Day and Financial Mail, the industry would like to impose titles such as business reporter or financial journalist on him. For want of expressing difference against reinforcement of historical hegemonies of these titles, he runs with the ‘political economy’ journalist tag. His case is marked in his work for various independent publications and in the development of alternative media.  He is currently in the employ of The New Age newspaper and is pursuing an ethnographic study of how newsrooms are interacting with the transformation demands of the post 1994 South Africa.

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Neren Rau assumed the role of CEO of SACCI in June 2008. Rau worked at the Reserve Bank for seven years and headed the Financial Safety Net Division of the Financial Stability Department. In that role, he was responsible for financial sector continuity planning inclusive of identifying risks that threaten the broader financial sector, formulating contingency plans and crisis management strategies to deal with such threats and developing and enhancing financial safety net policies. To a lesser degree, his division is also involved in monitoring the financial sector transformation process, black economic empowerment and initiatives to broaden access to finance.  Both through this role as well in his previous position as a Deputy Director in the National Treasury, Rau had extensive experience in researching, negotiating and advising on government policy for the financial sector.


CREDITS

sa

The Quarterly Journal for a Transforming Nation

publisher’s details Publisher

Managing Editor Feature Writer Production Director Production Manager Creative Direction Printer Advertising Sales Editorial Enquiries Advertising Enquiries Online Editor Online Advertising Administration General Enquiries

Saki Mabhele 376D Oak Avenue Office Park Randburg 2194 Tel: 0861 744 674 Fax: 0866 11 44 78 saki@transformsa.co.za Mzwandile Jacks mzwandile@transformsa.co.za Tiitsetso Tlelima ttlelima@transformsa.co.za Luvo Mxoli luvo@transformsa.co.za Nataski Vito nataski@transformsa.co.za Liesel van der Schyf liesel@vdsdesign.co.za SakiPrint cc Kgagamatso Maota editor@transformsa.co.za advertising@transformsa.co.za Tiitsetso Tlelima ttlelima@transformsa.co.za onlineads@transformsa.co.za Smangele Mpofu info@transformsa.co.za Tel: 0861 744 674 Fax: 0866 11 44 78 www.transformsa.co.za Facebook page: Like us through TransformSA website Twitter page: Follow us from TransformSA website Terms and conditions of use / Disclaimer TransformSA is a product of SAKIPRINT CC. 376 D Oak Ave. Office Park First Floor, Oak Avenue, Ferndale. TransformSA (USSN No. 2079-7273) considers it’s sources reliable and verifies as much data as possible. However, reporting inaccuracies can occur, consequently readers using this information do so at their own risk. TransformSA is sold with the understanding that the publisher is not rendering a legal or advisory service. Although companies and contributors mentioned herein are believed to be reputable, neither SAKIPRINT (Co. CK2002/063910/23), nor any of its employees, sales executives or contributors accept any responsibility whatsoever for such persons’ and companies’ activities. SAKIPRINT CC. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form without prior written permission of the publisher. Permission is only deemed valid if approval is in writing. TransformSA buys all rights to contribution, text, images unless previously agreed to in writing.

Volume 1 • 2011

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Images: Š Transnet

COVER STORY

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COVER STORY

brian MOLEFE speaks

He has been one of the country’s leading proponents of transformation for a long time. His work on South Africa’s transformation of its listed companies forms the basis for heated debates on change all over the country. Business colossuses and BEE practitioners beat a path to his door. Written by Mzwandile Jacks

I

n so far as there is a popular line in South Africa’s environs of transformation, Brian Molefe, CEO of Transnet, lays it down. Transnet is the country’s biggest transport utility. Molefe is also the former CEO of South Africa’s only sovereign wealth fund, the Public Investment Corporation (PIC). He has been a staunch critic of South African companies that failed to transform themselves in the past few years.

exclusive interview, Molefe told TransformSA it was his duty to ensure that Transnet helped with realising the broader societal objective of transforming the economy.

These companies included Sasol, the JSE-listed petrochemicals giant. The PIC holds a significant stake in this company. He was also particularly harsh on other companies where PIC held a stake. Molefe’s current comments on transformation are as weighty as earlier ones. Speaking in an

“We have increased our BB-BEE spend over the past three years from R6.9 billion to R19.4 billion,” Molefe said. “This is 75 percent of our total procurement spend compared to a 50 percent target set by the Department of Trade and Industry (DTI).”

Transnet spent billions of rand annually in buying services and goods which it sees as its biggest opportunity to ensure that the South African economy is transformed.

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COVER STORY

Transnet is the custodian of South Africa’s transport and logistics infrastructure focusing on rail ports and pipelines. Operationally, its focus would be on ensuring that this network functions in a manner that facilitates trade, not only within South Africa, but the rest of the continent. On rail, it is paying particular attention to providing a scheduled rail, especially in the general freight business. The ports and container terminals are functioning well with Durban Container Terminal – Pier 2 - being the only exception. This terminal is already receiving specific management attention which includes the acceleration of the programme to renew its fleet of cranes. The age of the equipment in Durban is one of the biggest challenges that Transnet faces. On pipelines, Transnet is on track to replace the existing asset with a new one.

“We have increased our BB-BEE spend over the past three years from R6.9 billion to R19.4 billion,” Molefe said. “This is 75 percent of our total procurement spend compared to a 50 percent target set by the Department of Trade and Industry (DTI).”

The trunk line, which runs from Durban to Gauteng, is complete and operational. The rest of the project will be finalised and commissioned by December 2013. “We recognise the role BB-BEE plays in the economic transformation of South Africa as it significantly increases the number of previously disadvantaged people who manage, own and control the country’s economy, as well as significantly decreases income inequalities,” Molefe said. He said though Transnet had consistently partnered with and supported BB-BEE-compliant partners and suppliers it is still in the process of finalising its BB-BEE and supplier development strategy. The strategy would link closely with Transnet’s supply chain to achieve sustainable and inclusive economic development, social stability and labour-absorbing economic growth. “I must admit this is long overdue. Supplier development, including BB-BEE, is a key focus of our procurement activities,” Molefe said, adding BB-BEE procurement spend had grown

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significantly over the past three years from R6.9 billion in 2007/08 to R13.5 billion for 2009/10. This was 40 percent of the total spend. The overall Transnet BB-BEE spend for 2010/2011 is R19.4 billion or 75 percent of the total. This was significantly higher than Transnet’s target of 65 percent. Its long-term goal is 70 percent. This is done while the company’s financial viability is maintained.. “Transformation does not exclude the need to perform. It is part of doing business,” he said. In line with its commitment to the New Growth Path (NGP), Transnet is focusing its skills development efforts on the training of artisans, engineers and engineering technicians. Last year, South Africa embarked on a new economic growth path in a bid to create five-million jobs and reduce unemployment from 25 percent to 15 percent over the next 10 years. The NGP aimed to address unemployment, inequality and poverty by unlocking employment opportunities in South Africa’s private sector. The NGP programme is a broad framework that sets out a vision and identifies key areas where jobs can be created. The growth path places employment at the centre of the country’s economic policy. Transnet planned to increase the number of trained artisans by an additional 500 a year for the next four years. It has 356 engineering technicians in the internship programme and the target is to recruit an additional 180 engineers a year. “We plan to increase the number of trained artisans by an additional 1500 in 2012; we are targeting an annual intern intake of 1500 learners focused on marine rail and cargo programmes; and we are going to increase direct jobs by 2.562; over 300 000 indirect jobs,” Molefe said. “We’ll boost the female employee base by 25 percent. Our 55 000 colleagues are a key element of our growth and efficiency goals for the


COVER STORY

next five years.” The company has a comprehensive human capital development plan in place and has made a conscious decision to train more than its requirements for the benefit of the country. It has concluded a partnership with the South African National Defence Force (SANDF) to recruit artisans from the Military Skills Development System, the army’s two-year programme. “We believe that people who have gone through military training have the required levels of discipline to make a valuable contribution,” he said. The company has also concluded a partnership with the University of Witwatersrand (Wits) and is also investigating further opportunities for possible collaboration with international institutions to promote the development of sector specific skills. To address the skills gap at supervisory and coordination levels, Transnet has embarked on a Trainee Manager Programme that will be implemented next year. Also in line with the NGP, the company’s supplier development strategy strives to leverage off the planned infrastructure spend of R110.6 billion over the next five years. The intention is to support industry further by developing local suppliers and increasing skills development in a manner that is conducive to economic development. By focusing on local suppliers, the plan is to reduce its supply chain costs through improved operational efficiency, procurement localisation and by securing supply. This will be achieved through skills transfer and by investing in plant, which will enable local suppliers to provide products and services of the requisite quality. This will, in turn, result in reduced turnaround times of spare parts, job creation and an improvement in the service received from suppliers of operational components and equipment. In addition, the development of local suppliers will reduce exposures to foreign exchange rate

fluctuations, reduce reliance on imports and avoid capital leakage. “Our largest Competitive Supplier Development Programme (CSDP) contract so far is the procurement of 100 General Electric (GE) locomotives,” he said. “The contract is the largest CSDP transaction to date in South Africa, positioning Transnet as the leading state-owned company in CSDP execution. ”The total localisation value as a percentage of the total contract is 52 percent. This will include skills development to Rail Engineering and Freight Rail over a four-year period, localised assembly and investment in plant, purchasing of local content and services over a 10year period. But that is not enough. Molefe has been with Transnet for almost six months and has not seen any resistance to transformation on the basis of race. But he believes that for Transnet to occupy its place in the South African economy it needs to change how it works.

“We recognise the role BB-BEE plays in the economic transformation of South Africa as it significantly increases the number of previously disadvantaged people who manage, own and control the country’s economy, as well as significantly decreases income inequalities,” Molefe said.

This is the reason it has introduced a 100-day management plan, designed to ensure that the activities and performance of the Group Executive Committee (GEC) members are monitored on a regular basis. This is as per the mutually agreed key performance areas (KPAs) and strategic performance objectives. Each member of this committee is expected to perform in line with the company’s mandate and KPAs. They are required to provide guidance to their teams to allow employees in their respective divisions to improve operations by focusing on efficiency, productivity, customer service and safety. “I believe that the team is dedicated and is working hard to lead this company into the future,” he concluded. And it seems it is all systems go for transformation in the utility.

Volume 1 • 2011

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CHANGE

rebranding

Images: Vodacom

hits SA

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CHANGE

The South African landscape has been hit with a series of transformation (rebranding) initiatives recently as companies started to review their own effectiveness and performance. This has been brought about by a change in market conditions due to the global economic meltdown. Written by Mzwandile Jacks

C

ompanies are not sure any more about their market share because competitors have revamped their business strategies to gain a chunk of the market. Changed market conditions, due to the global economic meltdown of 2009/10, have forced companies to change their game plans. Companies have realised that perceptions about them need to change so that they can be seen as modern rather than staid. “This is all in an attempt not to lose market share to the next competitor. These revamps have become part of the companies’ overall strategy,” a Johannesburg-based marketing analyst told TransformSA. TransformSA’s investigation found that rebranding went deeper than changing the logo. It transcended the companies’ culture and vision. Companies that have rebranded include South Africa’s biggest mobile operator, Vodacom, the second biggest short term insurer, Mutual & Federal, auditing firm, PwC. Vodacom chairman, Peter Moyo, said the company had completed one of the most momentous changes in its 17-year history with the familiar blue and green logo being replaced with a familiar red branding

adopted from Vodafone.Vodafone, the London-based mobile operator, increased its stake in Vodacom to become a majority shareholder in the South African operation. “There are obvious benefits to aligning our branding and leveraging Vodafone’s global presence. But for Vodacom the benefits and changes run much deeper than simply changing colour,” Moyo said. During the past financial year the board of Vodacom and its management examined how the group operated and how it wanted to operate. This meant bringing in an outside expert to review effectiveness and the performance of individual members. The review found that certain issues, such as succession planning, needed more attention. “On this score we have changed our approach to make sure a more robust process is in place,” Moyo said. Vodacom has developed a new code of conduct, which is aligned to Vodafone, which sets out Vodacom business principles and provides practical guidelines for employees. The management team took on an even more ambitious transformation programme during the year, examining organisational culture and identified Volume 1 • 2011

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CHANGE

barriers to performance. They then mapped out a process to take the group from its current makeup to one that more truly represents wider society, especially in South Africa.

“This is all in an attempt not to lose market share to the next competitor. These revamps have become part of the companies’ overall strategy,” marketing analyst.

This led to the restructuring of the group’s executive committee. It now has seven functional heads serving the local and international operations. Vodacom CEO, Pieter Uys, said the reasons for the change run deeper. “We also needed to signal to our customers that the new Vodacom means sweeping changes across our network, customer service and value offering,” he said. “Likewise, our employees needed a tangible break from the past and a high-impact start to a new way of doing things.” Mutual & Federal recently launched a new logo, which excluded Table Mountain from the background. This was in view of the fact that the company had ambitions to grow beyond SA mountains, further into other African nations where its parent, Old Mutual has a footprint. Venturing into what used to be called the dark continent on its own shows that even the culture of thinking in the company has changed. Vuyo Lee, the executive general manager for brand, customer and transformation at Mutual & Federal, said the company had also learnt its old brand seemed to lack relevance for the younger market. With its new brand Mutual & Federal hopes to remain relevant with its existing client base and attract new customers.

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PriceWaterhouseCoopers (PwC) announced last year that its brand name had been formally shortened to PwC, to provide consistency and ease of use, as part of its brand repositioning. The new branding includes a simplified logo consisting of the initials "pwc" in lowercase, designed to be easier to use and better suited to digital and online use. “Our reputation is the foundation of our new brand and our brand promise reflects our commitment to further enhance the value we add through meaningful relationships," PwC Southern Africa CEO, Suresh Kana, said at the time. According to Kana, the repositioning of the PwC brand was a natural step in the firm's journey to remain the number one professional services network by adapting to the changing needs of clients and stakeholders in today's challenging markets. The firm has for some time been focusing on building deeper relationships with its stakeholders and better leveraging the PwC global network. "Success will lie in how well we manage to bring our brand promise to life," said Kana. "It is all about what our clients experience when we interact with them and what our people experience when we interact with one another.” “The brand encompasses what it's like to work with us, how we do business, and what we are good at. The ultimate aim is for PwC to become known by all its stakeholders for creating value."


ADVERTORIAL

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Matsholo Motshekga – Director

MUDZIWA TRAVEL

Our clientele is wide and diverse: we have supplied travel management services to numerous government departments such as the Department of Justice and Constitutional Development, the Department of Minerals and Energy, the Department of Land Affairs, the Department of Agriculture; and various private companies such as Sanlam, Modimolle Silica Minerals, the PA Shop, Africa 1 Mining & Minerals, PKG Promotions & Marketing and Papillion Sales & Marketing. We strive to build long-term relationships with clients through our superior service. We always provide the best, safe and timely client travel experience. We have a long-standing business relationship with the Department of Home Affairs where

we assist in the transportation of immigration officials to and from various ports of entry including all international airports, that is, OR Tambo International, Cape Town International and King Shaka International. Our hands-on approach and an unsurpassed level of professionalism are what set us apart from other travel management companies in the industry. Our business owners have been known to get involved on an operations and management level on a daily basis. We are constantly striving to better our services and we pride ourselves in having a presentable and well-maintained fleet. Situated in Pretoria, Durban and Cape Town, we have a fleet of over 70 vehicles nationwide; ranging from entry level passenger vehicles to different carrier vehicles. Our drivers are well-groomed, punctual and experienced and they provide assistance and information freely and as required. Our services are available 24-hours a day, and we cater for emergency shuttle and VIP service after hours. Our business is represented nationally by dedicated, professional staff supported by the newest infrastructure and technology to ensure that we can guarantee you the finest service.

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TRANSPORT

GAUTENG

transport

vision

Gauteng’s MEC for roads and transport, Ismail Vadi, has the future of the Gauteng province’s road and transport system in his hands. As a province with South Africa’s biggest roads and transport network, Gauteng holds the key to resolving some of the country’s transport system’s teething problems.

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TRANSPORT

S

ome of the realities on South African roads and public transport system include potholes, traffic congestion, a lack of safety of taxis and trains, inadequate and unreliable public transport and taxi violence. As the country’s and the continent’s economic giant, Gauteng is also the biggest determinant of South Africa’s transport direction. And right now South Africa is not embarking on any path that could tilt the province away from its planned sophisticated and world class transport system, thanks to Vadi’s and his executive management team’s vision. Vadi and his team have not been sleepwalking ever since he was appointed to the position of Gauteng MEC. Because of his sound instincts and skills as a politician, Vadi has an amazing vision for Gauteng’s transport system.

use their cars to commute between Pretoria and Johannesburg.” Traffic congestion has been reduced by 20 percent between Pretoria and Johannesburg because of the introduction of the Gautrain line. This was in the first month of operation. “We are giving a world class service here,” Vadi says. There will be a direct connection between Johannesburg and Pretoria and infrastructure is already in place. It is expected that this line will be opened in the first quarter of next year. Another success story is Bus Rapid Transport (BRT), which is part of Gauteng’s integrated transport system. This system has been so successful that Ekurhuleni is working on its own BRT and this will be in operation in the next three years.

This has been evident when he talks about the successes of the projects that are already in place and his plans for the future. Since the first month of operation, Gautrain, the provinces flagship transport project, has seen more than 3.3 million people use its services since June last year when the OR Tambo International Airport line was opened.

25 YEAR INTEGRATED TRANSPORT MASTER PLAN

“The Hatfield-Rosebank line has been doing extremely well, with 750 000 using this service in the first month of operation,” Vadi says. “The monthly ticket on this line is R39.00. This means Gautrain is not only for the rich. We have seen all classes using this. We have also heard many civil servants say they are not going to

Mr Vadi has prioritised the designing of a 25-year Integrated Transport Master Plan (ITMP25) for Gauteng and established a high-level committee of experts to develop an ITMP25. Its mandate is to provide a short-term plan indicating more immediate steps to be taken to change the public transport landscape in the province,

which should be submitted to his office by January 2012. It also provides a long-term, 25year plan that will knit-in with the Gauteng Vision 2055 strategy, which should be handed to Mr Vadi’s office by March 2013. “The Integrated Transport Master Plan will serve as a road map to be followed, rather than merely an archival point of reference,” Vadi says. “My focus will be on the department’s road maintenance and construction programme, its public transport and logistics mandate, g-Fleet; Gautrain and the Gauteng Freeway Improvement Project.” The provincial treasury has allocated R6.2 billion to fund a broad range of programmes relating

The department wants to create a reliable, affordable, safe and accessible public transport system and a well-developed road and rail network for the efficient, effective and seamless movement of people and goods.

Volume 1 • 2011

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TRANSPORT

Mondli Gungubele, Mayor of Ekurhuleni and Ismail Vadi

Airport to major highways. • Cayman Road Phase 2 - in Sedibeng that involves the tarring of Cayman Road as an access road to the “Eye of Africa” Development. In the current financial year, the Department has earmarked the following roads for upgrading:

to roads and transport, representing 9 percent of the total Gauteng provincial budget. The department has allocated just over R1.2 billion for its roads infrastructure and maintenance programme. This represents the most important of its programmes this year. It is commonly known that the Gauteng roads network has deteriorated over the past few years. This has been confirmed by the department’s Annual Paved Road Network

rural areas. A total of R6 billion has been allocated nationally for the project. The Gauteng province received just under R500 million to address the problem of potholes and preventative maintenance work. Through this project, the department aims to create at least 5000 job opportunities. In addition, this programme must help to provide capacity and empower small and medium and macro enterprises (SMMEs), particularly with youth and women-owned and controlled businesses.

“I am an optimist and do believe that these plans will be achieved successfully,” Vadi says. “The monthly ticket on this line is R39.00. This means Gautrain is not only for the rich. We have seen all classes using this. We have also heard many civil servants say they are not going to use their cars to commute between Pretoria and Johannesburg.” Assessment. The assessment for 2010 shows that out of the total extent of the provincial paved road network of 4248 km, 9 percent of the roads are in a “very good condition” while 27 percent is in “good condition.” About 33 percent is in a “fair condition” and 20 percent in “poor condition”. But 11 percent is in a very poor condition. S’HAMBA SONKE PROJECT AND JOB CREATION S’hamba Sonke is a central component of the plan by transport minister, Sbu Ndebele, to create jobs through road maintenance programmes in both semi-urban and

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IMPROVING ROAD INFRASTRUCTURE This year, the department will be completing the construction of the following roads: • R55 Phases 1 and 2 - this is an alternative road between Sandton and Pretoria via Laudium, which entails the upgrading of the road from a single to a dual carriageway, including the construction of two bridges and culverts. • K29 Phase 3 - Malibongwe Drive that entails the upgrading of the road from a single to a dual carriageway. This includes the construction of a bridge across the N14 and the associated culverts. This will ease congestion from Lanseria

• K46 - William Nicol Drive, which entails the upgrading of the road from a single to a dual carriageway. This road is a major linkage between Sandton and Diepsloot. • K15 - Phases 2 and 3, which involves the upgrading of Adcock Road between Dobsonville and Protea Glen. This road will ease the mobility from Soweto to Krugersdorp. • P126 – Pinehaven Interchange, which entails the construction of an interchange over the N14, including the construction of 3 km long approaches, culverts and two bridges. GAUTENG FREEWAY IMPROVEMENT PROJECT The Gauteng Freeway Improvement Project (GFIP) is designed to upgrade approximately 560 km of provincial roads. Phase A1 of the project has upgraded 185 km of the existing road network, largely through bonds issued by the South African National Roads Agency Limited (SANRAL). “I am an optimist and do believe that these plans will be achieved successfully,” Vadi says. Gauteng Department of Roads and Transport No. 41 Simmonds Street Sage Life Building Johannesburg Tel: 011 355 7000 Fax: 011 355 7305 www.roadsandtransport.gpg.gov.za


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• Intelligent Meter options • Optional metered Lifeline Áow (40 ȳ/hr) when credit runs out • High air Áow detection and correction • Insensitive to lightning, freezing water, ambient temperatures up to 700 C, water hammer and dirt particles in water • Optional built in radio for AMR (no loose wires or antenna) • Arrears collection via User Tag (mode dependent)

COMMUNITY STANDPIPE OVERVIEW

The Community Standpipe Water Meter and supporting Meter Management System (WAS) is designed to offer a solution to the provision of water at communal water supply points. It requires low capital investment and can be used in both rural areas and informal settlements. One Meter can typically serve up to 40 households. The unit consists of a Class B multi jet water meter with electronic read out and built in Áow control valve. A patented valve system ensures extended battery life. The unit is meteorologically sealed and provides a high level of resistance to physical tamper and is immune to magnetic tamper. Should the meter become faulty, it can be replaced in the Àeld within ten minutes.

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• Eight programmable tariff steps • Physical tamper resistant. Full encryption and copy protection • Immune to magnetic interference • Meter accuracy unaffected by sand particles • High air Áow detection and correction • Adjustable Free Basic Water • Daily consumption limit for water-scarce areas • Full calendar clock • Patented low power consumption system • Battery can provide 90 000 valve applications • Robust metal housing with security screws • Delivered fully assembled and pressure tested to 20 bar • SANS 1529-1 and SANS 1529-9 approved

HANDHELD VENDING UNIT OVERVIEW

The Handheld Vending Unit is used in conjunction with the Intelligent Water Meter and Community Standpipe. It provides the link between the Meter and the Meter Management System (MMS). A network of conveniently located Vending Units provides the customer with easy access to “point of sale” where credit can be purchased. Each transaction is supported by a receipt printed from a dedicated printer.

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56 MB internal data memory, LCD display Single membrane keypad with standard key functions Built in battery with battery charge-level indicator Charged batteries provide 8 hours continuous operation Re-chargeable from a 220V AC source using the supplied charger. A car charger can also be used • High level of security with password protection • Theft risk is low as only dedicated functions are provided • Weighs approximately 350 g • Supplied with dedicated printer • Optional increased internal data memory (up to 2GB) • Optional GPRS module for automatic real-time downloading of data and online transactions • Optional collection of capital repayments and service charges

(PTY) LTD


PROPERTY

property sector's

LOPSIDED

Images: iStockphoto

OWNERSHIP

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PROPERTY

South Africa’s property sector does not only lack transformation at ownership level but there is also no black representation at big companies. This means property ownership remains lopsided, allowing only for whites and rich foreigners, who are flush with dollars, to play a major role in this sector while blacks are left out of the picture. Written by Tiisetso Tlelima

B

ecause this is the state of affairs, South Africa’s property sector ownership will continue not to reflect the true demographics of the country. While some sectors have made considerable strides towards transformation, the property industry is still lagging far behind. The property charter, which was first drafted eight years ago with the purpose of cultivating an environment that promotes BB-BEE and fast-tracking transformation in the industry, is yet to be gazetted. The property sector has urged the Minister of Department of Trade and Industry (DTI), Rob Davies, to sign the charter into law so that it can be implemented. The property charter’s proposed transformation targets include achieving at least 25 percent black ownership and 10 percent black women ownership within five years. Once gazetted, the charter will monitor progress or lack thereof, and identify areas that prohibit transformation in the property sector annually. In the meantime, the industry is still largely run and owned by whites – commercially driven activities surrounding property including development, management and sales rest in white hands. “It’s one of those really embarrassing stories to admit, that you’re sitting

in an industry which unfortunately hasn’t moved that much in terms of transformation,” said Kgaogelo Mamabolo president of the South African Institute of Black Property Practitioners (SAIBPP). “The thing about transformation is that there are only certain people who are keen about it. You may find that a lot of them just don’t care. They don’t want it. Some people think that we think we are entitled.” Not only is there lack of transformation at ownership level, but there is also little or no black representation within big companies and black estate agents make up a meagre six percent. “The excuse that you hear all the time is that there are no skilled black people,” said Mamabolo. “But none of those people who’ve said those statements have ever come to SAIBPP and said; do you have somebody like this?” Big business owners would rather give bursaries to university students than develop, mentor and invest in the existing market. “There’s very little investment in skills development and limited commitment to workplace training and the sector is not doing enough to promote the growth of sustainable enterprises” said Property Charter Council Chairman, Saul Gumede.

in ownership. They are also less represented in control, management and in the professional skills sector, according to Gumede. The popular view from the private sector is that black property practitioners are only good for getting government deals and government leases, and therefore, are unable to compete in a commercial environment. In addition, to the industry’s reluctance to transform, government has also played its part in stalling transformation efforts in the industry. Since the property charter was first drafted in 2003, the department of public works has had four different ministers and each of them want to make changes to the policy. Winning government tenders, which is usually seen as the easiest way for black property professionals to break into the industry, has proved to be a challenge for emerging enterprises because of fraud and corruption. “You find that the same names are always used, and the same individuals get opportunities,” explained Mamabolo.

Gender equality is another important issue that the industry has not addressed.

However, the department of public works tried to put a property incubator programme in place which aimed to identify, develop and mentor the youth by helping them with building acquisitions and maintaining and leasing buildings.

Black women remain under-represented

Access to financing is undoubtedly

Volume 1 • 2011

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PROPERTY

“It’s one of those really embarrassing stories to admit, that you’re sitting in an industry which unfortunately hasn’t moved that much in terms of transformation,” Kgaogelo Mamabolo. the biggest obstacles facing new entrants in the property sector. “There is insufficient financing to address the skewed patterns of ownership,” said Gumede. “This situation is exacerbated by legal and administrative obstacles to property ownership. Commercially, direct property ownership is dominated by institutional investors, large private owners and collective investment schemes.” Purchasing property is by its nature very expensive. A single building can cost millions and a shopping centre billions. “Say the bank loans you money at the value of 20

percent, you have to come up with 30 percent and black people don’t really have trust funds or access to networks of people with lots of cash,” explained Mamabolo.

to convince them of its potential to growing the economy.”

Therefore, it’s difficult for aspiring black property owners to raise the money to be able to participate in a transaction.

But, it’s not all doom and gloom. There have been a few success stories in the industry including a black-owned company called Motseng Properties which is managing about R8 billion worth of properties.

Their white counterparts have a higher chance of getting a loan from the banks because they have the money and a track record. In addition, because of the recent global recession, banks have become stricter and more cautious when lending money. The sector has struggled to find

“That comes from a single fund that decided it’s going to support black business,” said Mamabolo. “Without that I don’t think they’d be saying they have R8 billion because nobody from established business is scrambling to use them. You know it’s tough, it’s a matter of I’m going to use people I’ve

alternative sources of funding for emerging black entrepreneurs.

always known.”

“Unfortunately institutions such as the IDC and NEF have never looked at property as a fundable industry,” Mamabolo said. “I think part of the reason is that they don’t understand it. “But we are engaging with them now and they are showing interest. We believe we need to give them more evidence of what this thing is all about. We need

Changing the mindset of established business seems to be one of the major challenges to transformation within the sector. If you can change people’s mindsets, that will make transformation easier because more people will come forward to help you, Mamabolo added.

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BVA 105


PERSPECTIVE

BACK

on agenda

The BEE Advisory Council has had to withstand a huge criticism since its launch, with many detractors saying it is an impotent body with no agenda of its own. But it turns out it has done some important work since its launch, if anything BEE experts have said is to be believed. Written by Mzwandile Jacks

Johannesburg-based BEE expert told TransformSA the much-vaunted advisory council - launched in late 2009 – had brought back broad-base black empowerment (BBBEE) to the South African political agenda. This bucks the general trend in the BEE circles, with most BEE practitioners criticising the council and describing it as a useless talk shop which reworked old positions during its quarterly meetings with President Jacob Zuma. As government launched SA's first advisory council on broad-based black economic empowerment, expectations of an effective empowerment strategy rose, along with sceptism about the council's ability to fulfil its broad mandate. At the council’s first sitting in early 2010, deputy president Kgalema Motlanthe acknowledged that SA’s empowerment strategy had mixed successes. “The speed of economic transformation, we have to admit, has been frustratingly slow at times,” he said. And the “broad-based” element had been elusive. He conceded that empowerment in the first 15 years of democracy

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had been “a story dominated by a few individuals benefiting a lot”. Motlanthe’s admission of the limitations of government’s empowerment strategy has been welcomed by analysts and opposition parties. The link has been made repeatedly between SA’s inability to transform quickly and the brake that this will continue to be on economic development. Ajay Lalu, the CEO of Black Lite Consulting, told TransformSA that returning BB-BEE to the political agenda was critical because during the global financial crisis BB-BEE took a back seat. “The advisory council has recognised that fronting is a major concern and needs to be eradicated and criminalised,” said Lalu. “It has also now initiated the process of reviewing the codes of good practice which are in need of a major overhaul.” It had also introduced the alignment of the Preferential Procurement Framework Act with the BEE Codes and has introduced IRBA with its members accredited verification agents. Amid high expectations, President Zuma named members of the council in late 2009 after a twoyear delay. The 19-member council first met in

February 2010 but critics believe its quarterly statements have masked fierce battles fought by council members behind the scenes. These battles have been fought to save the BEE paradigm from being overridden by an “ultraleftist” agenda, led by Trade and Industry Minister Rob Davies and his Economic Development counterpart, Ebrahim Patel. “My view is that the council has achieved some milestones but far from what the public were expecting,” Lalu said. “This is due to the fact that it does not have a full time secretariat nor does it have any budget to commission research or employ consultants.” With further capacity and resources it would be more effective and therefore government needed to address the advisory council’s mandate and its support structures. “I think that we need to create a BEE Authority along the lines of the Competition Commission which will monitor progress, investigate fronting and provide information to the public on the state of BB-BEE in SA. This will feed into the Advisory Council and the DTI as regulator,” he said.

Images: iStockphoto

A


CSI

T

hese companies are moving away from the corporate social investment as it is generally known by South African public. They are practically making it possible for racial groups to work together without being suspicious of each other as it has been the case despite the all-important race elections in 1994. A Port Elizabeth-based German multinational, Schaeffler South Africa, has launched what is called The Rainbow Nation Club (RNC) which aims to move towards racial integration in the workplace and uplifting the lives of many of its under privileged workers and people.

Cause for

JOY

For South Africans wondering how their country will earn its keep in a world that is fast-moving to nonracialism, some companies offer cause for cheerfulness. Written by Mzwandile Jacks

This is very critical for the process of transformation given the fact that many South African companies are still divided along racial lines in the workplace. There is no doubt that South Africans of all races still do not trust each other in the workplace with whites saying they are being discriminated against by affirmative action. And black people on the other hand believe that white people still occupy positions of influence in most companies. Launched 18 months ago, the Schaeffler initiative provides short and long-term relief to 500 workers stationed at the PE plant. The plant makes clutches which are supplied to independent aftermarket with 60 percent of production volumes exported to other countries. Len Terblanche, the company spokesperson spearheading this project, told TransformSA, this initiative began because he strongly believed that the solution for this country’s problems lied in building a unified nation as envisaged by Nelson Mandela with his Rainbow Nation vision. “If South Africans stop dwelling in the past and concentrated on building

relationships, everything might fall in place as it did when the Madiba Magic was unfolding,” said Terblanche, referring to the role former president Nelson Mandela played in reconciling the polarised South African nation. The Club has encouraged other companies to join and has since succeeded in signing up several company managers to the club’s membership, which adds to their existing members. All 500 employees include workers that are members of the worker federation Cosatu. Employees have received a lot of support. According to Terblanche, the head office of Schaeffler Gruppe in Germany, the parent company, has committed to pledging R3 million toward the Rainbow Nation Club and its activities. Sponsorships at non-governmental organisations across the city, including Kwazakhele High School, ACCV Khayalethu Youth Centre, SOS Children’s Village, and 120 schoolchildren from Veeplaas who received new uniforms have been awarded. “Through the launch of the RNC at Schaeffler, we believe it has removed the 'them' and the 'us' and made win-win decisions possible,” Terblanche said. “We are truly passionate about this initiative as we believe that something needs to be done about the poverty in SA and the inequalities that still exist. We should make nation building a top priority and convince our leaders to embrace once more Madiba’s legacy of a unified Rainbow Nation.” This should include political, business and civic leaders. South Africans should be encouraged to make up-liftment of the underprivileged a priority. “We all have to realise that the government alone cannot solve this and that we are all part of the solution,” he said.

Volume 1 • 2011

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SECTION PERSPECTIVE TITLE

BEE highroad

on

South Africa is not about to walk out on black economic empowerment (BEE) and broad-based BEE anytime soon. Opponents of BEE may dream, but in the near or medium term, no South African government will risk a BEE withdrawal in cold blood amid widespread talk that this policy has failed.

Images: iStockphoto

Written by Mzwandile Jacks

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SECTION TITLE PERSPECTIVE

T

his policy is what sets South Africa apart from other African countries that are currently at war with themselves over scarce resources which have not been distributed equitably.

part of BEE has seemed elusive. In the main, the story of black economic empowerment in the last 15 years has been a story dominated by a few individuals benefiting a lot."

Rubeshne Gobardan, a senior manager for advisory at auditing firm, Ernst & Young, states confidently that multinationals seeking to start businesses in South Africa are fully aware of the necessity for this policy and are not discouraged.

Adding that broad-based economic empowerment was intended to benefit all sectors of the previously disadvantaged population and not a few individuals only, Motlanthe urged people to look at empowerment more broadly, "beyond business deals and shareholding in companies".

This, according to Gobardan, is an indication that the BB-BEE and BEE in general have not failed. This is a critical statement because critics of BBBEE and BEE have always been of the view that this process would prompt capital flight from South Africa. “In our interaction with these multinationals, they are fully aware of the necessity for BB-BEE compliance in order to remain sustainable,” Gobardan told TransformSA in an exclusive interview. “Instead of BB-BEE being a deterrent, they embrace the intention of the legislation and seek to ensure compliance by incorporating it as one of government’s pre-requisites and ensure that it is appropriately addressed.” Last year, it was reported that BEE – which is a key government policy intended to redress South Africa’s economic imbalances of the past had failed. This was after Kgalema Motlanthe, the deputy president, delivered the inaugural speech at the first meeting of the BEE Advisory Council. The council was launched by President Jacob Zuma in 2009 after delays of more than two years. "The percentage of black-owned companies registered at the JSE is disappointingly low," said Motlanthe at the time. "We also have to admit that the 'broad-based'

"We have to think creatively about ways in which we can increase the extent to which communities, workers, co-operatives and other collective enterprises own and manage existing and new enterprises and increase their access to economic activities, infrastructure and skills training." He emphasised that the impact of broad-based BEE, particularly the big deals, needed research. During that meeting of the council, members including the former CEO of Business Unity South Africa (BUSA), Jerry Vilakazi, talked about investigating the sustainability and structure of BEE deals, because some did not seem to change the lives of the poor.

have to be empowered with enough resources to deal with this," Vilakazi said. Gobardan admitted that nothing much had changed for the masses in South Africa as they were still being marginalised. “This has seen the advent of a new resistance which is now against the elite irrespective of colour and creed - as being evidenced in the attacks against political figureheads,” he said. But the BEE legislation had created the awareness with companies selecting initiatives to be undertaken to achieve a desired contributor status level. “Therefore, we do not believe BEE has failed, as it remains a key driver of a business’s sustainability within South Africa,” he said. South Africa was still faced with the statistics of about 90 percent of the population of South

“Therefore, we do not believe BEE has failed, as it remains a key driver of a business’s sustainability within South Africa,” Gobardan said.

Analysts at the time said this could mean the end of BEE deals where performance was tied to the performance of the share price. Most of these deals collapsed when the global financial crisis kicked in two years ago.

Africa being represented by African people while they only occupy 25 percent of the cumulative top management positions in the country.

Because they were financed through special purpose vehicles (SPV), BEE partners ended up in debt when the financial markets slumped.

“Until these statistics talk to each other, BB-BEE policy remains a key medium, which will address this disparity,” Gobardan said.

The SPV structures have attracted widespread criticism from BEE practitioners and observers in the past two and a half years.

“We believe that should government seek to discard this legislation questions will be raised as to whether they believe that equality has already been attained? Also this policy does appear to be something separating us from the political instability that presently exists within other countries in Africa.”

"Most members of the council raised their concerns about the appropriateness of these structures. We discussed that the council would

Volume 1 • 2011

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FILM AND PUBLICATION

Cause for satisfaction Looked at in one way, the Film and Publication Board (FPB) has cause for satisfaction. This is attributable to the transformation of the rigid apartheid’s directorate of publications to the more democratic FPB. Written by Mzwandile Jacks CEO of the Film and Publication Board – Yoliswa Makhasi

F

ew weeks ago, the press ombudsman ruled in the FPB’s favour after the board complained about the graphic sex pictures published on the front page of the Sowetan newspaper. The press ombudsman said the Sowetan newspaper's publishing of prominent pictures of two officers having sex on duty was not in the public interest. The ombudsman said the newspaper need not have published the pictures so prominently and explicitly to get its message across because there was no 'public interest' to do so. He ordered the paper to apologise on both its front and second pages. The pictures showed an officer from correctional services and a policewoman having sex in a hospital. Yoliswa Makhasi, the CEO of FPB, said it was wrong for the publication to do so because the Sowetan is a family newspaper. “When they did that, they exposed children to pornography,” Makhasi said. The FPB is a statutory body established by the Films and Publications Act of 1996. It replaced the Directorate of Publications which operated during the apartheid era. Its task is mainly to classify films,

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FILM AND PUBLICATION

videos, DVDs, computer games and certain publications for their suitable age viewership and to provide consumers with enough information to make informed choices about what children should or should not see. The FPB classifies all film material distributed in South Africa, except that shown on TV. Broadcasters have their own regulatory body. Its vision is to be a credible and visible content-classification authority and its mission is to regulate the media environment through the classification of content. This would be done by maintaining relevance to the values and norms of South African society through scientific research. It would balance the right to freedom of expression with an obligation to protect children from exposure to potentially disturbing, harmful and inappropriate materials. It would protect children from sexual exploitation in media content in order to educate the broader South African society to make informed choices. Makhasi said the board during the apartheid government was more about banning and censoring material they deemed not good for public consumption. “But we look at the merits of a particular case and give advice,” she said, adding they do not resort to censoring. FPB is intolerant to irresponsible broadcasters and distributors of content who show little regard for the protection of children. The FBP is against those who use the rights and freedoms enshrined in the constitution to further degenerate the morals and values of the caring society South Africans seek to attain. It recently warned e-TV and other broadcasters and channels to carry a moral responsibility to protect children and abstain from broadcasting content that may be deemed to be detrimental to children. Makhasi said: “The FPB will mobilise support… to ensure we close all space for those who have a disregard for the protection of children and minimise heart-ache and panic amongst parents.” Makhasi had been encouraged that the courts in South Africa were beginning to treat those accused of sexual crimes against children, especially child pornography, with a heavy hand. She has warned those involved in the

creation, possession and distribution of child pornography of the seriousness of the crime. Child pornography images were part of a cycle of child sexual abuse and exploitation. According to the amended Films and Publications Act, child pornography images are defined as any image or description of sexual conduct involving persons under the age of 18 years. FPB believes child pornography images are not a victimless offence, as some have argued. “Every child abuse image is evidence of the commission of a serious crime. Apart from the child victim, parents and relatives are victimised as they suffer the knowledge of the abuse of their child,” FPB believes. “This activity therefore, has far reaching implications socially.” In addition to various child protection initiatives, the Films and Publications Act has been amended to make the investigation and prosecution of child pornography offenders more effective. According to the Act, it is also an offence to possess, create, produce, distribute, import, access, advertise or promote child pornography images. Each of these acts carries a maximum penalty of 10 years imprisonment. Failure to report knowledge of child pornography images to the police is also an offence. It is also an offence to expose children to pornography. The amendments have brought far-reaching jurisdictional implications. If one commits any of these acts related to child pornography outside South Africa, they may still be prosecuted when they return to the country. Mmapula Makola, the Chief Operating Officer of FPB, said, in terms of the Act, the board was required to publish guidelines used to determine what is disturbing, harmful and threatening to children and to advise the viewing public about such images and scenes. The FPB has the classification committee whose members are required to view every film to be distributed in South Africa to ensure that the classification decision is based on the law and accepted community standards of tolerance in terms of religious and cultural diversity.

“We look at the merits of a particular case and give advice,” she said, adding they do not resort to censoring. “The classification of films and interactive game products remain the main activity of the board, both in terms of workload and income earned from industry tariffs,” Makola said. “All members of the public who write to the board to complain about film classification decisions or who give the board general feedback on the guidelines use for classification receive replies to their correspondence.” Only pornographic publications needed to be passed by the FPB before they were released on the market. The board does, however, deal with complaints received from the public regarding specific publications. But she was

“When they did that, they exposed children to pornography,” Makhasi said. quick to say parents were the ones that played a critical role in making sure that youngsters are not exposed to the subversive material. “Parents must be able to enforce some of the rules. This will make children know what is wrong as soon as they step out of the house,” Makola said. Film and Publication Board 87 Central Street Houghton 2041 TEL: 011 483 0971 FAX: 011 483 1084 Email: information@fpb.gov.za www.fpbprochild.org.za

Volume 1 • 2011

37


FAST FACTS

BB-Black Economic

Empowerment Private sector enterprises must consider the principles and guidance as contained in the Sector Charters when implementing BEE initiatives. True/False False: They must consider guidance as contained in the BEE Codes of Good Practice.

One of the defining features of Apartheid was the use of race to control and severely restrict black people from access to economic opportunities and resources. True/False TRUE…

In combination with one another, these policies gave people wealth and skills to black people. True/False

The under-development of black South Africans was characterised by the progressive destruction of productive assets, deliberate denial of access to skills and jobs and the undermining of self-employment and entrepreneurship. True/False TRUE…

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Government’s strategy for BB-BEE looks beyond the redress of past inequalities and aims to position BEE as a tool to broaden the country’s economic base. True/False TRUE…

Images: iStockphoto

FALSE – These policies restricted and suppressed wealth and skill endowments in black communities, inhibiting their participation in a de-racialised economy.


TENDERS

TENDER FRAUD

to end To borrow an old baseball cliché, you can’t tell the players without a scorecard, or so it would seem after the newlygazetted preferential procurement policy framework act (PPPFA) gets underway in South Africa in December this year. Written by Mzwandile Jacks

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EE companies would have to show up with good credentials before being awarded tenders with none of the traditional rigging of tenders. The newly-gazetted amendments to the preferential procurement policy framework act (PPPFA) would make tender fraud, corruption and misrepresentation of BEE status a thing of the past.

“This further encouraged other forms of BEE fronting which spread as far as the largest of corporates in South Africa to even the verifiers of this information,” Levenstein said. The updates in the act will reward companies who comply with Broad-Based Black Economic Empowerment (BBBEE), including socio-economic development,

Coming into effect in December this year, the new act would also put a halt to a tendency by many companies to use loopholes in the tender act to unfairly win tender contracts from government. According to Keith Levenstein, CEO of EconoBEE, one of the loopholes is the fact there are no clear checks and balances when a company brought something that looked like an accredited certificate.

“This further encouraged other forms of BEE fronting which spread as far as the largest of corporates in South Africa to even the verifiers of this information,” Levenstein said.

BEE certificates are expected to be a true reflection of a company’s current BEE status but due to misunderstanding and incorrect application of the codes this opens a door to controversy. The new amendments will make sure that there is an adjustment to the current BEE certificate validity format.

enterprise development, preferential procurement, skills development, employment equity, management and ownership. The BB-BEE Act encourages the formation of partnerships that would guarantee their sustainability but also earn the company profits in the long run.

Other examples include staff development, whereby companies are further rewarded if the skills are of a high standard such as university degrees or diplomas. The BB-BEE scorecard is an excellent, worldleading method of measuring the extent that transformation has taken place in a business. The tender act or PPPFA), on the other hand got out-dated as soon as the BB-BEE Act came into effect. Its method of gauging transformation was based on old out-dated principles which allowed loopholes and corruption to seep through. “Many of the problems caused by the misalignment were due to unclear guidelines and a general unwillingness by tender officials to change their policies,” Levenstein said. “This…further complicated the tender process and allowed for additional inconsistencies with each tender. Tender officials always had the scope to use broad-based principles in issuing of tenders but never did. They unfortunately decided to only use a black ownership or management figure as an indication of BEE compliance.” The requirements will allocate tender points based purely on compliance with the BB-BEE scorecard. If a company has achieved highly they will be awarded maximum points or if they are non-compliant or achieved badly will receive little or no recognition. There is a transitional period of 6 months, ending on 7th December by which time only valid certificates will be acceptable.

Volume 1 • 2011

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POLICY

State now serious

on BEE – expert

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POLICY

President Jacob Zuma became the first president, after former democratic presidents Nelson Mandela and Thabo Mbeki, to dedicate more than 10 minutes on BEE during his 2011 budget speech. This came after more than eight years since the BEE Act – aimed at formalising the implementation of BEE while redressing imbalances of the past – was made into law in South Africa. Written by Andile Tlhoaele

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he announcement in Zuma’s speech can only be attributed to the work of the recently established Advisory Council on BEE. Members of the long-awaited council were made public in late 2009 and the first meeting of the 20-member council, chaired by deputy president Kgalema Motlanthe, was held in Pretoria in early 2010. In the past, it was hard to find a minister who was prepared to utter a single word on BEE. The focus on BEE and the decision to change the BEE Act came as a sigh of relief as many people were beginning to question whether government was serious about BEE or just paying lip-service. The BEE Act is about to undergo major structural changes to make it effective, thanks to the BEE Advisory Council. The Council has been working hard behind the scenes engaging with stakeholders on the proposed changes announced by President Zuma.

Images: iStockphoto

The proposed amendments are intended to ensure a unified approach and consistent implementation of the BEE Act including tightening loop-holes on misrepresentation of BEE credentials, commonly referred to as fronting. Auditors will now join the verification industry and training programmes have been established to train BEE practitioners. The alignment of the Preferential Procurement Policy Framework (PPPF) Act is one of the exciting decisions taken to change the manner in which the government awards points for procurement and tender opportunities. The act is used by the government to procure goods and services for public entities.

The decision to sign into law changes to the procurement regulations comes after a barrage of complaints from black businesses to the government. Black business has always been of the view that until BEE was included as a mandatory condition for government procurement, South African companies would not take BEE seriously. The move to use government procurement to drive BEE compliance is seen as one of the best ways to enforce BEE in the country. Business is mainly concerned about profits and anything that is not linked to profits takes a back seat. If BEE is not positioned as an opportunity for growth to any business, companies will forever view BEE the same way as a requirement to comply with. If BEE is implemented correctly, it will result in growth and introduce new business opportunities to any business. The regulatory compliance approach to BEE promotes a culture of tick-comply on BEE. Companies tend to look for the shortest possible route to comply. This has been the case in the recent past. This approach has resulted in unsustainable BEE initiatives which were less impactful. Compliance to BEE has not been seen as a core business function. As a result many companies relegated the function to human resource managers and regulatory officers. The current government procurement evaluation model also focuses mainly on black ownership, undermining the importance of the other six elements of the BEE Codes of Good Practice. Volume 1 • 2011

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PERSPECTIVE

The other six elements of BEE include economic development, management control, employment equity, skills development, preferential procurement, enterprise development and socioeconomic development. The current government model has created an opportunity for companies to avoid compliance by offering discount to offset against points not scored on black ownership. The 20 or 10 points allocated are not sufficient to incentivise business to derive value from implementing BEE initiatives. Black companies have long been calling for 45 to 55 points to be allocated to BEE with

�If BEE is not positioned as an opportunity for growth to any business, companies will forever view BEE the same way as a requirement to comply with.�

the remaining to price and functionality. The alignment of the procurement regulations brings along direct and indirect opportunities. From 7 December 2011, every company must have a BEE rating certificate to benefit from public sector procurement. The certificate is used by government to evaluate BEE status for awarding procurement points and for the private business to claim BEE procurement on the scorecard. The proposed regulations stop short of stating minimum compliance levels. The lack of achieving higher status levels is a threat to any business. This is sufficient to send a message to those who treat BEE as tick-list approach rather than aiming to exceed minimum levels set in the Codes. Indirectly every company is now required to implement BEE in one way or another. This makes BEE compliance and reporting compulsory. A debate can be had on the extent to which it is needed to comply since compliance can mean merely just obtaining a level eight status which is the lowest BEE compliance status a company can score. In the event which is highly unlikely that two bidding companies have the same low level status, the awarding criteria will be based on price and functionality. This could occur for example in municipalities located in areas where businesses that are anti-BEE deliberately engage in activities to undermine BEE. Companies should compete on achieving level one BEE status which is the highest BEE compliance score. Those companies that are serious about BEE will incorporate BEE as part of their strategy. Soon, for example, companies will be publicly stating that they aim to achieve level one status within a particular period.

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Listed companies are also required to report as part of King III if not achieving BEE targets would impact on their performance and report initiatives to mitigate such risk to performance. Companies will be stating in annual reports that they did not meet women ownership compliance target for example. They will also state the impact on the business and the overall BEE score and how they are going to achieve the target by which date. There are more indirect benefits resulting from the proposed changes. These include the use of BEE certificates to prove BEE compliance. Many businesses can relate to having to submit BEE evidence in a form of certified IDs and share certificates. This will be a thing of the past as companies will use one BEE rating certificate to prove BEE status to as many entities as required. Companies that cannot maintain current BEE levels stand a risk of being downgraded and losing competitive advantage on their next verification. BEE certificates are now currency and are valued. The securitisation of BEE certificates is going to be one of the new challenges as with just changing the expiry date on the certificate of a company. The Auditor General is going to audit and raise findings to public entities who do not comply with the procurement regulations. Every company must comply and will compete on the BEE status whether it is based in the Karoo or Nongoma. The proposed changes will bring along new challenges in the way companies operate and do business. For the first time, government seems to be serious about BEE. It’s business unusual. Andile Tlhoaele is the CEO of Inforcomm and member of the advisory council sub-committee on Instruments to Promote BEE, Charters and Verification.


LEGISLATION

BEE mergers

on hold THE financing of BEE deals appears to have tapped the brakes as South Africa and companies with expansion plans entered the second and third quarters of this year. Spooked by the government’s revision of a tax law which previously allowed them to make acquisitions without paying tax, companies have put their acquisition ambitions into a holding pattern of sorts. Companies want to see what is going to happen to Section 45 of the Income Tax Act. Written by Mzwandile Jacks

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outh Africa’s Treasury suspended Section 45 in June this year because it was concerned about leveraged buyouts that changed equity into interest-bearing debt with tax benefits. But it lifted the suspension in early August, saying SARS was also investigating a number of pre-existing transactions that deliberately avoid paying their share of the tax burden. It did not name these transactions.

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The original Section 45 of the Income Tax was established to allow for companies to make acquisitions without incurring tax costs. This meant that some companies got involved in acquisitions to deliberately avoid paying tax. Corporate activity in South Africa and the financing of BEE deals is set to continue to be put on hold until this uncertainty is removed.

Stephan van der Walt, the head of corporate finance at Bravura, told TransformSA: “This will not be good for corporates and acquisitions in South Africa going forward. Many deals will be delayed because of this. In addition, there are still many things that are unclear in the new revisions, like the financing of transactions by banks. ” Roger Latchman, CEO of PKF BEE Solutions, agreed, adding that any delay by government


LEGISLATION

would impact negatively on BEE development and advancement of BEE deals.

company using a significant amount of borrowed money to meet the cost of acquisition.

“But I urge companies whose plans for BEE deals have been delayed by this review process to find ways of adhering to the other six elements of BEE Codes of Good Practice,” Latchman said, adding this would lead to the sustainability of their businesses.

Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company.

The other six elements of BEE include economic development, management control, employment equity, skills development, preferential procurement, enterprise development and socioeconomic development. But Kosie Louw, the head of legal and policy at the South African Revenue Services (SARS), said the revision of the suspension was a helpful process with about 50 transactions “put in front” of them to investigate. “These transactions sort of varied from absolutely plain vanilla-type re-organisations for which Section 45 was originally designed,” Louw said. “As to some, we would like to perhaps have a closer look at, but it was very useful in the sense that it helped us to design a new set of rules now...” Gisele Pieterse, a director at Ernst & Young, said there were some good things that came with the new amendment to the provisions in the Income Tax Act. These included government incentives for research and development (R&D) in the private sector. This was likely to add impetus to private investment resulting in the creation of jobs and contributing to national growth, Pieterse said.

Images: iStockphoto

“A longer term set of solutions to deal with excessive debt and characterisation of debt are still planned for 2012 and beyond,” Treasury said. Treasury suspended Section 45 in June this year. It was concerned about leveraged buyouts that changed equity into interest-bearing debt with tax benefits. A leveraged buyout is the acquisition of another

“The intention of the suspension was to provide the fiscus (treasury) with interim protection against the potential loss of R3 – R5 billion a year,” Treasury said in a statement. “A longer term set of solutions to deal with excessive debt and characterisation of debt are still planned for 2012 and beyond,” it said. “It is still not clear what is going to happen to transactions that needed to be funded by external debt,” van der Walt said. Van der Walt said the suspension of Section 45 in June contradicted the government policy of trying to grow and stimulate the economy, increase employment and encourage transformation. He said there was one BEE transaction which had to be reassessed because of the amendments. He did not name the transaction but said it could have created 400 jobs, adding some companies would be forced to revert to unidentified unsustainable forms of empowerment. “Many companies, especially mining companies, which have announced BEE transactions but await approval from the department of mineral resources will now need to go back to the drawing board,” van der Walt said at the time the suspension of the act was initially announced. Van der Walt said: “Because the revised section is still unclear on third party funding, we are thoroughly investigating the revised version of the act.” Section 45, according to van der Walt, is key to the implementation of sustainable BEE transactions because it is the only provision of the Income Tax Act which allows for the conclusion of sustainable BEE transactions which are not share price dependant.

Volume 1 • 2011

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LOCAL GOVERNMENT

Training and

skills development

in South African municipalities

Local government is difficult. Mayors and municipal managers face more legislative compliance issues than their private sector counterparts. They don’t always have the resources they need to do their jobs (whether money or human resources). They are increasingly finding that they need to provide services that aren’t officially part of their job description – the so-called unfunded mandates. Written by Paul Berkowitz

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he top-down nature of government structures compounds this last point: national and provincial government priorities are determined by ministers and MECs and municipalities are expected to fall in line and implement these priorities. There are other structural problems that are made worse by poorly-implemented decisions taken over the

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last few years. These include the devolution of revenue-generating powers to municipalities from national government without sufficiently enabling municipalities to perform these functions, and the rapid transformation of the municipal civil service. It must be stressed that the implementation of these decisions is being criticised, not the decisions themselves.

Citydex’s experience has been that municipal officers recognise the need for training and skills development, are eager to engage with potential service providers, and often have a good idea of what they want from service providers. However, there are a number of common themes in Citydex’s experience with training and skills development in municipalities that can delay


LOCAL GOVERNMENT

or stall the process. Interestingly, most of these aren’t unique to municipal government or even to the public sector, but they are important to highlight: Training is perceived, and commissioned, by municipalities as a stand-alone service. Citydex’s initial product offerings focused on a ‘complete solution’, which would include training, mentoring and desktop analysis. In practice, municipalities purchase these services separately. This is due to a number of factors, including the structuring and disbursement of SETA money. The need for training is based on ‘push’ factors, rather than ‘pull’ factors. Put another way, municipalities are guided by their needs to comply with certain legislation and processes, such as Auditor-General reports. Municipal officials prioritise training which they feel will result in enhanced audits, a smoother budget process, and which will reduce their exposure to criticism or adverse findings. Training which is not seen as essential, although it might be just as important for compliance purposes, is not conducted. For example, municipalities are uniformly poor at complying with their requirements for community participation (Chapter 4 of the Municipal Systems Act), because it is difficult for community members to hold the municipality accountable, and therefore they are not seen as an important constituency.

Images: iStockphoto

Municipalities’ training requirements are partly driven by the budget cycle. For example, following the recent municipal elections, the national Department of Cooperative Governance and Traditional Affairs (CoGTA), in partnership with SALGA, led an induction programme for new municipal councilors coinciding with the new financial year (from July 1). Any potential service providers (including Citydex) would have found it difficult to offer training for councilors during this period. Similarly, any training related to municipal budgeting (and improving the council’s approach to budgeting) must be carefully timed in order to maximize the benefit to the municipality. There are processes that should take place before certain training occurs, such as a skills audit, that don’t happen. Ideally, Citydex will audit a municipality’s past budget documents,

demographic information, policies and by-laws and staff complement before suggesting any training. Most municipalities are unwilling to pay for such an extensive review. Admittedly, the priorities of the service provider (attempting to justify as large and broad a contract as possible) are not the same as the client (who is looking for the most value for money). However, many municipalities suffer from a high staff turnover rate and a skills mismatch and there is often strong justification for an audit of some kind. The current focus of municipalities is the need to improve financial oversight, obtain clean audits, and put in place functioning performance management systems. Many of the problems related to adverse audit findings are a result of poor or non-existent administrative systems in the municipalities, and these problems can only partly be fixed through training. The problems with effective performance management seem to stem from a poor understanding of the legislation and the budget process. In one municipality where Citydex intervened, a manager complained that one of his staff (a middle manager) suggested that a key performance indicator (KPI) should be the number of meetings he convened in the calendar year! In cases like this, managers may need to be trained in the first principles of municipal government (i.e. basic service delivery) and linking the municipality’s objectives to individual performance targets and outcomes. The challenges summarized above should not be seen as damning of municipal government. As mentioned in the opening paragraph, municipalities have been facing huge challenges for over a decade. Moreover, it is our experience that things are improving in most of the municipalities that we come into contact with. We see more and more municipal council officials who are young, qualified professionals. The raw materials are there in the form of intellectual potential and the will to serve the community. The specialist knowledge and skills needed to perform optimally can be developed and nurtured by service providers. Berkowitz is a South African local government specialist.

Volume 1 • 2011

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LOCAL GOVERNMENT

Parks Tau Mayor of Johannesburg Parks Tau, the mayor of the City of Johannesburg, has grand plans for what many believe is Africa’s biggest city. These include addressing the problem of poverty and joblessness. He plans to do this by engaging in labour-intensive projects like the Expanded Public Works Programme and providing internships with a monthly stipend. He had an in-depth interview with writer, Tiisetso Tlelima. Almost every city department obliged to undertake projects to create employment under the City’s expanded programme.

Johannesburg has a population of 3.8 million and this is projected to increase to 4.1 million by 2015. The number of households is likely to increase to 1.5 million from 1.3 million in the same period.

These include: • Labour intensive projects – also in support of the Expanded Public Works Programme. • Internships with a monthly stipend. • Skills training and • The City’s expanded social package (Siyasizana) has a basket of service rebates and assistance to other social services offered by provincial government or non-government organisations. The city's tariff policy is premised on social considerations and this was again strongly reflected in the most recent budget, including the following provisions:

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Data released by Global Insight in 2008, stated that 21.6 percent of the City’s households still lived below the poverty income level. The high levels of unemployment, no doubt, contribute to the prevalence of poverty which is also evident in the city’s Gini coefficient of 0.63 in 2009.

Inequality and poverty remain critical areas of focus for Johannesburg. I raised it as a priority area in my first remarks following my election

Although Johannesburg is comparatively more developed than other cities in South Africa it clearly has its socio-economic challenges that must be addressed to ensure a safety net for the poorest.

hat programmes will you put in place to address issues of social exclusion, underdevelopment and alleviate poverty in the city of Johannesburg?

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as executive mayor of Johannesburg. It was substantially addressed in the 2011/12 budget and is again receiving priority attention during the current process to revise the city’s growth and development strategy.

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and entity is and initiatives opportunities public works

Varying property rates rebates are given to residential property owners who are registered


LOCAL GOVERNMENT

on the city's expanded social package, pensioners and sectional title residential property owners, subject to conditions detailed in the city's property rates policy: • Residents with a property value less than R150 000, pay an annual rate of R60.00 (R5 per month); • Residential properties valued at less than R150 000 will continue to receive free refuse removal service; • The first R150 000 of the value of all residential property is exempted from rating; and • All households within the City will continue to receive 6 kilo litres free water every month.

is assisting the local school and community with a vegetable project in addition to the school feeding programme already in place. Some of locally grown produce is used to feed the children in school during lunch hour and some of it is given to children from disadvantaged

and create employment opportunities for small contractors.

backgrounds to take home. Engen Petroleum has thrown its weight behind this project through sponsorship and technical support.

offered through the Urban Development Zones (UDZ) and the expansion of our broadband network to create a “digital city.”

Has the Inner City regeneration and urban renewal programme brought any economic opportunities to the area? If so, can you elaborate on these opportunities?

We completed major projects that changed the entire complexion of Johannesburg – Newtown, the Nelson Mandela Bridge, the Constitutional Court precinct, Brickfields and many more. We rejuvenated public spaces and created walkways and parks such as the redeveloped Ernst Oppenheimer Park which opened earlier this year. We have refurbished important heritage buildings such as Chancellor House – the offices where Nelson Mandela and Oliver Tambo started their career as lawyers in Johannesburg.

In recent months, we made significant progress on two vital projects designed to attract investment to the inner city – the tax incentives

How is the city assisting informal traders and young entrepreneurs to gain access to emerging economic opportunities? In support of developmental local government and particularly job creation and bankable business ideas, the city recently revised its supply chain management policies and procurement processes to create an enabling environment for start-ups, Small and Micro Enterprises (SMEs).

Images: City of Johannesburg / Enoch Lehung

Another example is our development of linear markets to create sustainable infrastructure, demarcated trading areas and developmental programmes in support of informal trading. The City is also working with the National Youth Development Agency (NYDA) to formalise informal traders in inner city streets, with a view to making them legal and sustainable. The plan is to reduce congestion along pavements, where many informal traders and informal car wash businesses operate, by building trading facilities in designated areas. The idea behind the programme is to create sustainable jobs for young people. We want to encourage a formal environment where youth is able to operate businesses so they can contribute economically to the city.” How is the municipality planning to address the problem of food insecurity in certain parts of Johannesburg? With regards to food security the city has, for instance, indicated that part of our current greening programme must be devoted to the planting of fruit trees and vegetable gardens. A good example of this is already in place at the Mayibuye School in Doornkop where City Parks

The city’s success with Inner City regeneration is well-documented. The Inner City Regeneration Charter was adopted in 2007 by the City and private sector stakeholders to halt inner city decline. It is now in its fourth year and has a budget of over R5 billion, set aside by the city for use over five years. Matching this commitment, private sector investors have invested billions in property and public environment upgrades in the area and continue to do so. We have seen a significant reduction in crime levels following the introduction of modern technology and a zero tolerance approach on by-law enforcement. Through the recently announced Inner City Property Scheme, we are addressing the issue of “bad buildings”, mobilising private capital to refurbish buildings

We have turned around the inner city. We have halted the decline and taken vital decisions to revitalise the CBD. This process will continue as our redevelopment plans spread outwards into Braamfontein, Doornfontein and the Ellis Park precinct and then also into Hillbrow, Berea, Yeoville, Bez Valley and further. The same process of urban regeneration has also commenced in the other CBDs that we find within a large city such as Johannesburg – most notably Roodepoort, Randburg, Sandton, Rosebank and Soweto.

Volume 1 • 2011

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LOCAL GOVERNMENT

Kgosientsho Ramokgopa Mayor of City of Tshwane

Kgosientsho Ramokgopa, mayor of the City of Tshwane, is working towards the provision of local government services, infrastructure, economic growth and development. The municipality has also been tasked with bringing the service levels in the areas which were recently incorporated into the city . According to him, economic transformation in the city is a priority. He had a long chat with writer, Tiisetso Tlelima.

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Kgosientsho Ramokgopa, the mayor of Tshwane Municipality.

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TRANSFORM SA QUARTERLY JOURNAL

he City of Tshwane has always been guided by the national imperative of building a democratic developmental local government. Therefore, we set ourselves the goal to work towards the provision of municipal services and infrastructure; economic growth and development; job creation; sustainable communities with a clean, healthy and safe environment and integrated social services; participatory democracy and Batho Pele; sound governance; financial sustainability; and organisational development and transformation.

The recent merger with the Metsweding District Municipality (which includes the Nokeng tsa Taemane and Kungwini Local Municipalities) has brought more responsibilities for the City of Tshwane as far as service delivery is concerned. The most stressful consequence of this merger, however, is the financial burden that has been placed on Tshwane at a time when we were just about to recover from our 2009 financial woes through discretionary expenditure cuts and improved revenue collection. As part of


LOCAL GOVERNMENT

the merger, Tshwane accumulated several rural agricultural areas and 19 informal settlements, all of which are characterised by limited resources and capacity. The municipality has therefore been tasked to bring the service levels in the newly included areas on par with those in comparable areas in the established Tshwane areas. Given this dilemma, the municipality requested a special restructuring grant from National Treasury. About 38 000 job opportunities will be created in the 2011/12 fiscal year and 375 000 by the end of the current five-year term in 2016. To this effect, 500 posts for trainee metro police officers for this fiscal year have been advertised. The trainees will be employed on a twelve-month training contract and those who are declared compliant or qualified will be considered for permanent employment.

year’s allocation to densify and deracialise settlements and bring centres of economic production closer to the people. Marabastad is one such project. The municipality also aims to eradicate all informal settlements by 2016 and the budget will be used for this purpose. With regards to SMME development, at least 300 SMMEs and 400 co-operatives are to benefit from the City of Tshwane's initiatives in this fiscal year. Manufacturing businesses will be incubated and 300 exporters will be supported through our trade development programme. Most of these programmes and initiatives will target women, the youth and people with disabilities. Our target for the empowerment

A businessman selling items at the Union Buildings in Pretoria.

Other projects aimed at creating jobs include the upgrading of sewers; lengthening of network and supply pipelines; supplying water to agricultural holdings; replacement of worn-out network pipes; refurbishing of water networks and eradication of backlogs; replacement and upgrading of deficient bulk pipelines; upgrades of purification plants; provision of basic sanitation; rehabilitation of storm water systems; replacement of traffic signs; rehabilitation of bridges; enhancement of traffic flow and safety; upgrading, regravelling and maintenance of roads; and installation of pre-paid electricity meters.

Images: Tshwane Municipality

The Level 1 and 2 accreditation that the City of Tshwane received puts us in a better position to plan and allocate the subsidy grants provided by Provincial Treasury and National Treasury for the installation of services and the formalisation and construction of houses. An amount of R398.1 million was approved on the capital budget in the 2011/12 financial year for the Urban Settlement Development Plan as well as R12.8 million for the construction of houses in Winterveld. The Tshwane Municipality intends to use part of this fiscal

of these groups is 50 percent or more. Economic transformation in Tshwane is a priority. The implementation of interventions to improve the economy of the city has already started. A new Chief Financial Officer was appointed in July this year and will strengthen the Finance Department. This should also boost financial management in view of efforts to produce clean audits. And once this has achieved clean audits, the City of Tshwane can be raised to even greater heights.

Union Buildings at night. Volume 1 • 2011

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LOCAL GOVERNMENT

Mondli

Gungubele the Mayor of Ekurhuleni

In an interview with Mondli Gungubele, the mayor of Ekurhuleni, Tiisetso Tlelima, discovers that he wants to empower township economies in Ekurhuleni by creating business opportunities and encouraging co-operatives. He also lashes out at those who attack foreigners claiming they take their women and businesses.

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our vision is to see Ekurhuleni as the economic hub of South Africa, an Aerotropolis with an airport in the centre and cities growing around it which would encourage economic growth. Can you tell us more about this plan?

But 17 years since the end of the apartheid and 10 years since Ekurhuleni’s formal establishment, Ekurhuleni has had major difficulties in developing a single city identity and integrating into one the residents of the nine previously separate towns.

Aerotropolis is the urban development form most suited to Ekurhuleni region given the region’s unique history and developmental challenges ahead of it. Our city is an amalgamation of nine town councils plus another two transitional authorities that constituted the former East Rand.

The task has been further complicated by numerous competing priorities. The city has had to address the developmental backlogs in previously disadvantaged areas. And it had to maintain at a particular level in its previously developed parts, for it is from the residents in these areas that it generates income for further growth and development.


LOCAL GOVERNMENT

At the centre of our developmental trajectory is the successful implementation of an Ekurhuleni Aerotropolis. For instance, as is the case with many around the world, our Aerotropolis has to make do with land, spatial and related developmental constraints. As matters stand, there is very little room for new developments around the airport city and we own very little in that regard. But we have worked out ways around these constraints. Foremost in our minds is the view that a successful Ekurhuleni Aerotropolis should benefit residents equitably. This includes the majority who live in the townships. We are pursuing a dream of a uniquely African Aerotropolis. We hope to showcase to the world the best that Africa has to offer while ensuring that our visitors feel at home because their connectivity to the world would be seamless and uninterrupted and their choice of business processes would be fully accommodated. Does Ekurhuleni municipality have the means and infrastructure to support this initiative? How much of the budget will be allocated to this project?

Images: Ekurhuleni Municipality

We have the first world features of our Aerotropolis that are bound to rival the best in the world. These include a rail, road and air infrastructure that makes mobility agile, quick, reliable and accessible. We have a digital city that attracts the best companies in the world, accommodation; office and related real estate infrastructure that makes the most discerning executives feel at home. We also have a conferencing infrastructure to meet requirements of any convention or company. R15 million has been set aside this financial year for all the necessary studies that need to be undertaken. Ekurhuleni has a population of 2.8

million, 60 percent of which are young people, are there any plans to create jobs for the youth? It is our view that the new growth path will create enough jobs for young people. That we are planning to utilise optic fibre to become a digital city is clear indication that we are well on our way to becoming a young people’s economy. This will create jobs and make sure that young people do business with the rest of the country and world by a click of a button.

Roadworks at Ekurhuleni.

What is the metro’s strategy for black economic empowerment and transformation? This particular issue plays a critical role in our tender process. We are looking at strengthening township economies to create opportunities for small black businesses. We want to encourage cooperatives so that our people can become their own bosses.

Refuse removals at Ekurhuleni.

You’ve taken a very strong stance against xenophobia and homophobia. How are you planning to stamp out violent hate crimes in Ekurhuleni? These will not be tolerated in our city and we will make sure that this never rears its ugly heard in the city again. Entrepreneurs that resort to violence when they cannot compete on grounds of price and service are not worthy of being referred to as entrepreneurs. We have also noted with disdain resurgences in sporadic incidences of intolerance and violence. To some these may be isolated cases, but I wish to condemn the homophobic rape and murder of Noxolo Nogwaza, three years after that of former Banyana Banyana player, Eudy Simelane. We do not want to be associated with the perpetuation of such heinous crimes and the sooner they are removed from society the better for all of us.

A Library in Ekurhuleni.

Metro Police maintain law and order. Volume 1 • 2011

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LOCAL GOVERNMENT

patricia

De Lille

THE MAYOR OF CAPE TOWN

Patricia de Lille, the mayor of Cape Town, tells writer, Tiisetso Tlelima, that she plans to create an economic environment that attracts investments and creates jobs for its people. She wants to make sure that the city creates opportunities for all its people.

Y

ou have been involved in politics for 34 years during which you headed your own political party. You became an MP and you also sat on numerous Parliamentary Portfolio Committees, what expertise do you bring to this job? My involvement in the process of drafting legislation for local government in my tenure as an MP equipped me with the key knowledge of how municipalities should operate and be

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governed. My 9 months stint as the MEC of Social Development in the Western Cape gave me the opportunity to lead a government department and learn about governing. Local government is at the coal face of service delivery as it deals with bread and butter issues and throughout my political career I have fought for the dignity of poor and vulnerable communities. However, I will be a mayor for all the people of Cape Town. The DA’s vision for Cape Town rests on five

pillars: building an opportunity city; a safe city; an inclusive city; a caring city and an efficient city. How do you intend on achieving this dream? Building an opportunity city by creating an economic environment that attracts investments and creates jobs for our people. Making this city safer by continuing to invest in our metro police and neighbourhood watches so that all the people of Cape Town can feel safe.


LOCAL GOVERNMENT

Ensuring that Cape Town is a caring city by providing services for all the people particularly those in our society who have not yet fully benefitted from what the City has to offer such as backyarders. To this end, I will make the plight of homeless people a special mayoral project so that, they too, can live in dignity. Making Cape Town an inclusive city where everyone has a stake in the future. We will redouble our efforts to overcome the injustices of the past and make sure that every citizen feels that they are an integral part of this great city. Continuing to improve Cape Town’s record as the most efficient metro in the country by governing well, rooting out corruption where it exists and being responsive to the needs of the people. Cape Town has been hailed as the best when it comes to service delivery, yet areas on the outskirts of the city such as Mitchell’s Plain, Khayelitsha and Gugulethu have been neglected when it comes to service delivery. How will you improve living conditions in these areas? And what measures do you have in place to ensure the five key pillars on which your vision rests, also apply there?

The truth is that the City of Cape Town delivers for all communities. We readily acknowledge that there are some in our society who are yet to fully taste what the city offers. The city is facing an enormous task of meeting the service delivery expectations of all people. My administration will pursue this mission with vigour at all times for the next five years and beyond. Cape Town is one of the best tourist destinations in the world. However, it hasn’t been able to recover from the global economic downturn. Are there any measures put in place to help uplift and sustain this industry which once employed 300000 people? I have reconfigured the Mayoral Comittees to establish a new new portfolio of Tourism, Events and Marketing that will be tasked with branding this city so that we attract new business. That new business must include our traditional markets, like tourism, but it must also seek new opportunities.

It is incorrect and misleading to say that those areas have been neglected with regards to the provision of basic services.

We know that Cape Town can become even more of an attractive destination for financial services investment, for instance. By marketing our assets, like the CTICC, and the city’s design itself, we can attract those businesses.

A recent uHABS (compiled by the Department of Cooperative Governance and Traditional Affairs) index ranked Cape Town first against all

What SMME development programmes have you undertaken to ensure small businesses grow in the City of Cape Town?

other municipalities in delivering basic services to local residents. The index uses official data from StatsSA and poverty data compiled by the University of Stellenbosch to measure effective delivery of water, sanitation, electricity and refuse removal services by municipalities throughout the country.

Images: City of Cape Town

Town delivers better basic services compared to the other metropolital municipalities throughout the country.

and BEE companies since changing the City’s tender adjudication processes to be open to the public. We have initiated the Activa project which gives support to small businesses. 52 percent of tenders for the 2009/2010 financial year were awarded to SMMEs. What plans does your office have for black economic empowerment and economic transformation for the City of Cape Town? The focus of my administration is to create an economic environment in which investment thrives and jobs can be created. When we create those conditions, we would have served all the people of this city by giving them basic services and making their metro a hub of opportunity.

The City supports a wide range of interventions to support the SMMEs. These include: The Business Place eKapa which provides advisory services and courses including sponsoring some Micro MBA courses in the past year.

The index shows that 91 percent of residents in Cape Town have access to these four basic services while 87 percent have access to higher levels of the same services. In contrast, nationally, only 54 percent of people have universal access to basic services and 49 percent have access to higher service levels.

Hosting the Cape Town Entrepreneurship Week to provide mentoring and outreach sessions for emerging SMMEs.

More than three studies by independent organisations have also found that City of Cape

Furthermore, the City of Cape Town has increased the amount of business given to small businesses

I have inherited an administration that has done exceptionally well to support genuine black economic empowerment and we will build on that foundation going forward.

Supporting the Raymond Ackerman Academy Youth Entrepreneurship programme to assist young business people in SMMEs.

Volume 1 • 2011

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LOCAL GOVERNMENT

ZANOXOLO Wayile

Mayor of Nelson Mandela Bay

Zanoxolo Wayile, the mayor of Nelson Mandela Bay, says he is restoring the dignity of the residents of the city, many of whom were deprived of access to the most basic of services all their lives. He says the city has received many service delivery awards under the current political leadership. In an interview with Wayile, writer Tiisetso Tlelima, finds that over 100Â 000 poor households in Nelson

from all over the world must realise that we have a fantastic city that has much to offer them: a city that rates with the best in the world.

H

ow is the municipality dealing with the current developmental challenges facing Nelson Mandela Bay such as poverty, unemployment and service delivery backlogs? Service delivery is a passion of the Nelson Mandela Bay Municipality. We want to make Nelson Mandela Bay a better place to live and work in for all its residents. Investors and tourists

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Last year, hosting no less than eight 2010 FIFA World Cup games, Nelson Mandela Bay sparkled and shone in the international spotlight! No less a person that FIFA President, Sepp Blatter, himself rated the Bay 9 out of 10 as a host city! Most importantly, we are restoring the dignity of our residents, many of whom were deprived of access to the most basic of services all their lives. We are transforming our city into a warmer, more caring place for all its residents. And our efforts have been recognised: We have received many awards for service delivery under the current political leadership.

Quality housing is the number one priority of many of our residents. The municipality’s commitment to the provision of housing is reflected in its Seven-year Housing Delivery Plan. We have delivered more than 22 000 houses over the past five years. This includes 7 676 in the past year alone. And we’ve relocated 6 683 residents from floodplains and other stressed areas, where their health and safety was at risk. Over 100 000 poor households in Nelson Mandela Bay receive free basic services every month, which includes 75 kWh of free electricity per month, 8 000 litres of free water every month, zero rates and taxes and a debt relief programme was introduced to assist those who struggle to pay their municipal bills.

Images: Nelson Mandela Bay Municipality

Mandela Bay receive free basic services every month.


LOCAL GOVERNMENT In recent years, the tourism industry has shown a steady growth and has contributed to job creation. Is the municipality assisting the sector to ensure it is sustainable and continues to create jobs? The municipality’s economic development framework seeks to improve the Metro’s global competitiveness and simultaneously eradicate poverty. Effectively, this framework recognises that Nelson Mandela Bay is part of the global economy and needs to ensure that it creates a safety net for the poor. The global economic recession experienced over the past three years has led to job-shedding in the city, with a number of firms forced to close or reduce operations significantly. In response, the city’s political leadership through the Economic Summit held in May 2010 brought together all socio-economic partners to re-imagine the economy, culminating in the adoption of a local development strategy. The Nelson Mandela Bay is a popular tourist destination, with unique attractions such as a 40 km expanse of pristine golden beaches. It needs to maximise its enormous potential for tourism and property development. The municipality recently reviewed its Tourism Master Plan to ensure that it builds on the legacy of the 2010 World Cup. Nelson Mandela Bay is a booming city that is already home to a number of prestigious and internationally acclaimed events. As tourism is the fastest growing sector in the local economy and because it yields more job creation opportunities and economic diversification, it is a key focus area of the metro. The metro has been successfully running a range of initiatives and programmes aimed at developing and honing the skills of local entrepreneurs, especially from the previously disadvantaged, in tourism and hospitality. One such initiative is the Community Tourism Forum, in terms of which the metro trains and equips local entrepreneurs in a broad range of skills, such as business skills, financial skills, ambassadors training and SMME tourism products. In addition, every year, 3 or 4 local entrepreneurs are selected for attending the annual South African Tourism Indaba to expose them to the broad range of tourism products on offer there. Continuous training is provided to product owners and their staff, thereby ensuring the quality of service delivery is always of high standards. Tourism

trends are regularly circulated to the industry, through the NMBT Membership Programme and assistance is provided to various tourism accommodation establishments throughout the Metro in terms of meeting the criteria of the South African Grading Council. For example, the Rainbow Guest House (Uiternhage/Dispatch) - black female owned accommodation establishment – began with 3 rooms and can now accommodate 22 guests, and in 2010 it opened Rainbow Restaurant in Kwanobuhle. This is a clear indication of growth, sustainability and job creation. The metro has had a cash flow problem since last September. How will the municipality address this problem this year and beyond? Since the cash flow problem emerged in September 2010, the Nelson Mandela Bay Municipality has developed and is successfully implementing a Financial Recovery Plan, which has seen a marked improvement in its financial performance. The implementation of the plan has already delivered real results, placing the municipality in a better and more sustainable financial position and ensuring its ability to meet its obligations in terms of service delivery and the Integrated Development Plan, as well as its financial obligations. Root causes of the cash-flow situation stem from a number of reasons including lack of credible and fully cash-backed budget, inadequate cashflow management, forecasting and monitoring, inadequate management of the Housing Revolving Fund, inadequate financial administration relating to operating and capital expenditure, limited effectiveness of credit control and debt collection measures and limitations in revenue growth or generation. The short-term interventions that formed part of the immediate solutions to the cash challenges included: • The full implementation by the various municipal directorates of the Operational Efficiency Work Plan as an essential part of the short-term solutions. • A successful application was made to National Treasury to receive the November 2010 allocation of Equitable Share in September 2010 – this allowed the backlog of payments to service providers to be reduced. • National Treasury approval was provided to consider the Adjustments Budget earlier than the regulated time-frame. The Adjustments Budget was approved on 29 October 2010. • The collection of government arrears was actively pursued by the Municipality.

Volume 1 • 2011

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OPINION

Is

empowerment sustainable? As South Africa gears up to host COP 17 in Durban in December, South Africa needs to ask whether empowerment is indeed sustainable. And are these issues not two sides of the same coin? What is the sense of empowering people if there is no planet or environment to support life? Written by Ajay Lalu

S

ocial justice and sustainable development need to be linked at policy and implementation levels. The COP stands for conferences of the parties. These parties have met annually from 1995 to assess progress in dealing with climate change.

This comes on the back of the recent adoption by JSE-listed companies of integrated reporting as recommended by King III Report on Corporate Governance. The report came into effect in April last year. So, how do social justice and BB-BEE really integrate?

In 1997, the Kyoto Protocol was concluded and established legally binding obligations for developed countries to reduce their greenhouse gas emissions.

If you tell people to stop cutting down trees as these are a source of oxygen and carbon capture, will they really hear or listen to you? People living in poverty without a roof over their head, heat in winter or the ability to cook their food will tell you that their ability to survive the night is actually dependent on them cutting the tree down. Therefore, unless people are housed, employed and enjoying a better quality of life, their

Images: iStockphoto

The President’s Advisory Council on BEE has recently recommended that the Global Reporting Initiative (GRI) for sustainability reporting incorporate specific measures that relate to BB-BEE and the Codes of Good Practice.

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OPINION

last concern in the world (unfortunately, but understandably) is the environment. It is for this argument that South Africa needs to create an environment where people are empowered and at the same time shown the impact of their actions and the way they interact with the planet. This would clearly demonstrate the importance for long term survival. Many companies are looking at BB-BEE and Sustainable Development through different eyes. Sustainability is the domain of the Sustainable Development manager, while BEE is often left to the Human Resources manager. South Africa can only empower people if people have a country and planet to live in, there is water and food and if people are aware of the impact that they have on their environment. This country needs to incorporate these two disciplines into a single lens and thus adopt strategies that focus on sustainable empowerment. Government needs to also consider the regulatory framework that supports both sustainable development and BB-BEE. There needs to be cohesion between these two policies. In practical terms, the Mining Charter requires companies to build houses for employees (empowerment). What the country should be insisting on

is that these houses are built with solar water geysers and solar lighting (sustainability). It is understood that as people are empowered, their needs and desires change. What needs to be influenced is how people aspire to these things.

“Many companies are looking at BB-BEE and Sustainable Development through different eyes. Sustainability is the domain of the Sustainable Development manager, while BEE is often left to the Human Resources manager.� Once people are empowered they want a fridge and a stove. People need to be educated that they should power these with solar or renewable energy and not coal powered electricity. This will allow Africa to leapfrog the rest of the world and ensure that her people live in a sustainable manner, while preserving the desires to a better quality of life. Social justice and sustainable development are therefore indeed two sides of the same coin. Ajay Lalu (CA(SA)), is Managing Director of Black Lite consulting, a sustainable empowerment consulting firm.

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Images: iStockphoto

SKILLS DEVELOPMENT

unleashing

ECONOMIC change from all fronts

There is general consensus that education and training all over the world is failing the global market or economy. South Africa has witnessed, via unfortunate riots throughout the Arab world, how impatient the youth has become to politicians promises that yield nothing. Government policies are failing to create jobs. Written by Mthunzi Mdwaba

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SKILLS DEVELOPMENT

E

xacerbated by the global financial crisis, which threatens to evolve into a secondary (and possibly more severe) crisis, the situation has become extremely dire.

The corollary is also true. Big business, when there is a crisis or during a depression "dumps" the biggest number of employees through retrenchments.

How different is the situation here at home? No different at all. In fact the situation is worse because South Africa was already having a huge jobs backlog when the financial crisis hit. The dream of halving poverty and unemployment and achieving the Millennium Development Goals (MDGs) by 2014 has all but evaporated.

This makes poverty and unemployment a lot worse, which small and medium companies shed in small numbers when they have to trim fat to suit and fit the conditions of deprivation. What South Africa should be doing, is including the youth in policy making, creating an environment in which entrepreneurship is encouraged, innovation takes centrefold and making mistakes within the necessary parameters is fine.

Where are we going wrong? Why are our policies not yielding jobs? There is a myriad of reasons that contribute to the negative situation South Africa is in, but none like its training and education, or lack thereof. I would like to devote my time to environmental, attitudinal and content related challenges. South Africa’s education and training is not designed at all to cater for business, entrepreneurship, enterprise creation and consequently sustainable enterprises. Closer scrutiny reveals that this is a societal challenge. South Africans are all breeding kids that are indoctrinated at an early age to look for jobs. The education and training system simply mimics societal requirements and expectations in that all the disciplines are bereft and devoid of any commercial and more importantly entrepreneurial content. It is trite and commonly accepted that big companies will continue, in a perfect world with no financial crisis, to grow steadily but will never revolutionise job creation. Equally it is accepted that small and medium sized businesses have the greatest track record and potential for job creation. Stable, sustainable economies have a higher preponderance of small and medium businesses vis-a-vis big and established businesses.

South Africa should be including the kind of content in its education and training that instills confidence in youth to be enterprising and demonstrate confidence that society has in them. This the country will do by providing an environment that is supportive to an innovative and enterprising culture, providing the necessary access to finance and other necessary resources. Only in doing this, will South Africa be able to ultimately contribute enterprise formations and a multiplier effect that is needed in creating jobs. I always make the example of how we fail our kids as society when I listen to my kids who are teenagers talking to their friends about the kind of jobs they would be looking for. These are kids who go to the best private schools in the land if not among the best in the world and yet they do not talk about creating enterprises and creating jobs for one another. They’d rather talk about expecting to stand in queues with all other job-seekers (some of whom never even had the opportunity to go to school, let alone the privilege of going to a private school, alternatively completing their studies). In addition, South Africans also push their youth in the same direction by pressurising them to do what I refer to as "cool jobs". As engineers, lawyers, doctors, chartered accountants, yes these are important professions, but South Africans cannot all follow the same professions. What about teachers, nurses, plumbers, electricians and many more vocational jobs that the economy needs? What about enterprises made up of these? Should South Volume 1 • 2011

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SKILLS DEVELOPMENT

Africans not be starting a revolution on the "coolification of these much needed jobs that could and should lead to new enterprises in their millions and creating millions of jobs. After all, given the scarcity of these skills, there's a much better opportunity to earn far more and to have far better sustainability. Sustainable economies rely on sustainable enterprises. The latter relies on the formation of enterprises and this relies on developing entrepreneurs.... and this leads to development that creates jobs in large numbers which we need more than ever before. There is no system that incentivises entrepreneurship and enterprise development.

South Africa’s education and training is not designed at all to cater for business, entrepreneurship, enterprise creation and consequently sustainable enterprises.

Unless South Africa changes its education and training content from the foundation level up, the country is headed for an untenable situation. As one commentator observed at an International Labour Organisation (ILO),"unless we find ways to deal with the problems of youth unemployment, the youth will deal with us (this was before the Arab eruption).� This involves a holistic change that ensures that we get all stakeholders on the same page and have an educational system that gets other stakeholders such as the Ministries of Labour, Trade and Industry, Communications, Science &Technology and Public Enterprises to collaborate with the Ministries of Lower and Higher Education. Changing the way our education and training is structured for optimal entrepreneurial outcomes is very critical. There is no way South Africa will be able to achieve any economic transformation without the necessary changing of attitudes. South Africans need to do things differently. All projections are very positive for the African Continent in terms of economic growth. Reports such as the McKinsey Report, Lions on the Move, see Africa as the next continent

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to watch with different regions having varying degrees of growth. While there is a cogent argument that South Africa is not coming off as low a base as some of its sister countries, there is no reason why it should be growing at a modest 3 to 4 percent a year. It needs to grow at 7.5 to 8 percent to grow the economy sustainably and create the jobs. To have this kind of growth, South Africa needs to change tact. Entrepreneurs thrive in situations where there is adversity and learn to convert challenges to opportunities that should be exploited for gain. This is an attitude and spirit to engender in society to ensure that the youth is moulded with this kind of thinking. This is the indoctrination South Africans need to inculcate. Of course, there will always be employees and there is nothing wrong with this as the world of work is made up of employers and employees. But the emphasis needs to change to that of the youth being creators of jobs, being owners of the means of production, sooner than later. As a member of the Governing Body of the International Labour (ILO) as well as a Board Member of the ILO Training Centre in Turin,I will be devoting my time to spreading as much entrepreneurial influence as I possibly can. I am also very supportive of the ILO Conference tackling Youth and Unemployment with a focus on Entrepreneurship. As change agents, we need to all take this up and treat it as urgently as deserved by the situation we have that seems ready to explode in our faces. We must not underestimate the power this would have in changing our society and instilling pride and dignity. Let's unleash the economic transformation from all fronts. Mthunzi Mdwaba is currently the vice-president of Business Unity South Africa (BUSA) and the Governing Body Member of the ILO and Management Board Member of International Organisations of Employees (IOE).


Giving Economic and Social Transformation a Boost of Energy Through Skills

Development

The Energy and Water Sector Education and Training Authority (EWSETA), is one of 21 Sector & Training Authorities (SETAs) established under the Skills Development Act of 1998 to address the dire need for economic and social transformation through the facilitation of skills development for our people. EWSETA is embarking on a strategy to address scarce and critical skills issues within the energy and water services sector and have through our Sector Skills Plan, identified core areas in which our attention will be focused over the next five years. Delivery partners within the higher education and private sector will be identified and partnered with based on the appropriateness of each programme to be implemented as a way of positively and proactively addressing the scarce and critical skills shortage within the energy and water service sector. If you are a potential delivery partner we urge you to think carefully about how you can be part of the solution to our country’s need for qualified individuals with scarce and critical skills. HELP THE EWSETA GIVE OUR SECTOR AN ENERGY BOOST. Contact us now and let us start working together to find a solution towards greening the economy, developing and training

The Energy and Water Sector Education and Training Authority 32 Princess of Wales Terrace Sunnyside Office Park 2nd Floor MPF House Parktown

PO Box 1273 Houghton 2041 Telephone: 011 274 4700 www@eseta.org.za

Department: Higher Education and Training

and water initiatives that make a difference.

higher education & training

professionals and artisans in our sector and implementing energy


EDUCATION

PRIVATE vs PUBLIC schools

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EDUCATION

South Africa’s kids are not getting it. Education is in crisis. Schools are not showing the way out of poverty and into development. To transform this state of affairs, South Africa needs to imagine a future its citizens have never lived. South Africans need to plan this future, make it happen, manage the social tensions. Written by Graeme Bloch

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outh Africa needs accountants, lawyers, doctors, scientists, as well as sociologists, musicians, artists and poets.

98 percent of white kids get through matric, only 50 percent of black kids even get there.

It is not getting enough high-level skills a nation needs to compete in the cut-throat globalised world, where even competitors like India and China will not wait for its slow if real progress. The country does not get high-level skills because it does not get basics.

South Africa is reproducing race in a new democracy. This is unfair, unsustainable, and unconstitutional. All kids rightly expect a fair opportunity.

Images: iStockphoto

Recent Annual National Assessments confirmed what all international tests (SACMEQ, PIRLS, TIMMS) have said: Right through the school system, South Africa is close to bottom of the class.

Are private schools a solution? The country has to fix the public schools where more than 80 percent of kids languish, in poor township and rural schools. Of the 27 000 odd schools, some 10 percent are suburban former Model-C’s, maybe another 5-10 percent are private (figures are hazy).

Maybe 35 percent of grade 4 kids can read but fewer can do mathematics. More than that: while in the ‘star’ performer - Western Cape - 2/3 of grade 6 kids in suburban schools could do maths recently, the figure was 0,1 percent in Khayelitsha. Khayelitsha results are worse than Eastern Cape!

Where demographics have shifted in many (public) suburban schools - from 1/3 to 98 percent of kids are now black - they creak under financial strain, there are cultural and self-esteem issues, the ‘colour’ of staff has changed little.

Where one in 10 white kids get an A in matric, only one in 1000 black kids do; 60 percent of white matriculants go to university, only 12 percent of black;

Even well-performing schools compare badly to top schools in Kenya; mediocrity makes all pay the price. It doesn’t help to march on these schools as COSAS has Volume 1 • 2011

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EDUCATION

In top schools, private and Outcomes Based Education dedicated teachers backed resources: children emerge creative, innovative, schooled yet able to act out of the box.

public, even works, with by sufficient as thinking, in basics and

Private schools, the best amongst them, have much to teach the school system. Like suburban schools (or former model C’s), like some township or rural schools too (think Mbilwi in rural Limpopo or Bhukulani Secondary under Dr Mathe in Soweto): there is a core of schools that show us the way.

threatened. If they were entirely black, most kids would still be stuck in township schools. Why risk one section that at least is performing?

“Where one in 10 white kids get an A in matric, only one in 1000 black kids do; 60 percent of white matriculants go to university, only 12 percent of black; 98 percent of white kids get through matric, only 50 percent of black kids even get there.”

Private schools are a mixed bag. They range from Oprah Winfrey Academy, where you must wear special socks to enter the library, to fly-by-nights out for a quick buck. Most are medium-fee schools with better results than many public schools: If you can get your children into a school where they have a chance, this is the bottom line. Discipline is sometimes harsh and extreme. Play sports, even better take steroids to make the rugby team! Single-sex schools may sometimes perform better academically, but often don’t teach social graces or social solidarity. Some fundamentalist schools are anti-science or ‘creationist’, further disadvantaging their learners. Stereotypes don’t help. It is good that bright black youngsters may get a chance. It depends what works for the child and parents. Many private schools have good principals, are well run, have dedicated teachers who want to teach and are tired of filling in forms for bureaucratic departments of education.

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Determination and natural talent with support from families, gets many kids through. If they are lucky enough to be in good schools they will fly, their talents will be recognized, and they will be helped and nurtured to be whatever they want to be. Private schooling is one option, sometimes - certainly not an ideological choice. Private schools are part of the overall system, albeit small, and maybe growing. South Africans must be careful not to break what is already fixed. The real task is to strengthen what works and to get cracking where most of our kids are. It is the public and probably primary levels that should be South Africa’s main focus. All citizens will have a part to play. Let us own what works as well as what needs to be fixed. South Africa is our country. Our future is here. Our children need us to leave a legacy of the best, so they can shoot for the stars. Graeme Bloch is visiting adjunct professor at Wits School of Public and Development Management. He is author of: ‘The Toxic Mix: What is wrong with SA’s schools and how to fix it’ (Tafelberg, 2009).


OPINION

Business faces

greatest threat

Earlier this year, it was considered that the greatest threat to business for 2011 was the proposed amendments to the labour relations framework that would have substantially altered every aspect of the employment relationship. Written by Neren Rau

B

arely at the mid-point of year, business now faces an even greater threat that could materially impact its very existence within South African borders. The nationalisation debate has reached a level at which it can no longer be ignored. Following the 24th National Congress of the ANC Youth League (ANCYL), the SA Chamber of Commerce and Industry (SACCI) can no longer continue to be cautious about fuelling the debate through its public involvement.

nationalisation specifically has proved to be the leading deterrent to greater investment in South Africa in recent years. The extension of the debate, by the Youth League, to include expropriation without compensation now stands in stark contrast to the spirit and letter of the South African Constitution.

The furthering of the nationalisation debate is also a leadership test for the leading political party in South Africa.

Indeed, nationalisation as a solution to the country’s societal inequalities and the challenges of poverty and unemployment is flawed on a number of political and economic fronts and attacks the fundamentals of a free society including property rights, an independent central bank and a market economy.

Business has to date accepted President Jacob Zuma’s assurance that nationalisation is not on the national agenda.

Even if government were to pay compensation for the expropriation of mines, it has been estimated that such cost would be in the region of R2 trillion.

The open challenge to the view of Zuma from within his own party adds to the conflicting messages that both domestic as well as international investors are experiencing.

How such funding is to be raised is a dilemma that has not concerned Malema.

In SACCI’s engagements with the diplomatic corps as well as with foreign investors, policy uncertainty broadly and the issue of

A further challenge which has been given scant attention is how a change in ownership of the mines will create a virtuous cycle of greater employment as well as greater revenue generation simultaneously if the country is to

contribute to the desired social upliftment. This, given that governments, domestically and abroad, have a poor track record in running enterprises successfully. It is unequivocal that the private sector is the only true generator of wealth. In recent times, this country has experienced a number of events that have triggered an exodus of South Africans to foreign shores. The 1994 elections and the power crisis of 2008 are two cases in point. While the patriotism and possibly irrational fears of these emigrants can be debated, the impact of such exodus on the available skills in South Africa is undeniable. A move towards any form of programme of nationalisation will not only trigger a mass exodus of investment and an immediate deflection of any contemplated funds movement in South Africa’s favour but would also trigger a third exodus of skills. Indeed, from an economic perspective, a policy of nationalisation would be akin to an extinction event. Neren Rau is CEO of SACCI

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BUSINESS TRAVEL

CRISS-CROSSING

the globe Chris Hlekane, the general manager of OR Tambo International Airport, is a globetrotter. He has visited countries such as Kenya, Singapore, Burundi, Brazil, France and more. One place he’s yet to visit is the North Pole which he believes has set the bar in green living. Aviation is a big contributor of carbon emissions to the environment and a sustainable world has become a subject that is particularly close to his heart. Witten by Tiisetso Tlelima

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BUSINESS TRAVEL

T

ransform SA caught up with this jetsetter shortly after his trip from Brazil. He shares his travel experiences.

But when you’re doing it with your family, it becomes a challenge.”

What does travel mean to you?

What draws you to a place, how do you decide what country to visit next?

Travel must accommodate any person of any nationality, language and gender. I should be able to do it without having to say I cannot speak Spanish or I cannot speak Italian.

In the past two or three years I’ve made a conscious effort that my decision to travel will not only be based on the social aspect. The knowledge of where I am also becomes important.

What is the most under-rated destination you’ve visited?

So what I tend to do every year is have one trip to places I want to go to in Europe and one within my continent. So I can learn more about my continent because our continent is beautiful. For me, travel is along those lines. You want to get something out of travel, not only to just go and affirm what I think I know, but to explore other areas and more so my continent.

I will never name a specific destination but I will give reference to some of the places I’ve been to. I was in Burundi two months ago (from the time of this interview). When I think of Burundi, the first

I’m kind of an impulsive person. I don’t like planning a lot. I like to feel something and just do it. If I feel like I want to ease my mind, I don’t want to read, I just want to go out somewhere, relax and do something. That’s the kind of traveller I am which is a bit challenging because it’s good when you’re doing it on your own. But when you’re doing it with your family, it becomes a challenge.

Which place would you never visit? I would like to go everywhere so long as it’s safe because there’s always something to learn. We become better people by learning. How often do you go on business trips outside SA? I do quite a bit actually. I mean at least once a month.

thing that comes to mind is what could that be like without making references to what’s happening in the country?

Images: Chris Hlekane

But when you start getting around in Burundi you start realising what a beautiful country it is. So, for me destinations which are under-rated are destinations that have a lot to offer. But they probably won’t be visited because of the way they are positioned or thought of.”

What do you pack when you go on a business trip? I tend to travel light. I normally take two suits, black and grey, because that can make me blend easily, with more ties and shirts. Of course, I could not survive without my electronic gadgets such as my iPad.

What kind of traveller are you? Do you plan or do you just head off?

What is the best airport, outside SA that you ever landed on – in terms of infrastructure, design, security and service?

I’m kind of an impulsive person. I don’t like planning a lot. I like to feel something and just do it. If I feel like I want to ease my mind, I don’t want to read, I just want to go out somewhere, relax and do something. That’s the kind of traveller I am which is a bit challenging because it’s good when you’re doing it on your own.

Changi International Airport in Singapore is the best. It has a balance of everything. From security to immigration processing - it’s a fully balanced airport. You almost feel like every aspect of the airport is designed by one person, yet these are all service providers who come from different design houses. Volume 1 • 2011

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INFORMATION TECHNOLOGY

Global IT groups

dictate BEE schemes H

owever, beneficiaries of BEE might argue otherwise. They would argue that without BEE, South Africa would not have seen the emergence of the number of black business leaders who have become role models for many aspiring young black entrepreneurs.

Black Economic Empowerment (BEE) was never a true and honest economic transformation tool, particularly in the information technology (IT) sector. The architects of BEE wanted to create a black middle class in order to safeguard their own economic interests. Written by Mdu Mkhonza

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They will argue that preferential procurement policies, especially in government, have enabled them to establish and grow their businesses through tender-preneurship. But the majority of genuine entrepreneurs and highly-educated individuals from the African section of the population will testify to the total failure of BEE and its programmes. They will argue that BEE has benefitted a few politically connected elite, tenderpreneurs whose success is based on corrupt practices involving government official, big businesses especially multinationals who want to define and dictate BEE initiatives and support programmes. Some big businesses’ equity equivalents of BEE programmes are just but one example of the arrogance and insensitivity displayed by big businesses.

On the other hand, there will be those who do not believe economic transformation and especially BEE should be forced on them. They argue that they had built their businesses over many years and therefore cannot allow their ownership and employment practices to be diluted and affected by BEE compliance issues. In a developmental state, collaboration is the cornerstone of innovation processes. South Africa has a unique attribute – the ability to mobilise people for a particular cause. The vast inequality that characterises the South African economic landscape is a recipe for disaster, viz. increase in unemployment, crime and possible social unrest. South Africa needs to channel the energies of the unemployed graduates and the frustrated youth towards the developing of new products and services that will make the country competitive. The information and communication technology (ICT) sector needs more than an ICT Charter in Knowledge and enterprise networks. Many emerging entrepreneurs lack information in order to foster meaningful transformation.


INFORMATION TECHNOLOGY

In many cases, the current conferences and summits are unaffordable yet they are valuable in the development of African entrepreneurs and professionals in the ICT sector. What needs to be done is for conference organisers and sponsors to insist on the representation of African entrepreneurs and professionals in these events through some selection criteria. A target of 10 percent of the delegates

information system or the national broadband rollout project – must be identified where clustering of big, medium and small enterprises shall be the implementation strategy. The diagram below depicts a typical cluster model that can bring about meaningful empowerment and transformation in the ICT sector:

People & Skills

Finance & Business Services Networks and Collaboration

Tier 1 Suppliers Tier 2 Suppliers Final Customer

Industry Organisation

Cluster Anchor Firms Leavers / relocators

Research / Design / Prototype

Networks and Collaboration

Infrastructure (premises, telcom, etc.)

Spin-offs / startups / inward investors

Material Suppliers

Networks and Collaboration

Cluster enabling environment

Core Cluster

Manufacture

Package / Market

Distribute

Related and Supporting Firms (Value Chain)

Research & Innovation Source: M Khonza

They will argue that BEE has benefitted a few politically connected elite, tender-preneurs whose success is based on corrupt practices involving government official, big businesses especially multinationals who want to define and dictate BEE initiatives and support programmes.

for a particular ICT conference must be African emerging entrepreneurs and professionals.

The cluster model is one area of focus that has not received the necessary attention in South Africa whereas internationally, this model has had tremendous successes in the past decade and its impact has gone a long way to address issues related to innovation, employment creation, industry competitiveness and economic growth. Is it not about time that

Supplier databases must be flexible to allow periodical registration of new suppliers. The State Information Technology Agency’s (SITA) three-year cycle of supplier registration must be scrapped and replaced with a six months cycle. Private companies must become transparent in the supplier registration and procurement policies.

government, the private sector and industry associations come together and map out an implementation strategy for ICT cluster development in South Africa?

Strategic projects – including major investment projects like the health

Mkhonza is president of BITF and writes in his personal capacity.

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ADVERTISING

Changing the

ADVERTISING

sector

The standard of education in South Africa denies the advertising industry an ability to uncover great talent. The quality of current matriculants leaves this big industry robbed of capacity. This makes it a myth talk that the industry is unable to train and attract young black candidates. Tiisetso Tlelima interviewed Nkwenkwe Nkomo, Chairman of DraftFCB, SA.

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T

ransformSA conducted a wide-ranging interview on transformation in the advertising industry with Nkwenkwe Nkomo, among South Africa's pre-eminent role players in an industry which has been criticised for giving little or no opportunities to  blacks in general. In this conversation, Nkomo gives TransformSA an amazing insight into what is going on in the industry.

South Africa’s advertising industry has made some progress with regards to transformation in the past few years. But there is still concern for the sectors’ inability to attract and train young, black candidates. What do you think is the reason for the slow pace in developing and training of young, black candidates? Frankly, I do not subscribe to the notion that our sector is unable to attract and train young black candidates. We are more than able and capable as we have demonstrated over the years. A number of factors have conspired to deny us quality candidates and chief among those is the abysmal standard of education in the country. The quality of current matriculants leaves much to be desired especially from most of our township schools. The search for trainee copywriters today is a real challenge, these youngsters just cannot write. They have no appreciation of grammar as the foundation for the creative craft and it does not matter what language it is. How far have we come as a country in trying to address this problem? We are actively addressing the problem. The Association of Communication and Advertising (ACA) has over the years supported the AAA School of Advertising in Johannesburg and Cape Town. Through the Apex Awards, the ACA is giving bursaries to students. The Red and Yellow School has been one of the major contributors to honing young talent and has made an impact and so has Vega. These institutions now offer some language bridging interventions. Then of course most universities offer marketing communication and advertising courses as well as degrees. A great pity is that institutions like Federated Union of Black Artists (FUBA) seem to have gone below the radar as creative arts centres.

In 1996, the Association for Communication and Advertising (ACA) embarked on a journey to transform itself which led to the launch of ACA Transformation Charter in 2000. According to a 2006 survey issued by the association, by 2006 black shareholding in the industry had risen to 37.6 percent and black managers accounted for 40.2 percent of total management. Would you say that the association has reached its transformation targets? Which areas are lagging behind in terms of transformation? Well, well, well... the entire process is actually now under the auspices of the Marketing Advertising and Communication South Africa (MAC SA) which also embraces the public relations and design industries. Marketers play the advocacy role in MAC SA. Currently, the sector charter is in the process of being gazetted under section 9. This is a joint process with GCIS and the Department of Trade and Industry (DTI). Yes, it has taken a little longer than we would have liked but we are on course. The timelines have been revised and endorsed by all stakeholders including the Parliamentary Portfolio Committee on Communication which has taken renewed interest in cajoling our sector along transformation road. Has Affirmative Action produced enough black executive candidates who could be appointed as board members in top advertising agencies in the country? Transformation is not meant to produce enough black executive candidates as board members, transformation leads to the creation and custodianship of truly great South African advertising that also resonates with the world. That is achieved at the coal face and not in boardrooms. While black male representation has increased in the past few years, black female representation continues to be low. Has the industry made any efforts to create more opportunities for emerging black female professionals? Is that a fact or is it part of the old “keep

throwing mud at them and some will stick” mentality? I cannot believe that there is truth in that but I am willing to be persuaded. Is it of any consequence that the CEO of the ACA is a woman and is black? Remember this is the association that governs the industry. Does it matter that the CEO of the Advertising Standards Authority (ASA) is a woman and is black. She heads the institution that regulates all advertising in our country. Must we look at them as firstly black, then women and ultimately capable professionals or do we regard them, as damn fine ad professionals. I can rattle off a number of great agency leaders who are black and female but I do not want to offend them by reducing their achievement to black for blackness’s sake. Let’s respect them as best of class in their field and then let’s feel good because they have done it in spite of the disadvantaged background we share. Perish the notion that women need to have opportunities created for them. Dash it all, they are doing it for themselves and they are doing a damn fine job of it whether we like it or not.

Nkwenkwe Nkomo Group Chairman Draftfcb, South Africa He joined FCB in 1983 as a trainee copywriter and rose within the ranks to creative director,a position he held for several years before being appointed Deputy Chairman of FCB Johannesburg . He honed his skills in Chicago and is an alumnum of the FCB Advanced Advertising Programme class of 1987 and further enhanced his creative career with a stint in New York at FCB /Lebber Katz. He is chairman of Draftfcb South Africa, chairman of the Advertising Standards Authority of South Africa, (ASA), chairman of the AAA School of Advertising and chairman of Marketing Advertising Communication South Africa. (MAC SA) . He also serves on the board of Sibikwa Arts and is a member of Inqanawe Steering Committee.

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BANKING

tiff

dashes Now that South Africa’s top four banks and COSATU have failed to resolve their tiff over increasing black direct ownership in banks, hopes of black masses have been dashed while banks continue generating profits.

Images: iStockphoto

Written by Mzwandile Jacks

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BANKING

hopes of ECONOMIC SLICE B

lack (including coloureds and Indians) South Africans, who were salivating at the thought of benefiting from increasing direct black ownership in banks to 15 percent, may not hold meaningful ownership in banks in the short term. It could also mean that the top four banks may not have to engage in restructuring all the BEE deals that have been struck in the sector in the past 10 years, saving them over R25 billion in costs. A Johannesburg-based analyst, who did not want to be named because he did a lot of business with all the top four banks, said failing to resolve the tiff meant that banks would continue to do business as usual while blacks would remain minority shareholders in the banks for many years to come. South Africa’s top four banks, Absa, Standard Bank, FirstRand and Nedbank, released good figures in the sixth months to June as nonperforming loans improved. The banks and the union federation have been at loggerheads over ownership for more than five years. SACP and COSATU have been calling on the banks to increase their direct black ownership from 10 percent to 15 percent. But the banks are stubborn to do so, saying this would mean restructuring of their BEE deals, which will be a tedious process. Cas Coovadia, CEO of the

Banking Association of South Africa (BASA), said there has been no progress in the talks between the warring parties since the negotiations deadlock in 2008. “This is not a big issue in my or the banks’ life anymore. We are now reporting against the generic codes,” Coovadia said, adding it was nonsensical to expect people from such diverse backgrounds to agree. “The parties that were in talks came from totally different backgrounds, making reaching a logical conclusion a nightmare.” Negotiating parties consisted of communities, labour movement and the big four banks. In 2008, the banking industry raised the stakes in its fight to do away with the demand to raise the direct black ownership target in the financial sector charter (FSC) from 10 percent to 15 percent, saying the matter needed political intervention. It was convinced that a political decision was urgently needed to gazette the charter without further delay. BASA's call for political intervention brought to an end the haggling within the FSC council. It was unlikely that the politicians would push a position that conflicts with the existing banking regulations as the strength and stability of the banking sector was key to SA's case as an investment destination. Treasury has clearly spelt

out its objections against the demands for 15 percent direct black ownership. DTI minister Mandisi Mpahlwa had promised to push for the gazetting of the FSC during the first quarter of 2009 but this did not materialise. BASA had been concerned that changing the direct black ownership target would have a negative impact on SA's image because it amounted to shifting the goal posts.

“This is not a big issue in my or the banks’ life anymore. We are now reporting against the generic codes,” Cas Coovadia. There was also concern that a straight readjustment of the charter's ownership element to match the BEE codes of good practice would set many financial institutions way behind the 2010 target. Patrick Craven, the spokesperson of Cosatu, told TransformSA, the whole ownership matter had been overtaken by events – which were the reason all parties were so quiet about it. “But we want a publicly owned banking system in South Africa,” Craven said, adding the role banks played in society had to be taken into consideration. Volume 1 • 2011

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SMME

Reviving NEGLECTED

Images: iStockphoto

SMEs

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SMME

For decades, small and medium enterprises (SME) were a neglected corner of South Africa’s cash-flush business world, with little investment and abysmal profit margins. Many of these enterprises collapsed and some sold their equipment to lead impoverished lifestyles. Written by Mzwandile Jacks

“The banking industry recognises the importance of the SME sector in being a driver for job creation and an engine for inclusive and sustainable economic growth hence the commitment to this… agreement with Khula.”

S

ome SMEs have found their owners now preferred to concentrate on finding employment at big corporates only to fail because they have been listed on the country’s credit bureaus. The key challenges faced by the SMEs relate to SMEs’ ability to access finance and non-financial support from both the private and public financial intermediaries. This has troubled SMEs’ experts because SMEs are a highly effective way of creating jobs and boosting economic growth in South Africa. Happily, a renaissance is underway. The Banking Association South Africa (Basa) and Khula Enterprise Finance (Khula) recently signed a cooperation agreement to pave the way for a structured partnership and mitigate SME challenges. Basa represents South Africa’s big banks and insurance companies while Khula has been blazing the trail when it comes to providing finance to SMEs. One expert told TransformSA this move could have been driven by Basa in an effort to redeem itself after a hugely bruising fight with unions over direct black ownership in South Africa’s big four banks. These banks include Standard Bank, Africa’s biggest by assets, Absa, South Africa’s biggest retail bank, FirstRand, third biggest retail bank and Nedbank, the fourth biggest bank. Parties have begun to facilitate the formation of an SME Credit Bureau (1st of its kind in Africa) and are providing access to the information portal for SMEs. The partners are also conducting research programmes, facilitate skills transfer and assist in the

development of a national mentorship programme. They have also established an SME forum and promote the redesigned Khula Indemnity Scheme and SME financial literacy. The agreement has facilitated greater financial inclusion of SMEs through the expansion of access to financial services, lowering financing costs to SMEs within the banking and financial sector and addressing barriers to SME financing as identified through an agreed targeted interventionist approach. The partnership will factor in the results of the survey on hurdles that inhibit SME financing encompassing both demand and supply-side viewpoints. Basa and Khula have also agreed that they have similar and complementary initiatives that are aimed at addressing the same key SME issues. They therefore entered into this partnership to complement and strengthen SME development and support initiatives. And minimise duplication of efforts. “The banking industry recognises the importance of the SME sector in being a driver for job creation and an engine for inclusive and sustainable economic growth hence the commitment to this… agreement with Khula,” said Cas Coovadia, MD of Basa. Malose Kekana, acting MD of Khula Enterprise Finance, said: “We believe that through these initiatives we will be in a stronger position to deliver on our mandate of creating a vibrant and sustainable SME sector – and, in turn, the growth of South Africa’s economy.” Volume 1 • 2011

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NEW GROWTH PATH

Will NGP change lives? The New Growth Path (NGP), which states that South Africa requires hard choices and shared determination to achieve a “step change” in growth and transformation of economic conditions,” will become a year-old in September this year, making it appropriate for South Africa to take a moment of pause and delve into swot analysis. Written by Sibonelo Radebe

T

he NGP was introduced in September last year as a new effort to jumpstart South Africa’s economic growth to annual rate of more than 7 percent. This is the level required for South Africa to make a serious dent on its socio-economic pathologies and mainly poverty and unemployment. As noted by finance minister Pravin Gordhan, the country desperately needs “to ignite the flame of higher inclusive growth, and sustain it.” He said: “We cannot view the fact that 42 percent of young people between the ages of 18 and 29 are unemployed as merely a statistic”. Before the financial meltdown of 2008/09 set in, South Africa did register a long phase of undisturbed economic growth but this was far from enough to address its high unemployment rate. Between 1993 and 2008 the country clocked average economic growth of about 3.2 percent. This came to be characterised as jobless growth which gave rise to a need for a game changing strategy. The financial meltdown pushed the South African economy into a recession and caused the country to bleed more than 1 million jobs. Corrective action became even more urgent.

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NEW GROWTH PATH

Government response would come through the NGP. The responsibility of developing the NGP rested with the new economic development ministry as headed by Ebrahim Patel who came straight out of the country’s leftist trade union movement. Patel’s political origins are important to capture the political and ideological dynamics of the NGP. Much as it came out of practical challenges facing the country’s economy, the NGP resulted from politico-ideological struggles within the ANC. The rise of President Jacob Zuma as partly propelled by the left within the ANC tripartite alliance came with a lot more emphasis on the role of the state in the economy. This stood against criticism that the structural adjustment strategy pursued by former President Thabo Mbeki was “neo liberal” in nature and relegated into insignificance the role of the state in economic development. This is debatable. Nevertheless the NGP places the state at the centre of its ambitions to mainly reindustrialise the South African economy. The NGP emphasises the harnessing of labour intensive manufacturing sectors. The language of this strategy is styled to address value added export industries as opposed to the current bias of exporting raw materials and commodities.

Images: iStockphoto

The NGP identifies six sectors to be supported to achieve faster employment creation and global competitiveness. They include, infrastructure, agricultural and mining value chain, green economy, manufacturing and tourism and other highlevel services. The new growth path came with a target of creating five million jobs in the next 10 years which should reduce unemployment from 25 percent to 15 percent. “Critically, this employment target can only be achieved if the social partners and government work together to address key structural challenges in the economy,” said the minister in the presidency Collins Chabane. While 12 months may be a short period of time within the world of assessing economic

engineering, the socioeconomic pressures which gave rise to the NGP are bulking up leaving no space for time luxuries. As constantly captured by the Congress of South African Trade Unions (Cosatu) general secretary Zwelinzima Vavi the country’s social pathologies make for a “ticking time bomb”. Thus an analysis of strengths, weaknesses, opportunities and threats of the NGP were needed yesterday. Pressure for the country to deliver the dividend of freedom is piling up by the day as partly reflected in the nationalisation discourse which is gripping the South African public. The nationalisation discourse as pumped up by the ANC Youth League (ANCYL) represents disappointed economic expectations of the post 1994 era. This was recently captured by the minister of mineral resources Susan Shabangu who said there were good reasons why the country is increasingly facing the spectre of youth impatience calling for “economic freedom in their lifetime”. The youth need to be given hope.

“While 12 months may be a short period of time within the world of assessing economic engineering, the socioeconomic pressures which gave rise to the NGP are bulking up living no space for time luxuries.” Even bankers acknowledge this point. In his contribution to the public debate Standard Bank CE Sim Tshabalala notes that “It should be accepted that these proposals (nationalisation) are not merely the product of shrewd political manoeuvring”. Adds Tshabalala; “They are the effects of the pain and anger caused by persistent grinding poverty for millions, deep-rooted mass unemployment, and a level of

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NEW GROWTH PATH

inequality that is both morally unacceptable and constitutes a real threat to social cohesion”. Therefore the ANCYL is right to be campaigning for ‘economic freedom in our lifetime. “The real question is whether their ideas are a sagacious way to achieve this freedom”. In a way the ANCYL may have done favours for the NGP by infusing into the public arena a sense of urgency for different stakeholders to come to the table and work towards a shared economic vision. The NGP needs a buy in from key stakeholders to take off earnestly. Key stakeholders including organised labour and industry bodies are more likely now to move towards a consensus to elbow out what could be considered extremist views. Industry is certainly more amenable to a move towards a consensus given talk of an economic Codesa coming from the business ranks. The founding document of the NGP states that to achieve a “step change” in growth and transformation of economic conditions the country requires hard choices and a “shared determination”. Institutional buy in has eluded the NGP if the initial reactions of organised labour and industry bodies are anything to go by. In its first comprehensive assessment of the NGP, the Congress of South African Trade Unions (Cosatu) said the NGP falls “far short" of being a comprehensive development strategy capable of transforming the economy”.

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Cosatu maintained that the NGP will have to be “overhauled if it is to succeed in uniting the alliance behind the type of programme envisaged by all alliance formations. Its weaknesses demonstrate that it was not a product of collective wisdom of alliance processes.”

Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF) to support its course. For instance the IDC has been made to commit to R100bn industrial development over the next five years and that is in line with the NGP.

Super private sector lobby group Business Unity South Africa (BUSA) has also suggested that the NGP is insufficient to place South Africa onto a high economic growth trajectory. This can be taken from the wording of BUSA’s formal presentation on the NGP.

This requires of the IDC to double its annual disbursements over the next five years. Presenting the IDC’s 2010/11 financial results IDC’s CEO Geoffery Qhena said the institution was ready for this task. The NEF has also positively indicated its readiness. Reacting to the IDC’s results Patel said “The IDC has a strong, healthy balance-sheet, which will now be used more actively to drive the NGP and job creation. In the year ahead, it will expand its investment and funding in the green economy, agro-processing, mineral beneficiation and manufacturing”.

BUSA has said the NGP needed to prioritise “getting the Delivery State in place before embarking too far on the Developmental State”. It added that the NGP needed to “use a targeted value-add approach to industrial development and other more job rich sectors rather than generating wish lists”. And the NGP must admit that most jobs will be created in the private sector. As a result the NGP has been unable to secure a buy in on one of its critical proposed intervention on the labour market. In this proposal government is asking those who have been lucky enough to be inside the labour market, and mainly high income earners, to make a sacrifice in committing to reasonably subdued wage increases. It is hoped that this will create space to absorb more of the jobless multitudes. This proposal has been met with disapproval from both labour and industry. While the endorsement of the NGP by key stakeholders is yet to come there is critical movement on certain fronts. Patel recently secure a new skills development accord under the auspices of the NGP. Addressing education and skills development is one of the core aspects of the New Growth Path," said Patel. The accord endorsed by labour, industry and communities and relevant government departments like education. The accord comes with steep targets including the production of 30 000 new artisans.

The introduction of the NGP has also resulted in calls for review of the broad based black economic empowerment (BBBEE) policy which is currently underway and under the direction of the Department of Trade and Industry (DTI). BBBEE policies are being reengineered to align with industrial development. This comes at the back of concerns that BBBEE implementation has been dominated by paper based transaction which are said to do little to improve productivity but only benefit a few individuals. The founding NGP document describes the prevailing BEE framework as “a cost on the economy without supporting employment creation or growth”. When stakeholders undertake the first anniversary review of the NGP, they will have clear targets to work with. These include assessing whether the country is in line to deliver five million jobs in ten years.

It also follows the streamlining of Sector Education Training Agencies mastered by the minister of education Blade Nzimande.

If the base period of this target started in September last year, then the NGP should have already created at least 500000 jobs in the first twelve months. There will be objections to this base period with arguments that the NGP has not been fully ushered in. Such an objection will open space for debilitating inertia in an environment which required urgency as in yesterday.

In addition, the NGP has streamlined the country’s development finance institutions (DFIs) like the

Sibonelo Radebe is a Johannesburg-based financial journalist.


ENTREPRENEURS

YOUNG, COMING & businessmen UP

South Africa’s soaring unemployment rate has propelled many ambitious South Africans into the world of entrepreneurship. Seeking employment from big conglomerates is slowly becoming a thing of the past. More and more young people are launching their own businesses. Consequently, they’re creating jobs and contributing to the growth of the economy. TransformSA speaks to some of the country’s young, black and successful entrepreneurs. Compiled by Tiisetso Tlelima

Lloyd Msomi Founder and Owner of Urban Nation Advertising In the heat of the world’s worst economic recession, May 2009, Lloyd Msomi took a very brave step and resigned from his full-time job to launch a brand activations agency, Urban Nation Advertising. He connects brands with consumers by setting up engaging activations in consumer ‘hot spots’ such as taxi ranks, shopping centres, stores and campuses across the country. Why did you decide to become an entrepreneur? “I can’t even remember how old I was when I fell in love with the concept of using something small and simple to make money. My mother is definitely my inspiration. She brought us up by designing and sewing garments which she sold to her network. I developed an interest in marketing and advertising at university and I landed a job at a marketing agency after completing my studies. However, not long after, I gave in to my childhood desire of being in charge of my destiny.” How long did it take you before you started seeing substantial profit? “Every project we’ve done over the past two years has made a profit but in a small business, even large profit is rarely sustainable, as you’ve got to keep closing deals in order to sustain the business. I’ve taken most of the profit and channelled it back into the company to grow

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its assets. It’s common knowledge that most aspiring entrepreneurs aren’t able to live beyond 12 months, so I count myself as truly blessed to have made it past the two-year-mark.” Who is your biggest client? “Right now, I don’t have any clients I consider “big”. Currently we find ourselves serving other more established marketing agencies through referrals. However, the biggest deal I’ve closed thus far has been Smirnoff (Spin and Storm). We provided market insights, brand ambassador management, music consultancy and event management services. We’ve also been very fortunate enough through our solutions to have serviced the likes of KFC, Nedbank and Vodacom.” Was networking with other people in the industry helpful to your success? “Networking in my industry has helped immensely. My personality has made this very easy, as I’m quite a talkative person. I’ve also found that it’s best to not only network with people in your own industry but to network with people in general. I managed to get some business after receiving a call from an acquaintance in the engineering industry.” What is your business philosophy? “Always keep your word and never promise something you can’t deliver. Positioning of my personal brand is also very important especially in a small business operation because people buy into the person before they buy into the business, so a good reputation is important.”


ENTREPRENEURS

Faizel Cook Managing Director of Cut2Black Media Cut2Black media is a multicommunications agency that offers a variety of services including strategy development, creative design, content development, and film and TV production. Under the leadership of Faizel Cook and Lesley Hudson, Cut2Black has worked with clients as diverse as the United Nations, Standard Bank, Accenture, City of Jo’burg and the Department of Arts and Culture. How did you finance your business? “I saved enough to allow me to work without a salary for the first three months. By the time I left eTV, we already had enough work to keep us busy for the first few months. We had a cash injection of R80,000 from our

other partners. We hustled a lot. Most banks will only give you money if you have some form of surety. Our goal was to have enough cash to keep the business running for three months, which we reached in year two. By year three we were able to buy out our other partners and we haven’t looked back since.” What has been your biggest challenge so far? “Any entrepreneur will tell you that one of the biggest challenges is moving from working in your business to working on your business. Both Les and I are still quite operational but we intend to scale down the amount of work we do so we can focus on growing the business.” What was your best idea that never worked? “Investing in a security company based in Cape Town. On the

Lisa Sebogodi Owner of Batsumi Travel Batsumi Travel is a 100 percent black women owned Travel Management Company. Owned and run by Lisa Sebogodi and Daphne Rapodile, the agency offers a boutique of products and services to the discerning traveller. It’s much like a private banker catering to the needs of a highnet-worth client.

face of it, it was a good business with enormous potential. Once we drilled down into the detail we discovered the business was in trouble with SARS, and was basically being bled dry by its employees. There was a protracted strike and the owner is currently trying to save it. Fortunately, this all happened during the due diligence process and the deal was never consummated.”

parted ways with others. We have a code of conduct and a tight process that governs how we deal with people who cross the line. Principles and process are important to any business.”

How do you feel when your employees don’t agree with your decisions? “We have people who have been with us since the beginning, and we treat them very well. With our support, our receptionist moved into HR and is currently running our events management business. Creating opportunities for our black South Africans was always a part of our strategy. Unfortunately, it can’t be the same for everyone, so we’ve

How do you find employees that truly care about the organisation the way you do? ”It is very difficult to tell before you employ a person whether they will care about your business the way you do or not. During the interview, they seem to have answers to your questions. We, however, look for the following traits: hard working and honest individuals.” What sacrifices did you make for your business? “I had to cut my salary by more than half of what I used to earn in formal employment and sometimes I didn’t even get a salary. I had to sacrifice big company benefits in exchange for company growth.” What’s your strategy for getting and keeping profitable customers? “Realizing that customers have different needs and expectations and to be able to treat them as such. Never have a ‘one size fits all’ approach. This can only be done if you listen more and talk less. Visits to customer premises will also give you an idea of the company culture which has to be taken into consideration every time you try and fill the need.” How does your business give back to the

community or society at large? “We are a small business and do not as yet have CSI Projects. However, we believe in giving young people who have recently qualified or those who need internship an opportunity to join us for a few months. We evaluate them honestly and motivate them to do their best. We also concentrate on ‘business etiquette’ to prepare them. Once they have some kind of experience they can go out into the market with confidence. This year we participated in ‘take a girl child to work’ project with great success. We are working on a formal plan for 2012.” What sets your business apart from other businesses in your industry? “We are an owner managed company and our response time is much quicker as we are both aware first-hand of any problems going on in the company. Operational weaknesses are identified much quicker and solutions are monitored closer to see if they work. We are very proactive and believe a lot of people who would like to travel cannot do so due to the economic down turn. We therefore, offer affordable travel specials. We are like a private banker and will take care of all our valued clients, from developing a travel policy to implementation and monitoring stage.”

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Why did you choose to be in this business and or industry? “I would say my experience in the ICT industry pushed me to want to start this business and secondly, constantly interacting with business owners and offering them solutions that add value to their businesses, is something that further motivated me to start this business. The entrepreneurial push that I have had from a young age was also instrumental in the formation of the Innovate Group.”

Group CEO for the Innovative Group (SA)

If the economy crashed hard and there was no more room for you in the business sector,

How do you motivate your staff and enable them to see your vision? “The most important aspect of any business is your staff because they can either make or break the company’s image and performance in general. It is imperative to keep a positive attitude floating around the employees. I

Innocent Mapfumo possesses vast experience in the information and communications technology sector, having served as a Business Development Executive for the Telecoms Department in the Itec Group as well as the Outsource Group. Innovate Group specializes in telecommunication, office automation, branding, advertising and web development – just to name a few.

what would you do with yourself? “No matter how hard an economy crashes, there is always a business opportunity waiting to be discovered. However, I wouldn’t really be affected because the solutions we offer will always have a demand. What’s important is to then come up with flexible payment options for companies to be able to have access to the products and services.”

always get their opinion on certain issues in the company or consult with some of them before making major changes in the organisation. This makes the employee feel valued and important in the company. I also structure different incentives for my staff. This bolsters their moral and self-drive and they look forward to taking up new challenges and making a difference every day.”

and taxi ranks, no one offered sales support and training to these customers. He then, decided to start his own company to fill this gap. However, from the get-go he knew he would have to offer more services to sustain the business. Today his services include component level repairs on complex GSM equipment down to basic power supplies for other telecoms products which were being sent overseas for repairs.

one of the local universities whereby we take graduates who have just qualified in electrical engineering and give them practical training for about 6 months. I want to focus on this as well and see how we can expand it and accommodate as many students as we can.”

Innocent Mapfumo

Delisani Sibanda Owner of Lwazi Telecommunications

What sort of training did you do before going into business? “I would say I am lucky because I am an engineer by profession and what I do is very much in line with what I was trained to do. So, on the technical side I didn’t really need much training. I, however, had to do courses on finance, HR and business management.”

The idea to start Lwazi Telecommunications came back in 2003 when Delisani Sibanda was working for CZ Electronics. He realized that although their GSM public phones were being sold to under-serviced areas like squatter camps

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What motivates you on a day-to-day basis? “Meeting new people on a daily basis and the vision of growing the Innovate Brand into a well reputable multinational company are two things that really motivate me on a day-to-day basis, not forgetting the fantastic team of people that work with me.”

www.transformsa.co.za

What is your future plan for your business? “Our mission is to provide specialized technical support and quality component level repair services that will add value to OEM’s (Original Equipment Manufacturers) and operators worldwide. With this in mind, I aim to grow the company and explore opportunities into Africa. We also have a program that we are running with

What has been the biggest lesson you’ve learnt so far? “In my few years in business, I have learnt quite a lot of lessons, but I would say the most valuable one is to appreciate your employees. As the business grows, you tend to depend more and more on your workforce. If they are not properly trained and motivated, that could be detrimental to your business. In other words, they can make or break your business.” If someone asked you for advice on how to make money, what would you tell them? “Unfortunately there is no formula for making money. If there was, we will all be billionaires. My advice will be, discover your passion. Be the best in what you do. Whether you are a business person, a worker, a sportsperson or whatever, if you strive to be the best and stay ahead of your competitors, money will follow, naturally.”


ENTREPRENEURS

Nobulali Dangazele Founder of Nobulali Productions Nobulali Dangazele is a sought-after facilitator, MC and actress. She is the founder of Nobulali Productions; a company established out of a need to make Shakespeare and books prescribed by the Department of Education and Independent Examinations Board more accessible to learners. Her company specializes in breaking complex concepts into understandable phenomena. Her clientele includes learners in private and public school as well as corporate companies. Through the use of interactive workshops as well as drama and film she communicates the client’s message to the desired audience. Do you think there’s a future for this line of business in South Africa? “Definitely! As long as there are people being born everyday there are new things to learn, develop and grow. The training and workshop space is dynamic and ever-changing. There is a constant need for one to be aware of new trends and to keep abreast with the dynamic speed at which people and the world we live in changes.”

John Mokoena Engineer and partner at Shilangane Engineering John Mokoena teamed up with a former colleague, Mdu Masango, in 2010 to revive a dormant

What do you enjoy the most about what you do? “I enjoy making a difference in the lives of those I offer workshops to, those that I work with and the inner growth I experience through the work I do. No two days are the same and every workshop comes with an opportunity to grow. I especially enjoy meeting people from all walks of life. I have had pleasure of meeting Michelle Obama, community members of Qunu and Nelson Mandela.”

system is also forever changing and what works today may not tomorrow thus we as a business constantly invest in research as this allows us to keep up with trends. It also allows us to be active as opposed to being reactive.”

What advice would you give to other upcoming entrepreneurs? “To thine own self be true” and strive for excellence in all you do. Through it all keep to what you believe as it’s always darkest before sunrise.” How do changes in society affect your business? “Training is usually the first to be cut in times of economic crisis. Human capital is not seen as the greatest asset by some organisations and this leads to less companies spending on the development of their staff. The education construction company (Shingalane Engineering) into a viable business that offers engineering, design, procurement and construction. By constructing a 220 kV transmission line from Aggeneis to Paulputs in the Northern Cape they have supplied electricity to the rural area and boosted economic development in the area. What makes a good entrepreneur? “A good entrepreneur is someone who sees opportunity in every problem. He is driven to succeed where others failed, has a good gut feeling that helps him make complex decisions when all the Harvard training is no longer applicable. He has the ability to read the kind of people he can trust to go into business with and has a good handling of numbers.” What qualities do you look for when choosing a partner? “I look for someone with integrity. Someone who can run at a breakneck pace but also takes that deserved time to go on holiday with family. My current partner is the opposite of me. He is cautious, conservative and meticulous. He ensures that we have dotted all the i’s and crossed all the t’s.”

What are the benefits of having a partner? “Your partner is there to spread your risk and he also serves as a back-up in areas you otherwise might have failed. He helps in diversifying the products that your business can offer. It is always better to find a partner who complements you than one with the same skills as yours. My partner has a management sciences background and I come from a hard-core engineering environment. Together we form a team that is strong commercially as well as in engineering.” In this cutthroat business world, how do you protect your idea? “We fortunately come from an environment where ideas have been around for many years and take long to evolve. Our advantage lies not so much in hatching new ideas but in packaging existing ideas into solutions that the client can benefit from. I come from a background where we did thorough engineering and not applications. We wrote papers and books, and lectured on the subject matter related to highvoltage engineering and this gives us an edge over most of our competitors.” Volume 1 • 2011

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Counsellours, which offers debt counselling services.

Kelebogile Mooketsi Managing Member at Good Life Debt Counsellours After seven years of working at the Weather Services, Kelebogile Mooketsi realized what she really wanted to do was to help over-indebted people realize their problem. She then started a debt management company, Good Life Debt

Godfrey Chipangura IT Consultant and partner at Afritech Systems

What are the basic survival skills you need to run a business? “The moment one is able to align their “life purpose” and their “careers”, the synergy between the two will pave a way to realize our dreams and give us tools to adapt to business challenges. Skills needed to run a business include personal development and industry knowledge, marketing and branding. You must also be a risk-taker and have an eye for opportunities. It also helps to network. As a woman I find that you have to have a thick skin to work your way against all odds.” What is the most challenging task you’ve ever done? “Changing the mindset of over-indebted people to take action and manage their debt problem in a timely manner. Same goes to encouraging employers to get involved in empowering their

of IT business solutions. However, the company has grown to become a specialist in the supply of Dell equipment to small and medium business, corporate and enterprise businesses. What has been your most effective marketing technique? “Our most effective marketing technique has been the networking that we are involved in which allows us to showcase our skills and our product portfolio. Our well designed and operational website ranks well on google. Focusing on our key products has also been a huge marketing and sales success for us.” How far are you willing to go to succeed? “I define success as being able to meet my own personal and business goals. So the answer to that question is that I am willing to put more than the required effort to meet and exceed the goals that I determine for myself and the business.”

Afritech Systems was started in 2008 by Pearl Mabuza and Godfrey Chipangura to fill the huge gap in the supply and consultancy services in specialised IT equipment. Initially, the focus was on re-selling IT equipment and implementation

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How do you handle tough business decisions? “Tough business decisions need to be handled through a process with checks and balances. I always like to look at the possible solutions immediately when the issue requiring the decision is fresh in my head and jot down notes. Ideally, I like to sleep over the problem

employees about debt management. The current statistic records at the Credit Bureau are shocking. From the 18.51 million credit records, 8.61 million are bad or impaired records. That’s 46.5 percent. A lot of it has to do with people not going for debt counselling when things start going rough.” What are you doing to adapt to the constant changes in the economy? “I’m engaging with relevant stakeholders in the debt counselling and financial industry (attorneys, financial advisors, economists, etc) and most importantly investing in community education awareness programmes on Debt Counselling. I’ve also had to adapt to the evolution of online marketing.” What is the worst mistake you’ve made in business? “Thinking that it will be easy for an over-indebted person to accept their financial difficulties and do something about it!”

as this allows me to rationalise my thoughts and come up with possible new avenues. Ultimately, after a discussion with my trusted colleagues, I am able to arrive at a final decision and solution.” How do you manage expenses and liabilities? “Managing expenses and liabilities is the cornerstone to the success and survival of every business. The key to managing expenses and liabilities is to keep them as minimal as possible. As this is not always possible, I manage expenses and liabilities by always being acutely aware of what they are at all times. We have a system that captures this information easily and makes it readily available to key members of staff at any given time.” If you had the chance to start your career over again, what would you do differently? “I am lucky in that I knew exactly what career path I wanted to follow from a very early age. I have had an extremely exciting IT career and I wouldn’t change much. When the internet revolution started I had great ideas about what I could do with this new spectacular technology, but I took long to act on those ideas. Given another chance I would go with my gut instinct and implement those ideas.”


SMME

Wine

unshackles black sisters

K

leynhans’ company, African Roots Wines, also produces the first South African wines to be served on big American carriers. Soon after she was evicted from the factory house she occupied with family, Vivian, with no money and nowhere to go, told TransformSA, a life full of pain and hardship began. The siblings were forced to split up and live with different relatives to survive.

factory in the small Western Cape fishing village of Paternoster, Vivian Kleynhans’ entire family was evicted from the factory house where she lived with her family, including six sisters and a brother. But little did she know at the time that more than 20 years later, she would be heading a black-owned company with a turnover of more than R2 million a year and exporting wines to 46 American states. Written by Tiisetso Tlelima

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However, 20 years later, the sisters reunited to start the Cape-based African Roots Wines in 2005. This was followed two years later by a brand called Seven Sisters, which consisted of carefully selected wines that suited the style and personality of each sister. When she started, Kleynhans had no knowledge of wine-making and she was particularly wary of venturing into an industry that was responsible for so many social ills in her community. Like many communities in South Africa, coloured communities in the Western Cape have been afflicted by alcohol abuse, which has led to crimes like murder, rape and drug pushing. “Mine was not a love of wine [because] where I grew up we were faced with misbehaviour due to this substance on a daily basis,” she says in an exclusive interview.

Images: Seven Sisters

When her father lost his job at a fish-processing


SMME “[But], since I entered the wine industry I became unshackled. I learnt about wine and the context in which it should be enjoyed.”

own land, grapes or have wineries but rely on established farmers who can easily pull the rug from under us,” she explains.

Acquiring the knowledge and the necessary skills to compete in the industry was of utmost importance to her. She enrolled at a wine college, attended numerous wine workshops and completed a wine management course at the University of Stellenbosch’s business school.

“Globally we have a much better chance to survive and grow as we are not judged but seen as global players.” Internationally people were more open to supporting virtual wine brands as business partners.

“Mine was not a love of wine [because] where I grew up we were faced with misbehaviour due to this substance on a daily basis.” “You need to have sound business skills and some wine product knowledge. Together with this, you need to have long breath to start a business in the wine industry,” she adds. Despite a couple of glitches encountered in getting the business off the ground, in just six years, African Roots Wines has grown tremendously. In addition to boasting an impressive annual turnover, their wines list can be found at South Africa’s food retailing giants like Pick ‘n Pay, Spar and Tops. Being new players competing at global level was crucial, as breaking into the saturated South African market proved to be difficult. Locally, cheap wine products make it harder for newcomers to compete. Established farmers sell products at ludicrous rates and shelve space in supermarkets is limited to well known brands. “We were seen as potential failures who don’t

For companies that were able to develop their brand and interact with real clients, chances were that they built permanent relationships.

Locally, as a black woman who does not own a vineyard, Kleynhans and her siblings were not taken seriously. “It was obvious when we started in this industry that we had to partner with an established winery or farm,” she explains. “The first two years were disastrous. We had no knowledge of this industry and we were seen as easy targets for dumping. I lost everything I put in after the second year.” Meanwhile, transformation in this 350-year-old industry is occurring at an incredibly slow pace, with only 2.6% of vineyards owned by black people. The vast majority of businesses in the wine industry are family-run with a turnover of less than R5 million a year and are exempt from BEE requirements. It is almost impossible for upcoming black winemakers to secure business loans with banks or funding from government because of the lack of collateral.

Seven Sisters struggled for years to attain funding from the South African Wine Industry Trust (SAWIT) which was established specifically to develop black wineries and transform the wine industry. Eventually, the sisters received a once-off start-up funding at the end of 2006 from the wine trust. Since then, however, the organisation (wine trust) closed its doors to black wineries, according to her. “The feeling among black wineries was that there were too many chiefs to cash in than recipients benefiting.” Even though there has been some support and structures put in place by the current government to make access easier for black wineries, it has been criticised for its lack of understanding of the industry. “Firstly, the policies that were intended to spearhead transformation lack serious revision as it seems like it is more voluntary than statutory and this gives little support to our development and growth,” she said. “If our government doesn’t insist [on transformation] then I’m afraid the few black companies which make up less than 1% of the R21 billion export industry and R6 million local wine sales will remain the same.” Hot-on-the-heels of the launch of Seven Sisters, the world underwent an economic downturn which meant African Roots Wines had to find innovative ways to sustain their extremely fragile business in this environment. With little or no money to advertise or to get their wines tasted at awards, they had to find alternative routes to make an impact. The most cost-effective way was to interact with people face-to-face and conducting food and wine pairings in a relaxed environment. “People are not only interested in purchasing a bottle of wine – there are too many wines on the shelves to pick from,” she says. “There are socially conscious people out there who want to know that their hard earned money will not only give them a good feeling after using the product but that it’s going to a good cause at the same time.” Volume 1 • 2011

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GLOBAL PERSPECTIVE

LEARNING FROM

emerging MARKETS Old Mutual has operations in many countries outside of South Africa, including Colombia, Mexico, China, India and a host of other African countries. In this wide-ranging interview with Kuseni Dlamini, the CEO of Old Mutual South Africa (OMSA) and emerging markets, TransformSA, a quarterly for a changing nation, peaks his brain on Old Mutual’s experiences on transformation issues in these countries. Written by Mzwandile Jacks

T

ransformSA found that the emerging world is indeed changing and this is not too different from South Africa’s transformation policies. TRANSFORMSA: The London and JSElisted Old Mutual has operations in Asia, South America and Africa. How different are these countries to South Africa in their approach to transformation? KUSENI DLAMINI: Transformation has a different meaning in these countries than it does in South Africa, where it involves bringing previously disadvantaged people into the formal economy. In China for instance, the government

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aims to create a stable, employed urban population. This is a massive challenge when one considers that over the last decade close to 300 million Chinese have become urbanised. Many have moved from the lower-income group to middleincome group. The government is quite good at managing the flow of people and realises the importance of managing infrastructural challenges like slums and delivery of services such as power-grids. China has about 5 percent unemployment and has an increasing number of superrich people. India has been a democracy since independence from Britain in 1947. But it does have a huge disparity between the


GLOBAL PERSPECTIVE

“The more people that are able to become fully active and participative in the formal economy, the better it is for business. The more wealth is generated and widely spread, the greater the associated activity in a given economy (across sectors),” Kuseni Dlamini

rich and poor and like China, the government is very hands-on and regulations aim to redress this disparity. But it has the caste system (social stratification) which adds another dimension to the transformation challenge in that country.

being implemented in Zimbabwe.

In the Latin American countries in which we operate, transformation again has a slightly different meaning. Colombia is an interesting example in that it is similar in certain ways to South Africa. But its transformation process is mainly to get people into the formal fiscal system.

KUSENI DLAMINI: Our view in these countries is the same as it is in South Africa. What is good for a country we start business in is good for Old Mutual. The more social development that takes place in a country, the more fertile the environment to conduct business. So we support all efforts to drive sustainable social and economic transformation.

Mexico is a far more populous country, with Mexico City being the world’s most populous city at around 25 million people. Mexico’s effort is mainly to get people into the formal economy, but there are some challenges of capacity within the government. In African countries such as Kenya, Malawi, Namibia, Swaziland and Zimbabwe though not always referred to as transformation, the concept of economic empowerment is one that is relevant and critical in these countries. TRANSFORMSA: Do these countries have transformation policies/agendas in place? KUSENI DLAMINI: The insurance regulator in India rules that for every 100 policies we sell, 20 must be sold to those in low-income groups. The regulator has a very robust attitude towards that.

Images: Victor Dlamini

Namibia has several industry transformation charters in place, similar to those in SA which are voluntary but aligned to the country’s transformation agenda. In African countries, there are localisation requirements, which mean that prescribed levels of local ownership need to be complied with in each of these countries. An example of this is the 30 percent local ownership recently introduced in Swaziland and the indigenisation regulations currently

TRANSFORMSA: Is the private sector in the countries in which Old Mutual operates happy with the introduction of new transformation policies?

TRANSFORMSA: What are companies like Old Mutual expected to do when they bid for business in these countries? KUSENI DLAMINI: Complying with local legislation is a non-negotiable in the way we do business, so we meet the requirements in the most viable, responsible and sensible way that we can. TRANSFORMSA: How is transformation linked to economic activity in those countries? KUSENI DLAMINI: The more people that are able to become fully active and participative in the formal economy, the better it is for business. The more wealth is generated and widely spread, the greater the associated activity in a given economy (across sectors). TRANSFORMSA: Is their transformation having a timeline? If so what is it? KUSENI DLAMINI: The idea of a “sunset clause” is incorporated in some of the Namibian charters. Can’t say for certain whether this is/will be legislated? The reason is that once genuine transformation has occurred and economic empowerment achieved, the redressing objectives no longer have to be maintained as the critical focus.

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WHERESECTION ARE THEY NOW? TITLE

KEEPING the silence DON NCUBE

Don Ncube was the founder and former chairman and CEO of Real Africa Holdings, an investment holding company which unbundled and distributed assets worth R3 billion to shareholders in 2003. The company had interests in gaming and leisure sectors. This company was among the forerunners of black economic empowerment (BEE) companies. This was soon after the government decided that black people had to get a better slice of the economic benefits. You might think he would be playing a major role in present-day BEE, a powerful lobby aimed at addressing economic imbalances in South Africa.

But little has been heard from him and his whereabouts have not been known for the past five years. He is currently quietly pursuing business initiatives in the energy, mining and infrastructure development sectors. Ncube was one of the most interesting black business characters of the first few years of BEE. He was the former employee of Anglo American, South Africa’s most powerful mining conglomerate and the first black person to sit on the company’s board. He has a performance track record as chairman of successful corporations such as Sun International, Oceana Fishing Group, Anglogold Ashanti, SAA and the Atomic Energy Corporation. – Mzwandile Jacks

Pre-eminent BEE leader recoils Gaby Magomola Named after his father, the business is run from a small office in Sandton and his son Thabo, is the CEO. Magomola was a BEE leader long before the concept became fashionable. But these days not many people, including crack journalists, know his whereabouts. The once glitzy Magomola has recoiled quietly into a "traditional family business".

Black Economic Empowerment (BEE) hasn’t changed much in the years since Gaby Magomola was sealing deals with companies like the arms maker EADS. But Magomola’s life certainly has. Since entering semi-retirement a few years ago, the founder of Kgorong Investment Holdings, is

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He once led African Bank, one of the earliest black-owned banks. He formed Futurebank and Afrisure, the black financial services giants of the 70s and 80s. In 1998 he co-founded the once powerful Kgorong Investment Holdings, bringing him

closer to the infamous Dave King of Specialised Outsourcing. He grew up in Bekkersdal, a sprawling township west of Johannesburg. He became a political activist and was eventually imprisoned on Robben Island between 1963 and 1969. After his release from the infamous prison, Magomola left for the US and later completed a B Com and MBA degrees at Ball State University. A job with Citibank, one of the world’s biggest banks, brought him back to SA in 1983 as one of the investment bank's senior managers. "I have drawn myself away from the large corporate sector into a traditional family business," Magomola told a weekly financial magazine last year. "I want to inculcate into my children the traditional values of doing business.” – Mzwandile Jacks

Images: © Gallo Images / Getty Images

now chairman of Thamaga Investment Holdings.


e ecutive

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TransformSA - Quarterly Journal  

'Transform SA' is a quarterly journal that disseminates information relating to transformation within the private and the public sector.

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