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sa

The Quarterly Journal for a Transforming Nation

LEADING SA’s TRANSFORMATION FOR 100 YEARS INSIDE: SIYA GAMA: A figure of unperturbed equanimity ENERGY SECTOR: Minister irate at lack of women CEOs CSI: South Africans give less TECHNOLOGY: Reviving reading culture VOLUME 2 2012 ZAR 45.00


contents

INSIDE

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18 Publisher's Note

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Foreword

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Editor's Letter

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Contributors

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Publisher's Details

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ANC celebrates while the economy slows down

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BEE Targets of the Highest Form

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Finding Solutions in Property Sector

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Retailers Ignore BB-BEE at own peril

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South Africans Give Less, says Global Survey

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Where is JSE's Real BEE Anyway

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BEE Commission to crack whip

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Wealth Distribution: An Investment or Hostile Takeover?

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Fast Facts

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Oil Sector lacks Women CEOs

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74 “In my opinion I think it is critical to have people of colour investing on the JSE as it is important to have a wide spread of shareholders in listed companies. In other words you will be 26 increasing trade ability. And in that way we start creating a strong middle class. But more importantly this gives the employees the opportunity to become shareholders,� said Theo Botha, the shareholder activist.


contents

INSIDE

58 Creating Jobs in Vhembe

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Finding Ways to Create Jobs

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BEE Stirs Heated Debate

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Shaping the Future of Business – XIG

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To BBM or not to BBM

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Consumer Act: Business Wakes Up

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A Jetsetter who loves SA

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“The fact that there was no increase in the past year shows that the Top 100 JSE

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High Capacity Connectivity Services

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Cloud Computing: A New Buzzword

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Sparks to Fly at Congress

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Don't ignore other BEE aspects for sake ownership, warns Empowerdex

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From Rags to Riches

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Succeeding Against All Odds

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Young Entrepreneurs Take the Plunge

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companies have not done any new BEE deals.

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Many of the deals are in fact unwinding, like the Investec and Bidvest BEE deals which means one can expect a real decrease (in ownership) next year,” Ajay Lalu, MD of Black Lite Consulting, said.


PREFACE

publisher's note Since the release of the first edition of Transform SA I have met and interacted with many transformation activists and opinion makers. As proponents for social change we exchanged ideas about Transform SA and all that we stand for. We agree that advocacy platforms of this nature continue to be of great need in the fight against socio-economic disparities. Transform SA needs to encourage more interaction, robust debate and a solutions-driven approach to challenges facing South Africa. Paramount to the fight against social ills is the depth at which we are able to connect with those communities who continue to wallow in abject poverty. While relief methods are strategic, there is a need for a more systematic approach. This must differ vastly from endless verbal pledges and unfulfilled expressions of interest we have come to know. These have proved to be non-significant as they would most likely tackle merely the immediate actualities of these challenges while underlying causes continue to resurface with the intended beneficiaries left with high expectations. We really need to do so much more. A hundred years of transformation! Transform SA congratulates and recognises the centenary of the African National Congress, not only as a milestone for this key player in the struggle against inequality but also a point at which the movement must reflect on its journey and settle on what has resulted in the success of its existence. This must happen with a particular focus on core values and the basis on which

the ANC was formed. These could be used as a guide for advancement and the way forward in navigating through the necessary transition of migrating from being a vigilant liberation movement to a governing political party of great stature. For black business it is appropriate to salute the ANC for successfully mitigating some of the major impediments that were created by the apartheid regime. This also goes for the enabling environment it continues to present through its government policies which favour preferential procurement, women empowerment, youth advancement, SMME development and affirmative action. While I’m at ease with the level at which most senior management and political leaders comprehend and embrace transformation I am not charmed with the gaps that exist in middle management. A number of middle managers have proved to be nonresponsive to the call for transformation. Yet they are meant to play a role that is more significant than just compliance. Perhaps this is an issue of poor political education or simply an abdication of patriotic duty. But the signs are everywhere that change must happen now! Transform SA would like to pass on a sincere vote of gratitude for all the patronage that it continues to enjoy from contributors, advertisers, subscribers, advisors and supporters. Saki M Mabhele

Volume 2 • 2012

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PREFACE

fore

word A warm welcome to you and yours to the second edition of TransformSA magazine. It is quite an auspicious time in our country and in the life of TransformSA magazine. It is hoped that you have had some time to reflect on the transformation project and give deeper thought to the various articles that were published in the inaugural edition. For the team at TransformSA, it’s hard to believe that they are on their second edition already – how quickly time flies! It certainly has been quite an eventful last couple of months and by the looks of things, it’s only going to get more interesting. We have witnessed several phenomena which have come to define the year 2011- among some of these are the numerous uprisings in the Arab world which have come to be collectively known as the Arab Spring – culminating in the death of Colonel Muarmmar Gaddafi of Libya. One is reminded of the economic emancipation march held by the ANC’s Youth League last year whose theme was “Economic Freedom in our lifetime!” We have also witnessed the worsening of the global economy through the various near defaulting of the various economies in the Eurozone – something which jeopardises our very own export markets and by extension our domestic economy as it will have a visible impact on the various B-BBEE transactions and thus might have a dent on our transformation efforts. On the legislation front one notes the recently promulgated B-BBEE Amendment Bill which will seek to criminalise fronting and other forms of misrepresentation by imposing sentences of no less than 10 years imprisonment. Of particular importance to mention is the recent commemoration of the centenary of the African National Congress - a highly remarkable milestone indeed! - Which was not only a celebration of 100 years of the existence for Africa’s oldest liberation movement; but also a celebration of an inclusive policy environment whose benefits have enabled our people to participate in the mainstream economy of our country. This month also marks the beginning of South Africa’s tenure as the chair of the UN Security Council. As part of being a non- permanent seat holder in the Security Council, South Africa has once again been afforded the opportunity to chair the UN Security Council. This ought to bode well for South Africa’s efforts to introduce reforms in terms of the mandate and configuration of not only the Security Council, but the United Nations as a whole. To that end, we have various matters of international importance to grapple with and look at. Chief among these will be the need to work towards better world peace and security, the respect for human rights and better efforts towards the achievement of the Millennium Development Goals. Marking the end of this year will of course be the ANC’s Elective Conference in December, one can only wish for the prevailing of cool heads as this conference should be able to give direction in terms of the transformation trajectory of our country. All of these developments have a bearing on transformation and for this reason TransformSA will be keeping its eyes peeled, for transformation is a project that is of national importance. Lastly, we hope that 2012 will be all that you have planned it to be and in your own small way you help further the transformation project. B. Peter Vundla

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EDITORIAL

editor’s

letter I

recently spent a few very interesting hours at a Black Management Forum (BMF) conference in the sunny Johannesburg. I was a media representative in the gathering of some of the country’s finest black minds. BMF is a non-racial, thought leadership organisation founded in 1976 whose main aim is to influence socio-economic transformation. It thus provides us with a really good overview of transformation in South Africa. During the course of the conference it quickly became obvious that many guests were concerned about the lack of transformation in the Top 100 JSE listed companies. All this needed government intervention and deepening the struggle of black business people so that transformation can be realised in local companies, most argued. Somewhere in this magazine, we publish a story in which major black economic empowerment (BEE) players and activists call for JSE-listed retail companies to give black people an opportunity to invest on this bourse. Apparently there isn’t a widespread of black shareholders in this sector. I was also alerted to an allegation which points to how disengaged and insensitive South Africans have become towards giving to the poor by a recent article in one of the country’s most popular news websites. Published early in January this year, the article about World Giving Index reminded me, not that I ever needed to be, that individual selfishness is steadily creeping into our society. This is sad considering that the gap between the poor and the rich in SA continues to widen. This means we should be giving to the poor more than ever before.

This exposed remarkably clearly that honest hard-working, tax-paying private SA citizens have now become self-centred, having forgotten that giving was not only a traditional thing but had been pivotal in the struggle against apartheid.

According to this index, SA ranks an embarrassing 108th position out of 153 in the World Giving Index. This does not bode well for transformation in the country. This exposed remarkably clearly that honest hard-working, tax-paying private SA citizens have now become self-centred, having forgotten that giving was not only a traditional thing but had been pivotal in the struggle against apartheid. Lastly, we would like to thank all our readers for supporting the first issue of this magazine which came out late last year in the manner they did. Again, thank you to all the advertisers who came on board in that edition. This is indicative of the fact that many out there do see that this magazine has a great future and is an important voice in the country. We welcome more of your support. Thanks. Enjoy

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, and a governing body 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.

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.

Adam Ismail is a director at ENS (Edward Nathan Sonnenbergs). He currently practices as an attorney in the corporate commercial department. He specialises in mergers and acquisitions, both in South Africa and the rest of Africa. He also represents multi-nationals with their investments into South Africa and the rest of Africa. Within mergers and acquisitions, he has extensive experience in black economic empowerment transactions, where he has rendered advice on a number of significant high profile deals, such as advising on the BEE codes of good practice and its interface with the various transformation charters. Another area of substantial experience within mergers and acquisitions is real estate, where he has been involved in the structuring and implementation of a number of high profile property developments in South Africa and Africa. He has acted for a diverse range of clients in both the local and international arena. Adam’s practice experience includes the drafting of commercial contracts such as, shareholder’s agreements, sale of share agreements, sale of business agreements and service agreements. He also has experience in company sales and purchases, management buy-outs and, commercial transactions within the hospitality and leisure industry. Lalu Mokoku has a Masters degree in Dramatic Arts which she obtained as a Drama For Life Scholar. She is ShakeXperience™ programme developer and responsible for documentation as well as monitoring and evaluation. She is a "Winter Summer Institute in Theatre for Development" co-founder, researcher, child participation and protection specialist, writer and theatre practitioner with significant experience. She has worked with numerous organizations including non-governmental organizations (NGOs) (community, national and international), research institutes and UN organisations as an independent consultant.

Rui Marto obtained his Bachelor of Arts degree in 1989 and his Bachelor of Law degree in 1991, both from the University of Witwatersrand. Rui Marto is a practicing attorney and director of Marto Lafitte & Assoc Inc, specializing in property and commercial law. He was admitted as an attorney in May 1994.  He co-founded Marto Lafitte & Assoc in 1995.  Rui Marto hosts a number of seminars and has appeared as a guest speaker at various professional and private forums, including SAPOA.  He has contributed a number of articles to various publications and websites on various topics related to his area of expertise.

Tshetlhe Litheko, is an economics graduate from the University of South Africa (Unisa). He is the CEO of Lehae Consulting Services, a transformation and enterprise development firm. Among some of Lehae's achievements is launching an enterprise development fund, designed to allow the private sector to actively contribute to the economic development of South Africa. As a social activist, Tshetlhe founded a youth development project in the 90's, which earned him national recognition as the SABC, Old Mutual and Sowetan community builder of the year nominee in the year 2000. He is often driven by the need to build a universal philosophy in nation building, which recognises that beneficiaries of development are not ignorant about their developmental needs and thus their empowerment should be driven by them with the aid of those that are altruistic enough to contribute to the empowerment process.

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CREDITS

sa

The Quarterly Journal for a Transforming Nation

publisher’s details Publisher

Managing Editor Assistant Editor Feature Writer Production Director Production Manager Creative Director 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 Ntsako Mbhokota ntsako@transformsa.co.za Tiitsetso Tlelima tiisetso.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 Litho 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 (ISSN 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 2 • 2012

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COVER STORY

ANC celebrates while the economy

slows down According to both vice presidents of Business Unity South Africa (BUSA), the ANC should also see how the centenary celebrations have contributed to the development of Mangaung by way of beneficiation. They urge ANC members to ask tough questions of whether the party has provided the kind of development it intended. Written by Mthunzi Mdwaba and Brenda Madumise ens of thousands of ANC members, supporters, friends both domestic and international, descended on the tiny city of Mangaung earlier in January to mark the centenary celebrations of the ANC, and without a doubt, the city’s inhabitants were overwhelmed by the sheer numbers, the colourfulness and the capacity to consume and spend. In its 100 years of existence, the ANC has managed to

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reshape and recreate itself to stay true to its founding principles and later the Freedom Charter. The centenary celebrations should resonate with every South African, not just ANC members or supporters. It should mean that South Africa keeps this hardwon democracy forever young and begin the next 100 years with the choice to harness the values of human decency.

Image: ANC

T


COVER STORY It should also acknowledge that as free people South Africans must choose to shape the forces of the information age and the global society to unleash the limitless potential of all people. The challenge of the past remains the challenge of our future. The country's divide of race has been and continues to be its constant curse. Prejudice and contempt, cloaked in the pretence of religious or political conviction, are no different. South Africa has a rich texture of racial, religious, cultural and political diversity that must be cherished and harnessed because great rewards will come to those who can live together, learn together and work together. The ANC deserves to be revered and applauded for turning 100 years old, becoming the oldest liberation movement in Africa. This is hugely impressive endurance. The centenary celebration is made more remarkable by the fact that the ANC is also the only liberation movement to ascend to power via a blood less coup - an important point acknowledged by all throughout the world. In the 100 years since the 8th January 1912, 9 of ANC's Presidents are no longer alive and were all part of the pre-democracy liberation period of the struggle for political freedom. Three of them were part of a team that ushered us into the new country led by Nelson Mandela. These are: • John LangalibaleleDube (1912 1917) • Sefako Mapogo Makgatho (1917 1924) • Zacharias Mahabane (1924 - 1927 & 1937 - 1940) • Josiah Tshangana Gumede (1927 1930) • Pixley Ka Isaka Seme (1930 - 1937) • Dr Alfred Bitini Xuma (1940 - 1948) • Dr James Sebe Moroka (1949 1952) • Chief Albert Luthuli (1952 - 1967) • Oliver Reginald Tambo (1967 1991) • Nelson Rolihlahla Mandela (1991 1997) • Thabo Mvuyelwa Mbeki (1997 2007) • Jacob Gedleyihlekisa Zuma (2007 to date)

It managed to gain power in this manner while migrating from being a liberation movement to being a ruling party. Very significant during the evolution of the ANC, is the adoption in Kliptown of the Freedom Charter during Chief Albert Luthuli's tenure as president. The Charter was as is well-known, a statement of core principles of the South African Congress Alliance, made up of the ANC and its allies, the South African Indian Congress, the South African Congress of Democrats and the Coloured People's Congress. The ANC at this stage was already a mature age of 43 years old. The 40 former and current African statesmen who attended the celebrations, included Ugandan President Yoweri Museveni. Museveni praised the ANC for doing the entire continent proud by introducing a plan to instil non-racialism through the Freedom Charter. He added that," the way (the ANC) handled the issue of racism… was a master stroke when you said it does not matter who you are, whether you are black or white." He credited the ANC for ending tribal wars and galvanising all the tribal struggles into one national struggle. However, the ANC should be checking its performance as a 17-year-old ruling party, plus the 83

years of selfless struggle against the Freedom Charter. The ANC should also see how the centenary celebration has contributed to the development of Mangaung by way of beneficiation. ANC members should ask tough questions of whether it provided the kind of development it intended. Should it have supported the black person who owns a lodge in the township? Could it have done better than just supporting the Mangaung city infrastructure which is already flourishing? Could it have fixed roads going into the township? Could it have ensured that more suppliers were Mangaung based? Is it possible that it could have organized the event a lot better by ensuring proper training of its marshals so that they knew the stadium well to be able to do their work? Is it possible that it could have catered for old and frail people to be driven up and down the stadium by say, golf carts? Is it possible that it could have provided maps? An attempt to answer these questions and more importantly attending to corrective action will assist the ANC in preparing for the elective conference in Mangaung which is less than 12 months away. It is critically important that the ANC asks the following questions against the backdrop of the 10 guiding principles of the Freedom Charter, although this article is limited to seven of same; • What has been achieved? • How has it fared against own expectations and those of the people? • What has it not been able to achieve as per the Freedom Charter? • How does it achieve what it has not been able to deliver? • What are its plans for the next 100 years so that the ANC of the past 100 years is as relevant to the youth of today and tomorrow? • How can it be ensured that the ANC is as successful in the delivery of the promises made in the Freedom Charter as it was in liberating the people of South Africa? The People Shall Share in the Country's Wealth As writers of this article and members of the ANC, we believe that this line should be read together with the third paragraph of the preamble of the Charter, which reads: "Our country will never be prosperous or free until all our people live in brotherhood, enjoying equal rights and opportunities!” This is an elephant in the room that still bedevils South Africa. The wealth of this country cannot continue to be in the hands of a few people. The JSE ownership perhaps demonstrates this in a very conspicuous

Volume 2 • 2012

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COVER STORY

manner. Seventeen years into our democracy, the JSE still has a very insignificant number of black participants, particularly black women.

constitution guarantees the right to be equal before the law, without regard to race, gender, ethnicity, disability or privilege.

Granted, most of the problems have arisen through the corruption of officials and suppliers who have cut corners in delivering.

This is despite the country's demographics and a plethora of empowerment policies meant for the JSE and private sector in general. What is particularly curious is evidence demonstrated in numerous research results. White business is the biggest beneficiary of empowerment policies. It has become wealthier.

The rule of law applies to the weak and strong, the rich and the poor, the powerful and powerless.

This has resulted in the provision of houses that are inadequate. The houses have huge defects and with the best intentions, are built along the same apartheid pattern. Black people are still living far away from the urban centres and their places of employment, incurring more transport costs.

If the country does not address this matter in earnest, it runs the risk of living in a country that is not safe and secure. The global economy that South Africa is part of, constantly seeks to increase efficiency and at the same time equally requiring constant investment in education and training. It should be an economy that responds to the creativity of young entrepreneurs who wish to be Independent Power Producers (IPP) but are being held back by government officials who refuse to process their applications unless they pay a bribe to speed up their applications. The Land Shall be Shared Among Those Who Work it This is a hot potato that needs to be resolved rather urgently before it becomes a problem that takes a violent nature. Former Zambian President, Kenneth Kaunda, addressing the gala dinner guests at the centenary celebrations, warned South Africa against repeating the same mistakes other African countries such as Zimbabwe had made in attempting to resolve the land issue. He said: "Comrade Zuma you have more serious problems than any of us. The problem is the land question. Please remember two wrongs can never make a right. Discuss with white leaders, the problem of land. The situation here is very serious."

There Shall Be Work and Security South Africa has come many miles towards justice but has not fulfilled the dreams of the many black South Africans. Unemployment amongst black people is the highest, with the youth constituting the largest part. Black people bore the brunt of poverty and child poverty has risen to unacceptable levels. South Africa has the New Growth Path (NGP), intended to create jobs. But this is still a long way from curing the unemployment ills due to processes that still need to be followed. While small wins have been had, such as the signing of various accords, referred to as "low hanging fruit", the majority of the NGP's intentions are still on "ice" until the social partners agree on how to move forward together. The Doors of Learning and Culture Shall Be Opened Technically, this has been done, but realistically, the country is still a long way from ensuring that the doors of learning and culture provide what was intended by the signatories to the Charter. The education status quo is still light years away from being the kind of education that will lead to the desired results of ensuring that South Africa (truly) belongs to all who live in it.

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There Shall Be Peace and Friendship Peace must mean many things to South Africans. South Africans have the right to live safe and secure lives today, tomorrow and forever. Every South African, from teacher to journalist, from politician to community leader, from a business person to the unemployed, must make peace and friendship a mission to banish from the minds of children and young people glorifying violence, rape and sexual assault. South Africans must also endeavour to end the practice of speaking peace in one place and preaching hatred in another. So, while a lot has been achieved, thanks to the ANC, South Africans cannot be complacent as much more needs to be done. As the country looks to the next 100 years, it needs to change to be in a position to deal with the realities that face the global community.

There Shall be Houses, Security and Comfort

South Africa seems to be caught in liberation and populist mode, which it urgently needs to convert to drafting of well considered, pro-growth policies that come with being the ruling party. Having done exceptionally well in the area of political struggle, the country needs to turn its efforts to the economic struggle that is still a long way from being won.

Lots of work and success has happened here, but lots still need to be done, especially to ensure security and comfort.

The reality is that black people still sit outside the economic activity of the country. SMMES of all kinds, irrespective of whether they are white-

Small gains have been made in the last year, but much more needs to be done to ensure that the doors of learning are open to all, accompanied by qualitative input that lends itself to the creation of jobs.

All Shall Be Equal Before The Law This is a principle that all South Africans must espouse and should be at the core of their being. It is what many black South Africans have struggled and died for. That is why the

This has also led to lack of supervision of children as parents have to leave their homes early to catch transport and return late at home without the opportunity to spend quality time with family, especially their children's school progress.


COVER STORY

South Africa has come many miles towards justice but has not fulfilled the dreams of the many black South Africans. Unemployment amongst black people is the highest, with the youth constituting the largest part. Black people bore the brunt of poverty and child poverty has risen to unacceptable levels.

owned or black-owned are in dire need of policies that will ensure a conducive environment for their growth and prosperity.

always results in very little being done because of the sheer energy and time that is devoted to election battles.

They are being choked by an inflexible regulatory framework and bureaucratic red tape. The economic system needs to re-orient its programmes and policies towards employment generation and employment security as opposed to job security and promote policies conducive to the creation of sustainable and competitive enterprises. South Africa urgently needs to find ways of doing away with the mistrust and distrust that exists between the government, labour and business, so we can realise the meaning of "together we can do more".

The ANC urgently needs to find ways to have an attitudinal change, and to behave like the ruling party it has been for the last 17 years.

More often than not, there is no movement in passing policies that can create job-rich growth as they get stuck for eternity at NEDLAC due to pure distrust. A more constructive partnership between business and government is far more important than the dominance of either. The sooner the country can place people at the centre of everything it does, the better. The country has been talking about Private Public Partnerships (PPPs) and industrialisation for a very long time. But it is paralysed by corruption, incorrect deployments and sycophantism where these activities need to be activated. It is to be noted that there has been a huge commitment and an anti-corruption partnership recently between the social partners, with Labour and Business taking a very proactive role. But the country needs to do more. South Africa needs to sign up to a pact that will punish waste, whether in the public or private sector. It is gratifying to see the NEC's centenary statement, in which it outlines its plans to modernise and end the bruising leadership battles that have characterised the party's post-exile era. The statement states: "Leadership development shall be accompanied by a review of the leadership election system of the ANC in order to enhance internal democracy, credibility of the process as well as the integrity and suitability of candidates." This would go a long way to ensuring that South Africans are not hamstrung from doing anything because everyone is eyeing the next election, which

Members of the ANC need to re-examine the liberation role of the past insofar as it is devoted to the economic struggle. But they should balance that with the role it has of leading and running the country. The ANC unnecessarily plays into the hands of its enemies by failing to do simple things that, as the ruling party, should not require much to ensure delivery. If the ANC avoids these things it shall concomitantly grow its brand that it so constantly and consistently erodes. As inadvertent as this might be, this makes no difference. The ANC brand should sell itself to all - the youth, white people who are still resisting to join the party because of its own lack of delivery and in-fighting. The ruling party needs to find ways to open up and de-mystify its inner workings by allowing young people and fresh thought to come into the organisation and not restrict the involvement to comrades who were either in prison or in exile. There are a lot of people who want to participate, but somehow, the organisation pushes them out and the perception is that, you must buy your way in. People pay to be invited into the inner circle. The ANC is losing the youth steadily because it does not have the emotional attachment and the high level of gratitude that our age group has for the ANC. The youth recognises what the ANC has done for the country by way of liberation and giving birth to our democracy. At the time it did things that no other party anywhere in the world has been able to deliver. But what about tomorrow, what has it got to offer in a competitive environment? We have to change more rapidly and perhaps more profoundly. Mthunzi Mdwaba and Adv. Brenda Madumise are both BUSA Vice-Presidents and members of the ANC. They write in their own personal capacity.

Volume 2 • 2012

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TRANSPORT

BEE targets of the

highest

form Siyabonga Gama, the CEO of Transnet Freight Rail (TFR) tells Transform SA his division has earmarked R5.3 billion for the 2010/2011 financial year to spend on broad based black economic empowerment (BBBEE), including procurement, women-owned SMMEs, 100 percent black-owned companies. Written by Mzwandile Jacks

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Images: Transnet Freight Rail

enterprises and triple BEE


TRANSPORT

S

omehow he remains a figure of unperturbed equanimity. As state-owned enterprises wobble under all sorts of criticism, Siyabonga Gama, the CEO of Transnet Freight Rail (TFR), has been quietly making sure that his unit achieves transformation targets of the highest form. Gama recently told Transform SA his division had earmarked R5.3 billion for the 2010/2011 financial year to spend on broad based black economic empowerment (BB-BEE), including procurement, women-owned SMMEs, 100 percent black-owned enterprises and triple BEE companies. Gama, speaking in an exclusive interview with Transform SA, said BB-BEE performance for 2010/2011 was 75 percent against a planned spend of 70 percent. “We have achieved this by assisting suppliers to improve their BB-BEE status by guiding them on procurement policies and procedures,” Gama said. TFR, the wholly-owned subsidiary of Transnet, is the largest division within the transport utility, which is a commercialised organisation with the state as its sole shareholder. Transnet has affirmed its commitment to affirmative procurement since 1994. Black Economic Empowerment (BEE) has been integrated with the tender rules and procurement policies to assist historically disadvantaged communities (HDC) and empower TFR's managers to effect affirmative procurement without compromising specifications, safety and standards. “In order to promote the development and support of suppliers and contractors from disadvantaged communities, TFR has decided that a large portion of the available total procurement expenditure be spent in such a manner that it advances BB-BEE,” Gama said.

“This will continue to be done by setting targets at various levels, which include: complying with all TFR’s BB-BEE requirements when submitting tenders. As a precondition for selection, a potential supplier must submit a signed BB-BEE certificate, a detailed scorecard and any other documents that may be required by TFR. These shall form one of the critical requirements in the valuation of BB-BEE. Pre-qualification on BB-BEE credentials is a key determinant on whether a supplier is evaluated on the technical and financial aspects of bid evaluations. This demonstrates our commitment to economic redress and ensuring we move small business and black business from the periphery to the centre over time.” TFR subscribes to Transnet’s Procurement Procedures and does not only support BEE, but also has a role to encourage other companies to ensure a level playing field in South Africa by removing the current inequalities in business. Social and economic transformation will assist our country to avoid the kind of polarisation brought about by too few participants in the economy and will create jobs in underserved communities.

“We have achieved this by assisting suppliers to improve their BB-BEE status by guiding them on procurement policies and procedures,” Gama said.

TFR prefers to do business with business enterprises who share these same values. Gama said of the R5.3 billion, BB-BEE spend, 16 percent went to black owned business (51% Black owned) for full year 2011 and 11 % to Black Women-Owned businesses (30% BWO) full year 2011. He said the other chunk would go to procurement spend on triple BEE companies. Actions are in place to improve spend on Black Owned and Black Women-Owned businesses. INFRASTRUCTURE DEVELOPMENT TFR will continue to invest in infrastructure in line with its strategy to lead and vigorously

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TRANSPORT

“In order to promote the development and support of suppliers and contractors from disadvantaged communities, TFR has decided that a large portion of the available total procurement expenditure be spent in such a manner that it advances BB-BEE,” Gama said.

drive supply chain transformation to unleash rail efficiency at internationally competitive prices. Its logistic system plays a critical role in positioning the country’s economy in a globally competitive domain. In this regard, TFR will continue to collaborate with the mining houses to optimise and leverage productive capacity by reducing transit times. TFR always ensures that its investment in infrastructure development will promote meaningful BEE and the growth of local industries. All the deals that have been signed so far meet these criteria. “We will continue to invest in infrastructure development until 2040 and this is indicative of what we see as a market trend. We will also look at the installation of new rail tracks and the stabilisation of civil works below rail tracks,” Gama said. TFR will also mobilise all resources to contribute to volume growth and greater tonnages transported efficiently by rail, rather than road, to reduce the cost of transport in the country. A key focus will be on service delivery to customers and to motivating employees to contribute meaningfully to the success and sustainability of the business. TFR is targeting significant growth in the export coal and iron ore lines as well as in mining and heavy manufacturing industries over the next five years.

entry-level operations jobs for the container and automotive business. Many of TFR’s operations are in smaller municipalities and rural areas, leading to economic stimulation in those areas. This is coupled with skills development programmes in operational and technical fields and professional support to improve human capital development. The ’Graduates in Training’ programme resulted in 36 of the 48 participants attracted for an 18 – 24 month period being successfully placed in the organisation. The remaining 12 are still undergoing training; we are now in a process of implementing the second intake intending to bring in additional 295 GIT’s for the next two years. Of the 19 ‘people with disabilities’ who were given internships, 40 percent completed their training successfully while the remainder remain in training. The ‘Engineering Development Programme’ was successfully launched and implemented, with the first intake of 10 depot engineers and five trainee depot engineers starting their programmes in December 2010. The ‘Management Development Programme’ was successfully launched and piloted. Of the 12 candidates who attended the pilot programme, seven have already been appointed as operations trainee managers. TFR achieved and exceeded the employment equity target of 77 percent by giving preference to the recruitment of black, female and disabled job applicants.

The potential general freight five-year volume target has been validated and significant demand exists. This presents opportunities for future growth, which will be targeted in line with national objectives and particularly in those areas identified by the New Growth Path (NGP).

This was achieved by filling positions with suitably qualified candidates, using the broad guideline of 70 percent black, 30 percent white and 15 percent – 20 percent female candidates.

The aim is to achieve volume growth and increased market share while reducing the cost of externalities.

TFR training spend was 2.2 percent in 2011 as a percentage of personnel costs. This is slightly higher than the target of 2 percent. Compared to the national percentage benchmark of 5 percent and a benchmark internationally of 10 percent.

JOB CREATION TFR has initiated the ‘1 800 operators’ recruitment campaign nationally to enhance the operational feeder channels, including the creation of 119

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In the year ahead, TFR will continue to recruit new skills in fields such as econometrics, economic research and economic regulations to position the business strategically.


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S h u t t l e s , G ro u p Tr a n s f e rs , F l e e t & Tr a v e l M a n a g e m e n t Volume 2 • 2012

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PROPERTY

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PROPERTY

Finding

solutions in property sector While it is undeniable that the government land reform policies have been slow and only partly successful, the writer submits that it is erroneous to adopt policies that are (arguably) unconstitutional. South Africa remains a role model to the rest of the world in its political transformation. Written by Rui Marto Volume 2 • 2012

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ransformation in the property sector and land reform in South Africa is a massive and complex challenge. There are many differing and often competing views offered to resolve this issue. It is my view that despite the complexity, we must stay the course and rely on the Constitution as our compass to find the solution. Let us kick-start with some background. Racial inequality during apartheid was based on a land program. This was enforced through the Natives’ Land Act of 1913 and 1936 followed by Group Areas Act of 1950. The legislation enforced a separation and dispossession of land through group areas system. The undoing of the consequences and legacy of this legislation is central to the transformation process.

of willing buyer-willing seller. This principle appears to no longer be supported by the government as evidenced after the tabling of the Expropriation Bill and more recently the Green Paper on Land Reform. The proposed legislation suggests that expropriation can take place in some instances below market price and it takes away some of the remedies that have existed to date for landowners. There has been widespread resistance to the proposed legislation. The main argument against its acceptance is that it is unconstitutional. I will revert to a discussion of certain aspects of the Green Paper on Land Reform. Property Rights and our Constitution

The government has until recently supported a policy of land redistribution using the principle of willing buyer-willing seller. This principle appears to no longer be supported by the government as evidenced after the tabling of the Expropriation Bill and more recently the Green Paper on Land Reform.

The terms “land reform” and “transformation” in the property context are used broadly and sometimes to mean different things. The postapartheid legislation has sought to address the racial dispossession in terms of three broad programs, including land tenure, land restitution and land redistribution. Land tenure program deals with rights of those who occupy land. The Extension of Security of Tenure Act of 1997 seeks to ensure that “the law promotes the achievement of long-term security of tenure for occupiers of land, where possible through the joint efforts of occupiers, landowners and government bodies;” and “that the law should extend the rights of occupiers while giving due recognition to the rights, duties and legitimate interests of owners.” Restitution of Land Act of 1994 aims to “provide for the restitution of rights in land” in respect of those communities whose land was dispossessed. The restitution is achieved through either restoration of land rights and title, provision of alternative land or compensation. Land redistribution aims to provide the poor with access to property. The latter is by far the most contentious. The government has until recently supported a policy of land redistribution using the principle

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The Constitution introduced the fundamental right to property and right of access to adequate housing, as contained in section 25 and 26 of the Constitution. Section 25 confirms that no one may be deprived of property and no law may permit arbitrary deprivation of property. “Property may be expropriated only in terms of law of general application (a) for a public purpose or in the public interest; and (b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.” The section includes provisions on compensation stating: “The amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including: (a) The current use of the property; (b) The history of the acquisition and use of the property; (e) The market value of the property; (d) The extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and (e) The purpose of the expropriation.”


PROPERTY

The section further sets out the context in which these provisions are relevant, stating: “For the purpose of this section, the public interest includes the nation’s commitment to land reform and to reforms to bring about equitable access to all South Africa’s natural resources. “No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination.”

“No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination.”

Section 26 grants the right to housing. The clause states: “(1) Everyone has the right to have access to adequate housing. (2) The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right. (3) No one may be evicted from their home, or have their home demolished, without an order of court made after considering all the relevant circumstances. No legislation may permit arbitrary evictions.” Market approach After much debate prior to 1994, the government adopted a market approach to land reform which was supported by international community as the most viable. This was supported by World Bank. The property rights entrenched in the Constitution form the basis of the government land reform policies, to date. Twenty five years later, it is argued that not enough has been done. Critics of the willing buyer-willing seller principle argue that: 1. It is a disregard for history in that blacks were dispossessed of their property in the first instance; 2. It is unworkable in that there is a lack of funds to allow for redistribution at a speed required for transformation. It is unreasonable to expect those who have been dispossessed to wait for redress indefinitely. There is an increased restlessness and criticism

of government policies. There is a greater fear that inaction will lead to Zimbabwe-style land grabs. Change in Approach: Green Paper on Land Reform This appears to have resulted in government’s change in approach as outlined above in moving away from the market approach. The Green Paper on Land Reform 2011 appears to do just that. It seeks to establish a Land Management Commission which, many believe, infringes on the jurisdiction of SA Courts. The commission gives a Valuer-General control of determining the amount of compensation payable for expropriated land and a state bureaucracy is given the job of “invalidating” title to land. It is argued that the Constitution already allocates these powers to the courts. The Green Paper also introduces a limitation on land in private ownership. It requires commercial farmers with more land than the maximum to dispense with the ‘excess'. The state could decide to expropriate ‘excess' land at valuations decided by the Valuer-General. Certain provisions of the Green Paper appear to attempt to bypass the Constitution. Conclusion While it is undeniable that the government land reform policies have been slow and only partly successful, I submit that it is erroneous to adopt policies that are (arguably) unconstitutional. South Africa remains a role model to the rest of the world in its political transformation. The Constitution was at the heart of that success. It is said about democracy that it is the worst system in existence, except for the alternative. The same argument can be made for the market approach. It is imperative to maintain the rule of law and uphold the Constitution. Rui Marto is a practicing attorney and director of Marto Lafitte & Assoc Inc, specialising in Property and Commercial Law.

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PERSPECTIVE

Retailers ignore BB-BEE at own peril, says activist

Written Mzwandile Jacks

“H

ow can this be?” angrily asked Theo Botha, South Africa’s well-known shareholder activist recently. “Have listed retail companies not heard of the increasing… black spending power?” And so, in almost all respects, it seemed these companies have not heard about this power, otherwise they would have implemented BBBEE in their operations a long time ago. Botha, irritated by the retail companies’ reluctance to have people of colour invest in their companies, asked why other companies in other sectors have implemented more than one BEE transaction while companies like Pick ‘n Pay, South Africa’s biggest retailer, had not. Botha is an unassuming man. But few would have been surprised were the Pretoria-based shareholder activist to reveal that he has now become a BB-BEE militant.

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A well-known white shareholder activist calls for South Africa’s retail companies to give people of colour a chance to invest in the JSE, saying it is important to have a wide spread of shareholders in companies listed on the local bourse.


PERSPECTIVE

He used to be only involved with JSE-listed companies which had white shareholders as a majority.

middle class was mentioned four times in the annual report,” Botha said.

Other white shareholder activists may find fighting for BB-BEE hard, but Botha is already pushing back in this regard.

Turning to the Government Employee Pension Fund (GEPF), which is the power behind Public Investment Corporations’ (PIC) throne, Botha said they have failed to drive the process of BB-BEE in the retail companies.

Speaking at the Black Management Forum (BMF) conference, Botha said: “In my opinion I think it is critical to have people of colour investing in the JSE as it is important to have a wide spread of shareholders in listed companies. “In other words you will be increasing trade ability. And in that way we start creating a strong middle class. But more importantly this gives the employees the opportunity to become shareholders.”

“In other words you will be increasing trade ability. And in that way we start creating a strong middle class. But more importantly this gives the employees the opportunity to become shareholders.”

Botha made these comments shortly after analysts attacked the retail industry for dragging its feet on empowerment. Analysts said these companies were doing this because they were not under direct pressure from the government as their main customer base was the man on the street. Spar, another food retailer, said it planned to sell 10 percent of its business to empowerment partners for R1 billion. Its shares rose 2.53 percent to R60.80 on the back of the news while the retail index fell 1.63 percent. Retailers such as Clicks, Truworths, Foschini and Lewis have not done any deals to date, at least at ownership level. Syd Vianello, a retail analyst at Nedcor Securities, warned that at some point the government would force these companies to put BEE schemes into place. Empowerment deals in the sector were an eventuality, but retailers did not consider it important enough, Vianello said “Edcon 2011 annual report states that clothing & footwear spend as a percentage of household expenditure has increased, in part as a result of a rapidly emerging black middle class, which has more than doubled in size since 2000. The words black

“The PIC is the biggest shareholder in retail companies. These companies are also supported by the rapidly growing black middle class, Botha said. “I can therefore conclude the GEPF engagement policy with retail listed companies in regards to empowerment has failed.” So what is the way forward? Botha urged the BMF to engage with the GEPF around the issue of BB-BEE in retail companies. Meanwhile, BMF said BB-BEE Economic Advisory Council was toothless and needed to become a fully-fledged chapter nine institution with a full-time secretariat to handle problems. Tembakazi Mnyaka, deputy president of the Black Management Forum, said BMF was also concerned that the amendments to procurement regulations would continue to benefit the white majority. These amendments are due to come into effect on December 7 and will enforce up to 75 percent local procurement. Earlier this year, a summit of black business groups – including the Black Lawyers Association, the Association for the Advancement of Black Accountants of South Africa and the Association of Black Securities and Investment Professionals – called for the advisory council to be elevated into "a structure that takes a form of a commission or ministry". BMF president Jimmy Manyi called it "scandalous" that this far down the track sufficient headway had not been made in addressing the under-representation of black people in the top echelons of business organisations and companies. It was worrying to see in the latest employment equity report that white people occupied more than 70 percent of top management positions.

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CSI

South Africans

give less, says global survey

According to the UK-based Charities Aid Foundation’s (CAF) second annual World Giving Index, South Africa ranks poorly, making transformation too slow. Written by Mzwandile Jacks or most developed economies like the US, the UK and Netherlands, hunger is a fleeting inconvenience, easily elucidated by stepping out to the stores or ransacking the fridge. However, persistent hunger is part of everyday life for many people in the rural backwaters of South Africa.

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is that South African corporates and individuals give less than those in developed countries like the US, the UK and the Netherlands. This is too sad for words because South Africa, as one of the pre-eminent transforming nations of the world, should be ranking high in the giving stakes as it has millions of poor people.

Halving the proportion of people in South Africa’s rural areas who do not get enough to eat is one of the goals of the country’s corporate social investment (CSI).

South Africa ranked an embarrassing 108th position out of 153 in the World Giving Index released recently, tracking sub Saharan African, which ranked poorly in general against other parts of the world.

Reducing hunger and poverty are a complicated matter it seems. At this stage, many South Africans are getting poorer. Yet the indication

Recently, the UK-based Charities Aid Foundation (CAF) released its second annual World Giving Index, which seeks to measure the

Image: iStockphoto.com

F


CSI

“The spirit of a giving civil society in the post1994 administration has dissipated. These days there is very little enabling policy, though of course legislation does require all listed companies to plough one percent of their net profit into the communities they serve,” Du Toit said.

amount of philanthropy and volunteerism within the polled countries.

made a donation. Ireland and the Netherlands are jointly third with 75 percent each.

The report – which is compiled by CAF using Gallup polling information, is based on three measures. These are ‘giving money’, ‘volunteering time’ and ‘helping a stranger’.

However, this report drew the ire of Tshikululu Social Investments which manages grant-making funds and trusts for large and medium sized businesses in South Africa.

The global average of the three giving behaviours in 2011 was 32.4 percent, compared to 31.6 percent in 2010.

Gina de Villiers, Tshikululu’s Senior Communications Specialist, says South Africans do in fact have a strong culture of giving and in the case of some companies, have done for many decades.

Colleen Du Toit, the CAF Southern Africa CEO, says South Africa and the region needed an increased social investment as large amounts of foreign aid money were being withdrawn from the country. “The spirit of a giving civil society in the post-1994 administration has dissipated. These days there is very little enabling policy, though of course legislation does require all listed companies to plough 1 percent of their net profit into the communities they serve,” Du Toit says. “These days, companies aren’t content to just throw money at anyone who asks. Corporate social investment isn’t just about giving anymore. Companies want to see tangible benefits. But this doesn’t mean that the process need be painful for either the company or the non-profits organisations involved.” CAF specialises in trying to nudge companies in the right CSI direction. CAF will even arrange so-called employee corporate social investment, where company workers who want to volunteer their time and energy can do so through the intervention of CAF. Unsurprisingly, the index ranked the USA as the number one giving country in the world, with Ireland coming second and Australia coming in close third. According to the study, the UK is the second most generous nation globally in monetary terms, with 79 percent of the population donating to charity each month. The highest-ranked country for ‘giving money’ is Thailand with 85 percent of the population having

But de Villiers says corporate social investment (CSI) in South Africa can become smarter. “Every research report can be questioned, the methodology attacked, the number of interviewees disputed and the results dismissed. Instead of picking at the CAF research, I’d like to offer some alternatives…,” de Villiers says. “The 2010 Barclays Wealth report entitled “Global Giving: The culture of philanthropy” indicated that the wealthy in South Africa were second only to the USA in philanthropic giving. I believe that this report surveyed individuals, not companies, but as the CAF research included individuals, I thought it made an interesting comparison.” Regarding corporate giving, de Villiers urged CAF to consider the 2011 edition of Trialogue’s CSI Handbook, a guide to CSI in South Africa that is well-regarded in our “industry”. For this, the 14th edition, 148 respondents from 97 “large” South African companies were interviewed face-to-face and their responses combined with “publicly available secondary information” and Trialogue’s own databases. “They state that companies invested R6.2 billion into CSI in 2010/2011. This is quite a bit more than the R4 billion mentioned in CAF. Whether this improves the impression of the private sector’s culture of giving is, of course, up for debate, but here are two more numbers that I find interesting. Again according to Trialogue, “82 percent of the companies surveyed allocated additional contributions over and above their CSI expenditure” and “over the past ten years CSI has outstripped inflation by 77 percent”.

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PERSPECTIVE

Where is JSE's real

BEE anyway? The fact that there was no increase in black direct ownership in the the past year (2011) shows that the Top 100 JSE companies have not done any new BEE deals since 2010. Written by Mzwandile Jacks

“H

Other BEE practitioners, mainly supporters of the government’s BEE policy, roared back their approval. Theirs, after all, should be a country of equal opportunity, a beacon to the world as, Nelson Mandela, the first black president of the country, claimed. Just a few days earlier, the JSE, Africa’s biggest exchange, had released figures showing

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ow much real empowerment is actually taking place on the JSE?” Ajay Lalu, the MD of Black Lite Consulting, thundered recently. “In my view very little.”


PERSPECTIVE

that there was no significant change in the number of black South Africans holding stakes in listed companies.

seriously involved this time around to avoid the heavy criticism they received last year when the first JSE ownership report was released.

The JSE said black South Africans held at least 17 percent of the companies listed on the bourse. It said the 17 percent included 8 percent (direct ownership) through empowerment stakes and 9 percent mandated investments such as pension funds.

It was accused of not properly getting involved in BEE issues and for failing to align the mining charter with the codes of good practice.

This showed that nearly 18 years since the end of apartheid, efforts to increase black ownership of JSE-listed companies have run aground. This is because JSE’s Top 100 companies have failed to strike enough BEE deals in the past year. In late 2011, October to be exact, the JSE said black direct ownership of listed companies stood at 8 percent. As a proportion of the 44 percent of the JSE's total available share float at the time, black shareholders held an 18 percent beneficial ownership, it said then. “The fact that there was no increase in the past year shows that the Top 100 JSE companies have not done any new BEE deals,” Lalu told Transform SA. “Many of the deals are in fact unwinding, like the Investec and Bidvest BEE deals which means one can expect a real decrease (in ownership) next year.” Patrick Craven, the Cosatu spokesperson, said it was “extremely dissappointing” that after so many years of the BEE introduction in South Africa the wealth of the country is still in the hands of “a few white males.” “The JSE-listed companies are supposed to be at 80 percent black direct ownership. The current approach needs to be changed. We need more corporative wealth to be created,” Craven roared. “The current approach is enriching a few people many of which are already rich. This is deplorable.” Sandile Zungu, a member of the BEE Advisory Council, said the numbers released by the JSE “looked suspect.” “We are currently looking at this matter. We are going to engage with some members to see what we can do,” Zungu said, declining to divulge more information. His comments show the council wants to be

It is not clear why South African corporates have not been striking BEE deals in the past year but a Johannesburg-based economist, Mike Schussler, said blacks have done very well economically in the past few years. “The fact that there has been a slow down in big BEE deals, should not rule this out,” Schussler said. The latest figures suggest no progress has been made in the past year and also underscore the fact that a lot remains to be done in increasing black economic participation in the Top 100 companies. The Department of Trade and Industry's codes of good practice require a company's black economic empowerment (BEE) interest to be calculated by taking the total share capital and excluding mandated investments, investments held by the state, treasury shares and foreign operations. The JSE’s analysis was prompted by an extensive debate which has for some time taken place about black ownership on the JSE, which is seen as a good indicator of economic progress and transformation.

“Many of the deals are in fact unwinding, like the Investec and Bidvest BEE deals which means one can expect a real decrease (in ownership) next year.”

The JSE commissioned the research with the aim of determining and presenting “accurate percentages.” The analysis was conducted by an independent research house Trevor Chandler & Associates using data from the share registers. Russell Loubser, the former CEO of the JSE, said the first survey, did not take into account shares held indirectly by the black public through mandated investments. “Although direct black ownership remained at 8 percent, I am heartened by the fact that it did not decrease, considering the difficult market conditions,” he said.

Volume 2 • 2012

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OPINION

BEE Commission

to crack whip

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OPINION

It is 17 years since BEE became a buzzword in SA business lexicon. But there has been talk that many companies were not implementing this honestly. The government has taken steps to address these complaints Written Mzwandile Jacks

Volume 2 • 2012

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OPINION

B

EE Commission, to be launched this year, is due to lay formal charges against those who commit fronting or the other BEE related crimes. Dozens of suspected South African companies now live under the fear that they might be targets of the commission because the crime of fronting is really widespread among JSE-listed companies.

“Further, the commission will deal with noncompliance and circumvention by introducing penalties for offences, among other aspects, while the Independent Regulatory Board of Auditors (IRBA) will provide for the regulation of the verification industry,” he told the media at a press conference recently.

The Department of Trade and Industry (DTI) in December finally agreed to launch the BB-BEE Commission, which will monitor all issues relating to BEE. Since 2009, BEE experts like Ajay Lalu, the MD of Black Lite Consulting, have been calling for this launch after talk that BEE had failed got widespread. DTI Minister, Rob Davies said the department planned to establish a BB-BEE Commission, which will be tasked with establishing an institutional environment for monitoring and evaluating issues pertaining to BB-BEE.

Turning to the enterprise development, the DTI stated that enterprise development (ED) was one of the significant elements that could contribute towards the broader aims of government to support the growth of small enterprises and job creation.

Davies said the commission would play an important role, including, but not limited to, overseeing, supervising and promoting adherence to the Act and the Codes of Good Practice in the public interest.

In the light of a new drive towards creating effective black-owned and black-female-owned enterprises, the department has elevated enterprise development to also focus on key sectors of the economy.

He did not specify exactly when the commission would be formally launched.

“Further, the commission will deal with noncompliance and circumvention by introducing

www.transformsa.co.za

BEE rating agency Empowerdex MD Lerato Ratsoma said the formation of the commission would provide the public with an institution to go to when reporting unfair practices relating to BB-BEE. “A fulfilling part is that there are penalties for misrepresentation of BB-BEE information, as well as provision for government to cancel contracts where information provided was found to be fraudulent, especially, since there is always litigation concerning government tenders,” Ratsoma said.

The commission, he said, would be tasked with strengthening and fostering collaboration between the public and private sectors, to promote good governance and safeguard the aims of BB-BEE.

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penalties for offences, among other aspects, while the Independent Regulatory Board of Auditors (IRBA) will provide for the regulation of the verification industry,” he told the media at a press conference recently.

“With regard to the points system, we have ensured that entities cannot score a certain level without doing some work on ED. Preferential procurement has also been elevated in terms of the points system, with [greater] emphasis being placed on black-owned and female-owned enterprises,” Davies said. The Employee Share Option Plan (Esop) would also


OPINION

become part of the scorecard. “When correctly applied, Esops have the potential to drive wealth and capacitate employees, as seen with iron-ore giant Kumba’s model,” he explained. Meanwhile, Davies lashed out at claims that the gazetted amendment bill had brought confusion over who the beneficiaries of BB-BEE were in SA. “There is no confusion regarding the beneficiaries of the BB-BEE. The gazetted B-BBEE Amendment Bill has not deviated from the original beneficiaries as defined in the BB-BEE Act and further qualified in the Codes of Good Practice,” Davies said. ‘The definition in the current B-BBEE Act of black people is a generic term which means Africans, Coloureds and Indians. The current Amendment B-BBEE Bill does not propose to change the beneficiaries of BB-BEE at all’ said Davies. Davies also dismissed the recent media reports that the Amended Bill will see companies will no longer receiving BEE grading for appointing white women and people with disabilities. Members of the public have less than 30 days to comment on the BB-BEE Amendment Bill that has been gazetted by Davies. The gazetting of the Amendment Bill is the culmination of the recommendations done by the Presidential BB-BEE Advisory Council.

general, male, female and people with disabilities. There has never been any discussion about deviating from the original beneficiaries as defined in the BB-BEE Act. Therefore, the statement should be dismissed with the contempt it deserves, and the market should not give credence to such statements’ he said. The Minister added that the proposed amendments to the BB-BEE Act are intended to achieve key strategic objectives. ‘These objectives… are to align the BB-BEE Act with other legislation impacting on BB-BEE and with the Codes; establishment of the BBBEE Commission to establish an institutional environment for monitoring and evaluating BB-BEE; provide for the regulation of the verification industry by the Independent Regulatory Board of Auditors; and deal with non-compliance and circumvention by, inter alia, introducing offences and penalties’ added Davies. The Bill also introduces inclusion of specific statutory offences involving fronting and other forms of fraudulent misrepresentation of empowerment status and the specification of penalties and blacklisting of entities and/or management for those offences.

The proposed amendments to the BB-BEE Act intend to align the BB-BEE Act with other legislations impacting on BB-BEE and with the Codes.

The bill also makes provisions for empowering the Special Investigations Unit to investigate all offences involving fronting or corruption committed by both the public and private sector with regard to the application of the Act and BB-BEE Codes of Good Practice.

“These statements about the bill are misleading as BB-BEE is intended to empower black people in

Members of the Public have until February 2012 to comment on the BB-BEE Amendment Bill.

“A fulfilling part is that there are penalties for misrepresentation of BB-BEE information, as well as provision for government to cancel contracts where information provided was found to be fraudulent, especially, since there is always litigation concerning government tenders,” Ratsoma said.

Volume 2 • 2012

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SECTION PERSPECTIVE TITLE

Wealth distribution:

or hostile takeover?

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Image: iStockphoto.com

An investment


SECTION TITLE PERSPECTIVE

Economic transformation is needed in South Africa to accelerate growth and help overcome challenges of income inequality. South Africa is ranked in the world’s top 10 countries where income gap between the rich and poor is ever widening. Written by Tshetlhe Litheko

T

here are patterns in economics, which have a significant influence in the make-up of society. An Italian engineer-turned-economist named Vilfredo Pareto, discovered one such a pattern, when he developed the distribution of wealth array in 1897.

everyone that we have fewer rich people than we have impoverished ones. It was the discovery of a Pareto’s principle, which essentially says 20% of the people own 80% of the wealth of a given country, that recent calls for wealth redistribution have found relevance.

Different nations have varied resources to yield different kinds of products. Some rely on agriculture, while others may rely on other natural resources or technology.

The concept of redistribution of wealth is seldom argued through an Economic Tetris that places a level of comfort that as a society we are striving towards an economic turnaround. Redistribution of wealth is defined as the transfer of income, wealth or property from some individuals to others caused by a social mechanism such as taxation, monetary policies, welfare, nationalisation and so forth. It is often a progressive redistribution, from the rich to the poor.

Coupled with the fact each nation’s population has different backgrounds, skills, and levels of education, Pareto’s discovery made the distribution of wealth appear as universal as the law of gravity. The concept goes something like this: If we took a list of all South African’s who are worth say, R10,000 and built on that list by adding groups of other members of society with many other levels of wealth, both large and small, and we plot the results on a graph, the result will be a

Countries would chose to use the mentioned tools to redistribute wealth for ethical, sociological or economic reasons. Firstly, at an ethical level, any society needs to be altruistic with how it cares for its poor. Secondly, taxing

The concept of redistribution of wealth is seldom argued through an Economic Tetris that places a level of comfort that as a society we are striving towards an economic turnaround. Redistribution of wealth is defined as the transfer of income, wealth or property from some individuals to others caused by a social mechanism such as taxation, monetary policies, welfare, nationalisation and so forth. It is often a progressive redistribution, from the rich to the poor. sliding graph, where many individuals are at the lowest end of the scale and fewer and fewer are higher up as we progress along the graph toward higher levels of wealth. However painfully obvious this could be to

the wealthy at higher rates will not affect their life chances, compared to taxing the less wealthy, particularly the lower and working classes, at equal rates. Thirdly, to prevent revolt on the part of poor, who may feel excluded or exploited. Fourthly, to ensure workers can buy

Volume 2 • 2012

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PERSPECTIVE

goods and services that are produced, as house hold consumption has a bearing on the success of businesses and wealth creation. Fifthly, to even the playing field, because wealth breeds wealth and rags to riches cases are a rarity. Lastly, to avoid corporate subsidies that are extreme and taxing the wealthy at higher rates is one way to offset these subsidies. In 2010, the ANC Youth League brought up the subject of the nationalisation of mines as wealth redistribution mechanism and subsequently commentators such as Desmond Tutu have suggested concepts such as rich people tax. What are the alternatives to wealth redistribution instruments that have yielded economic turnarounds for other world economies? And can we suggest these for the necessary economic transformation in our economy? Are the current commentators talking out of turn or is there some merit to their comments? Let’s explore two cases, where wealth redistribution is taking a mutually beneficial framework. Ireland 90’s Success Story Beginning in the early 1990’s, unprecedented economic growth saw the level of Irish real GDP double in size over the course of a little more than a decade. There have been many reasons advanced for Ireland’s success over this period, including a concept called “co-ordinated social partnership agreements”. The first of these agreements involved the labour market accepting moderate increases in wages in exchange for the long term development of various industries. In return, both government and business remained committed to labour unions to honour them once the targeted growth is achieved. In November, Kumba Iron Ore announced the final results of its spectacularly successful Envision employee share ownership plan: a R2.6 trillion distribution to 6 029 workers. After tax, the distribution was as much as R345 000 a worker. This and many other Employee Share ownership (ESOP) schemes are examples of how the private

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sector could be trusted to honour long term commitments to the labour sector as labour allows business to survive economic recessions. Malaysia Economic Transformation Blueprint Malaysia has been an economic darling of the Asian-Pacific region for many years with a sustained 8% GDP growth from the 80’s to the 90’s. Perhaps their most exemplary programme for South Africa is their transformation blueprint. The plan recognises the role played by the private sector in the development of the economy. A platform for investment was created with 92% expected from the private sector.

Malaysia has been an economic darling of the Asian-Pacific region for many years with a sustained 8% GDP growth from the 80’s to the 90’s. Perhaps their most exemplary programme for South Africa is their transformation blueprint. The plan recognises the role played by the private sector in the development of the economy. A platform for investment was created with 92% expected from the private sector.

The sector was involved in the planning of this transformation blueprint in partnership with government. Collectively the partnership identified 12 National Key Economic Activities (NKEA). From NKEA the partnership has identified 131 entry point projects, which will be prioritised in government planning and funds allocation. Policies will be amended to facilitate fast track implementation of such activities, including liberalising the market and removal of bottlenecks.

Economic transformation is needed in South Africa to accelerate growth and help overcome challenges of income inequality, where South Africa is ranked in the top 10 countries in the world. The gap between the rich and poor has grown by 4% from 0.66 to 0.70, between 1993 and 2008. As income continues to be concentrated on a few, we need to approach wealth distribution as an investment opportunity and not a hostile transaction. The global economy is converging ever closer with each passing day, the ominous challenge being a South Africa that reacts to economic changes, instead of a forward thinking country. Tshetlhe Litheko is Johannesburg-based writer.


FAST FACTS

FAST

FACTS Compiled by Mzwandile Jacks

One: The tiff between banks and the unions in the financial sector has been about preferential procurement in the sector. True or False? False: The battle has been over black direct ownership in JSE listed banks and insurance companies. Unions want it to be raised to 15 percent. It currently stands 10 percent. Two: Big Johannesburg-based law firms represented the big four banks and insurers in this battle for ownership? True or False? False: The banks were represented by the Banking Association of South Africa (BASA), an industry body. Three: Banks and insurers believe that increasing black direct ownership to 15 percent would lead to another run on

banks since the collapse of the second tier bank Saambou in the early 2000s. True or False? False: Banks and insurers believe this would lead to another costly restructuring of all BEE deals in the sector. This could cost more than R20 billion. Four: Unions agree it is impossible for banks and insurers to increase ownership to 15 percent. True or False? False: Unions believe the banks can do this, citing Investec, the JSE listed investment and private banking group, which has more than 15 percent black direct ownership. Five: The financial sector charter was gazetted in 2008. True or False? False: The charter could not be gazetted in 2008 and the banks and unions missed the deadline. This meant the battle for ownership in the sector had not been resolved.

BBBEE Compliance may not be important to you... but it is CRUCIAL to your business! Introducing Kbonga BEE Verification Agency (Pty) Ltd Kbonga BEE is a 100% black owned B-BBEE Verification Agency and has been accredited by SANAS. We provide Broad Based Black Economic Empowerment assessments, verification and certificates for enterprises and sectors that are required by legislation or the Codes of Good Practice to become B-BBEE compliant. Through our expertise, we are able to provide reliable, accurate B-BBEE Ratings to enterprises at value based costs. Kbonga BEE is taking Broad Based Black Economic Empowerment to a new level of excellence.

The Benefits of Verification Why should you get verified? 1. BBBEE compliance enables a company to get preferential procurement from the Government, Parastatals and the Private Sector. 2. BBBEE compliance enhances your competitive advantage. 3. BBBEE compliance enhances workforce diversity in your company 4. By being compliant and verified yearly, you benefit from the key principles of BEE, namely that: • Black economic empowerment is broad-based, • Black economic empowerment is an inclusive process, • Black economic empowerment is associated with good governance, • Black economic empowerment is part of South Africa’s growth strategy.

Tel: +27 21 421 4940 • Fax: +27 21 421 8284 / 086-2960912 • Email: info@kbee.co.za / nazo@kbee.co.za


LEGISLATION

Oil sector lacks

women

Image: iStockphoto.com

CEOs

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contents

INSIDE

26

18 Publisher's Note

5

Foreword

6

Editor's Letter

8

Contributors

10

Publisher's Details

11

ANC celebrates while the economy slows down

14

BEE Targets of the Highest Form

18

Finding Solutions in Property Sector

22

Retailers Ignore BB-BEE at own peril

26

South Africans Give Less, says Global Survey

28

Where is JSE's Real BEE Anyway

30

BEE Commission to crack whip

32

Wealth Distribution: An Investment or Hostile Takeover?

36

Fast Facts

39

Oil Sector lacks Women CEOs

40

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74 “In my opinion I think it is critical to have people of colour investing on the JSE as it is important to have a wide spread of shareholders in listed companies. In other words you will be 26 increasing trade ability. And in that way we start creating a strong middle class. But more importantly this gives the employees the opportunity to become shareholders,� said Theo Botha, the shareholder activist.


contents

INSIDE

58 Creating Jobs in Vhembe

44

Finding Ways to Create Jobs

47

BEE Stirs Heated Debate

50

Shaping the Future of Business – XIG

53

To BBM or not to BBM

54

Consumer Act: Business Wakes Up

56

A Jetsetter who loves SA

58

72

14

“The fact that there was no increase in the past year shows that the Top 100 JSE

4

High Capacity Connectivity Services

60

Cloud Computing: A New Buzzword

64

Sparks to Fly at Congress

66

Don't ignore other BEE aspects for sake ownership, warns Empowerdex

68

From Rags to Riches

72

Succeeding Against All Odds

74

Young Entrepreneurs Take the Plunge

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companies have not done any new BEE deals.

30

Many of the deals are in fact unwinding, like the Investec and Bidvest BEE deals which means one can expect a real decrease (in ownership) next year,” Ajay Lalu, MD of Black Lite Consulting, said.


PREFACE

publisher's note Since the release of the first edition of Transform SA I have met and interacted with many transformation activists and opinion makers. As proponents for social change we exchanged ideas about Transform SA and all that we stand for. We agree that advocacy platforms of this nature continue to be of great need in the fight against socio-economic disparities. Transform SA needs to encourage more interaction, robust debate and a solutions-driven approach to challenges facing South Africa. Paramount to the fight against social ills is the depth at which we are able to connect with those communities who continue to wallow in abject poverty. While relief methods are strategic, there is a need for a more systematic approach. This must differ vastly from endless verbal pledges and unfulfilled expressions of interest we have come to know. These have proved to be non-significant as they would most likely tackle merely the immediate actualities of these challenges while underlying causes continue to resurface with the intended beneficiaries left with high expectations. We really need to do so much more. A hundred years of transformation! Transform SA congratulates and recognises the centenary of the African National Congress, not only as a milestone for this key player in the struggle against inequality but also a point at which the movement must reflect on its journey and settle on what has resulted in the success of its existence. This must happen with a particular focus on core values and the basis on which

the ANC was formed. These could be used as a guide for advancement and the way forward in navigating through the necessary transition of migrating from being a vigilant liberation movement to a governing political party of great stature. For black business it is appropriate to salute the ANC for successfully mitigating some of the major impediments that were created by the apartheid regime. This also goes for the enabling environment it continues to present through its government policies which favour preferential procurement, women empowerment, youth advancement, SMME development and affirmative action. While I’m at ease with the level at which most senior management and political leaders comprehend and embrace transformation I am not charmed with the gaps that exist in middle management. A number of middle managers have proved to be nonresponsive to the call for transformation. Yet they are meant to play a role that is more significant than just compliance. Perhaps this is an issue of poor political education or simply an abdication of patriotic duty. But the signs are everywhere that change must happen now! Transform SA would like to pass on a sincere vote of gratitude for all the patronage that it continues to enjoy from contributors, advertisers, subscribers, advisors and supporters. Saki M Mabhele

Volume 2 • 2012

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PREFACE

fore

word A warm welcome to you and yours to the second edition of TransformSA magazine. It is quite an auspicious time in our country and in the life of TransformSA magazine. It is hoped that you have had some time to reflect on the transformation project and give deeper thought to the various articles that were published in the inaugural edition. For the team at TransformSA, it’s hard to believe that they are on their second edition already – how quickly time flies! It certainly has been quite an eventful last couple of months and by the looks of things, it’s only going to get more interesting. We have witnessed several phenomena which have come to define the year 2011- among some of these are the numerous uprisings in the Arab world which have come to be collectively known as the Arab Spring – culminating in the death of Colonel Muarmmar Gaddafi of Libya. One is reminded of the economic emancipation march held by the ANC’s Youth League last year whose theme was “Economic Freedom in our lifetime!” We have also witnessed the worsening of the global economy through the various near defaulting of the various economies in the Eurozone – something which jeopardises our very own export markets and by extension our domestic economy as it will have a visible impact on the various B-BBEE transactions and thus might have a dent on our transformation efforts. On the legislation front one notes the recently promulgated B-BBEE Amendment Bill which will seek to criminalise fronting and other forms of misrepresentation by imposing sentences of no less than 10 years imprisonment. Of particular importance to mention is the recent commemoration of the centenary of the African National Congress - a highly remarkable milestone indeed! - Which was not only a celebration of 100 years of the existence for Africa’s oldest liberation movement; but also a celebration of an inclusive policy environment whose benefits have enabled our people to participate in the mainstream economy of our country. This month also marks the beginning of South Africa’s tenure as the chair of the UN Security Council. As part of being a non- permanent seat holder in the Security Council, South Africa has once again been afforded the opportunity to chair the UN Security Council. This ought to bode well for South Africa’s efforts to introduce reforms in terms of the mandate and configuration of not only the Security Council, but the United Nations as a whole. To that end, we have various matters of international importance to grapple with and look at. Chief among these will be the need to work towards better world peace and security, the respect for human rights and better efforts towards the achievement of the Millennium Development Goals. Marking the end of this year will of course be the ANC’s Elective Conference in December, one can only wish for the prevailing of cool heads as this conference should be able to give direction in terms of the transformation trajectory of our country. All of these developments have a bearing on transformation and for this reason TransformSA will be keeping its eyes peeled, for transformation is a project that is of national importance. Lastly, we hope that 2012 will be all that you have planned it to be and in your own small way you help further the transformation project. B. Peter Vundla

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EDITORIAL

editor’s

letter I

recently spent a few very interesting hours at a Black Management Forum (BMF) conference in the sunny Johannesburg. I was a media representative in the gathering of some of the country’s finest black minds. BMF is a non-racial, thought leadership organisation founded in 1976 whose main aim is to influence socio-economic transformation. It thus provides us with a really good overview of transformation in South Africa. During the course of the conference it quickly became obvious that many guests were concerned about the lack of transformation in the Top 100 JSE listed companies. All this needed government intervention and deepening the struggle of black business people so that transformation can be realised in local companies, most argued. Somewhere in this magazine, we publish a story in which major black economic empowerment (BEE) players and activists call for JSE-listed retail companies to give black people an opportunity to invest on this bourse. Apparently there isn’t a widespread of black shareholders in this sector. I was also alerted to an allegation which points to how disengaged and insensitive South Africans have become towards giving to the poor by a recent article in one of the country’s most popular news websites. Published early in January this year, the article about World Giving Index reminded me, not that I ever needed to be, that individual selfishness is steadily creeping into our society. This is sad considering that the gap between the poor and the rich in SA continues to widen. This means we should be giving to the poor more than ever before.

This exposed remarkably clearly that honest hard-working, tax-paying private SA citizens have now become self-centred, having forgotten that giving was not only a traditional thing but had been pivotal in the struggle against apartheid.

According to this index, SA ranks an embarrassing 108th position out of 153 in the World Giving Index. This does not bode well for transformation in the country. This exposed remarkably clearly that honest hard-working, tax-paying private SA citizens have now become self-centred, having forgotten that giving was not only a traditional thing but had been pivotal in the struggle against apartheid. Lastly, we would like to thank all our readers for supporting the first issue of this magazine which came out late last year in the manner they did. Again, thank you to all the advertisers who came on board in that edition. This is indicative of the fact that many out there do see that this magazine has a great future and is an important voice in the country. We welcome more of your support. Thanks. Enjoy

Mzwandile Jacks

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An Authorised Financial Services Provider

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

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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.

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contributors

PROFILES

Mthunzi Mdwaba is Vice President of BUSA, and a governing body 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.

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.

Adam Ismail is a director at ENS (Edward Nathan Sonnenbergs). He currently practices as an attorney in the corporate commercial department. He specialises in mergers and acquisitions, both in South Africa and the rest of Africa. He also represents multi-nationals with their investments into South Africa and the rest of Africa. Within mergers and acquisitions, he has extensive experience in black economic empowerment transactions, where he has rendered advice on a number of significant high profile deals, such as advising on the BEE codes of good practice and its interface with the various transformation charters. Another area of substantial experience within mergers and acquisitions is real estate, where he has been involved in the structuring and implementation of a number of high profile property developments in South Africa and Africa. He has acted for a diverse range of clients in both the local and international arena. Adam’s practice experience includes the drafting of commercial contracts such as, shareholder’s agreements, sale of share agreements, sale of business agreements and service agreements. He also has experience in company sales and purchases, management buy-outs and, commercial transactions within the hospitality and leisure industry. Lalu Mokoku has a Masters degree in Dramatic Arts which she obtained as a Drama For Life Scholar. She is ShakeXperience™ programme developer and responsible for documentation as well as monitoring and evaluation. She is a "Winter Summer Institute in Theatre for Development" co-founder, researcher, child participation and protection specialist, writer and theatre practitioner with significant experience. She has worked with numerous organizations including non-governmental organizations (NGOs) (community, national and international), research institutes and UN organisations as an independent consultant.

Rui Marto obtained his Bachelor of Arts degree in 1989 and his Bachelor of Law degree in 1991, both from the University of Witwatersrand. Rui Marto is a practicing attorney and director of Marto Lafitte & Assoc Inc, specializing in property and commercial law. He was admitted as an attorney in May 1994.  He co-founded Marto Lafitte & Assoc in 1995.  Rui Marto hosts a number of seminars and has appeared as a guest speaker at various professional and private forums, including SAPOA.  He has contributed a number of articles to various publications and websites on various topics related to his area of expertise.

Tshetlhe Litheko, is an economics graduate from the University of South Africa (Unisa). He is the CEO of Lehae Consulting Services, a transformation and enterprise development firm. Among some of Lehae's achievements is launching an enterprise development fund, designed to allow the private sector to actively contribute to the economic development of South Africa. As a social activist, Tshetlhe founded a youth development project in the 90's, which earned him national recognition as the SABC, Old Mutual and Sowetan community builder of the year nominee in the year 2000. He is often driven by the need to build a universal philosophy in nation building, which recognises that beneficiaries of development are not ignorant about their developmental needs and thus their empowerment should be driven by them with the aid of those that are altruistic enough to contribute to the empowerment process.

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CREDITS

sa

The Quarterly Journal for a Transforming Nation

publisher’s details Publisher

Managing Editor Assistant Editor Feature Writer Production Director Production Manager Creative Director 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 Ntsako Mbhokota ntsako@transformsa.co.za Tiitsetso Tlelima tiisetso.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 Litho 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 (ISSN 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 2 • 2012

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COVER STORY

ANC celebrates while the economy

slows down According to both vice presidents of Business Unity South Africa (BUSA), the ANC should also see how the centenary celebrations have contributed to the development of Mangaung by way of beneficiation. They urge ANC members to ask tough questions of whether the party has provided the kind of development it intended. Written by Mthunzi Mdwaba and Brenda Madumise ens of thousands of ANC members, supporters, friends both domestic and international, descended on the tiny city of Mangaung earlier in January to mark the centenary celebrations of the ANC, and without a doubt, the city’s inhabitants were overwhelmed by the sheer numbers, the colourfulness and the capacity to consume and spend. In its 100 years of existence, the ANC has managed to

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reshape and recreate itself to stay true to its founding principles and later the Freedom Charter. The centenary celebrations should resonate with every South African, not just ANC members or supporters. It should mean that South Africa keeps this hardwon democracy forever young and begin the next 100 years with the choice to harness the values of human decency.

Image: ANC

T


COVER STORY It should also acknowledge that as free people South Africans must choose to shape the forces of the information age and the global society to unleash the limitless potential of all people. The challenge of the past remains the challenge of our future. The country's divide of race has been and continues to be its constant curse. Prejudice and contempt, cloaked in the pretence of religious or political conviction, are no different. South Africa has a rich texture of racial, religious, cultural and political diversity that must be cherished and harnessed because great rewards will come to those who can live together, learn together and work together. The ANC deserves to be revered and applauded for turning 100 years old, becoming the oldest liberation movement in Africa. This is hugely impressive endurance. The centenary celebration is made more remarkable by the fact that the ANC is also the only liberation movement to ascend to power via a blood less coup - an important point acknowledged by all throughout the world. In the 100 years since the 8th January 1912, 9 of ANC's Presidents are no longer alive and were all part of the pre-democracy liberation period of the struggle for political freedom. Three of them were part of a team that ushered us into the new country led by Nelson Mandela. These are: • John LangalibaleleDube (1912 1917) • Sefako Mapogo Makgatho (1917 1924) • Zacharias Mahabane (1924 - 1927 & 1937 - 1940) • Josiah Tshangana Gumede (1927 1930) • Pixley Ka Isaka Seme (1930 - 1937) • Dr Alfred Bitini Xuma (1940 - 1948) • Dr James Sebe Moroka (1949 1952) • Chief Albert Luthuli (1952 - 1967) • Oliver Reginald Tambo (1967 1991) • Nelson Rolihlahla Mandela (1991 1997) • Thabo Mvuyelwa Mbeki (1997 2007) • Jacob Gedleyihlekisa Zuma (2007 to date)

It managed to gain power in this manner while migrating from being a liberation movement to being a ruling party. Very significant during the evolution of the ANC, is the adoption in Kliptown of the Freedom Charter during Chief Albert Luthuli's tenure as president. The Charter was as is well-known, a statement of core principles of the South African Congress Alliance, made up of the ANC and its allies, the South African Indian Congress, the South African Congress of Democrats and the Coloured People's Congress. The ANC at this stage was already a mature age of 43 years old. The 40 former and current African statesmen who attended the celebrations, included Ugandan President Yoweri Museveni. Museveni praised the ANC for doing the entire continent proud by introducing a plan to instil non-racialism through the Freedom Charter. He added that," the way (the ANC) handled the issue of racism… was a master stroke when you said it does not matter who you are, whether you are black or white." He credited the ANC for ending tribal wars and galvanising all the tribal struggles into one national struggle. However, the ANC should be checking its performance as a 17-year-old ruling party, plus the 83

years of selfless struggle against the Freedom Charter. The ANC should also see how the centenary celebration has contributed to the development of Mangaung by way of beneficiation. ANC members should ask tough questions of whether it provided the kind of development it intended. Should it have supported the black person who owns a lodge in the township? Could it have done better than just supporting the Mangaung city infrastructure which is already flourishing? Could it have fixed roads going into the township? Could it have ensured that more suppliers were Mangaung based? Is it possible that it could have organized the event a lot better by ensuring proper training of its marshals so that they knew the stadium well to be able to do their work? Is it possible that it could have catered for old and frail people to be driven up and down the stadium by say, golf carts? Is it possible that it could have provided maps? An attempt to answer these questions and more importantly attending to corrective action will assist the ANC in preparing for the elective conference in Mangaung which is less than 12 months away. It is critically important that the ANC asks the following questions against the backdrop of the 10 guiding principles of the Freedom Charter, although this article is limited to seven of same; • What has been achieved? • How has it fared against own expectations and those of the people? • What has it not been able to achieve as per the Freedom Charter? • How does it achieve what it has not been able to deliver? • What are its plans for the next 100 years so that the ANC of the past 100 years is as relevant to the youth of today and tomorrow? • How can it be ensured that the ANC is as successful in the delivery of the promises made in the Freedom Charter as it was in liberating the people of South Africa? The People Shall Share in the Country's Wealth As writers of this article and members of the ANC, we believe that this line should be read together with the third paragraph of the preamble of the Charter, which reads: "Our country will never be prosperous or free until all our people live in brotherhood, enjoying equal rights and opportunities!” This is an elephant in the room that still bedevils South Africa. The wealth of this country cannot continue to be in the hands of a few people. The JSE ownership perhaps demonstrates this in a very conspicuous

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COVER STORY

manner. Seventeen years into our democracy, the JSE still has a very insignificant number of black participants, particularly black women.

constitution guarantees the right to be equal before the law, without regard to race, gender, ethnicity, disability or privilege.

Granted, most of the problems have arisen through the corruption of officials and suppliers who have cut corners in delivering.

This is despite the country's demographics and a plethora of empowerment policies meant for the JSE and private sector in general. What is particularly curious is evidence demonstrated in numerous research results. White business is the biggest beneficiary of empowerment policies. It has become wealthier.

The rule of law applies to the weak and strong, the rich and the poor, the powerful and powerless.

This has resulted in the provision of houses that are inadequate. The houses have huge defects and with the best intentions, are built along the same apartheid pattern. Black people are still living far away from the urban centres and their places of employment, incurring more transport costs.

If the country does not address this matter in earnest, it runs the risk of living in a country that is not safe and secure. The global economy that South Africa is part of, constantly seeks to increase efficiency and at the same time equally requiring constant investment in education and training. It should be an economy that responds to the creativity of young entrepreneurs who wish to be Independent Power Producers (IPP) but are being held back by government officials who refuse to process their applications unless they pay a bribe to speed up their applications. The Land Shall be Shared Among Those Who Work it This is a hot potato that needs to be resolved rather urgently before it becomes a problem that takes a violent nature. Former Zambian President, Kenneth Kaunda, addressing the gala dinner guests at the centenary celebrations, warned South Africa against repeating the same mistakes other African countries such as Zimbabwe had made in attempting to resolve the land issue. He said: "Comrade Zuma you have more serious problems than any of us. The problem is the land question. Please remember two wrongs can never make a right. Discuss with white leaders, the problem of land. The situation here is very serious."

There Shall Be Work and Security South Africa has come many miles towards justice but has not fulfilled the dreams of the many black South Africans. Unemployment amongst black people is the highest, with the youth constituting the largest part. Black people bore the brunt of poverty and child poverty has risen to unacceptable levels. South Africa has the New Growth Path (NGP), intended to create jobs. But this is still a long way from curing the unemployment ills due to processes that still need to be followed. While small wins have been had, such as the signing of various accords, referred to as "low hanging fruit", the majority of the NGP's intentions are still on "ice" until the social partners agree on how to move forward together. The Doors of Learning and Culture Shall Be Opened Technically, this has been done, but realistically, the country is still a long way from ensuring that the doors of learning and culture provide what was intended by the signatories to the Charter. The education status quo is still light years away from being the kind of education that will lead to the desired results of ensuring that South Africa (truly) belongs to all who live in it.

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There Shall Be Peace and Friendship Peace must mean many things to South Africans. South Africans have the right to live safe and secure lives today, tomorrow and forever. Every South African, from teacher to journalist, from politician to community leader, from a business person to the unemployed, must make peace and friendship a mission to banish from the minds of children and young people glorifying violence, rape and sexual assault. South Africans must also endeavour to end the practice of speaking peace in one place and preaching hatred in another. So, while a lot has been achieved, thanks to the ANC, South Africans cannot be complacent as much more needs to be done. As the country looks to the next 100 years, it needs to change to be in a position to deal with the realities that face the global community.

There Shall be Houses, Security and Comfort

South Africa seems to be caught in liberation and populist mode, which it urgently needs to convert to drafting of well considered, pro-growth policies that come with being the ruling party. Having done exceptionally well in the area of political struggle, the country needs to turn its efforts to the economic struggle that is still a long way from being won.

Lots of work and success has happened here, but lots still need to be done, especially to ensure security and comfort.

The reality is that black people still sit outside the economic activity of the country. SMMES of all kinds, irrespective of whether they are white-

Small gains have been made in the last year, but much more needs to be done to ensure that the doors of learning are open to all, accompanied by qualitative input that lends itself to the creation of jobs.

All Shall Be Equal Before The Law This is a principle that all South Africans must espouse and should be at the core of their being. It is what many black South Africans have struggled and died for. That is why the

This has also led to lack of supervision of children as parents have to leave their homes early to catch transport and return late at home without the opportunity to spend quality time with family, especially their children's school progress.


COVER STORY

South Africa has come many miles towards justice but has not fulfilled the dreams of the many black South Africans. Unemployment amongst black people is the highest, with the youth constituting the largest part. Black people bore the brunt of poverty and child poverty has risen to unacceptable levels.

owned or black-owned are in dire need of policies that will ensure a conducive environment for their growth and prosperity.

always results in very little being done because of the sheer energy and time that is devoted to election battles.

They are being choked by an inflexible regulatory framework and bureaucratic red tape. The economic system needs to re-orient its programmes and policies towards employment generation and employment security as opposed to job security and promote policies conducive to the creation of sustainable and competitive enterprises. South Africa urgently needs to find ways of doing away with the mistrust and distrust that exists between the government, labour and business, so we can realise the meaning of "together we can do more".

The ANC urgently needs to find ways to have an attitudinal change, and to behave like the ruling party it has been for the last 17 years.

More often than not, there is no movement in passing policies that can create job-rich growth as they get stuck for eternity at NEDLAC due to pure distrust. A more constructive partnership between business and government is far more important than the dominance of either. The sooner the country can place people at the centre of everything it does, the better. The country has been talking about Private Public Partnerships (PPPs) and industrialisation for a very long time. But it is paralysed by corruption, incorrect deployments and sycophantism where these activities need to be activated. It is to be noted that there has been a huge commitment and an anti-corruption partnership recently between the social partners, with Labour and Business taking a very proactive role. But the country needs to do more. South Africa needs to sign up to a pact that will punish waste, whether in the public or private sector. It is gratifying to see the NEC's centenary statement, in which it outlines its plans to modernise and end the bruising leadership battles that have characterised the party's post-exile era. The statement states: "Leadership development shall be accompanied by a review of the leadership election system of the ANC in order to enhance internal democracy, credibility of the process as well as the integrity and suitability of candidates." This would go a long way to ensuring that South Africans are not hamstrung from doing anything because everyone is eyeing the next election, which

Members of the ANC need to re-examine the liberation role of the past insofar as it is devoted to the economic struggle. But they should balance that with the role it has of leading and running the country. The ANC unnecessarily plays into the hands of its enemies by failing to do simple things that, as the ruling party, should not require much to ensure delivery. If the ANC avoids these things it shall concomitantly grow its brand that it so constantly and consistently erodes. As inadvertent as this might be, this makes no difference. The ANC brand should sell itself to all - the youth, white people who are still resisting to join the party because of its own lack of delivery and in-fighting. The ruling party needs to find ways to open up and de-mystify its inner workings by allowing young people and fresh thought to come into the organisation and not restrict the involvement to comrades who were either in prison or in exile. There are a lot of people who want to participate, but somehow, the organisation pushes them out and the perception is that, you must buy your way in. People pay to be invited into the inner circle. The ANC is losing the youth steadily because it does not have the emotional attachment and the high level of gratitude that our age group has for the ANC. The youth recognises what the ANC has done for the country by way of liberation and giving birth to our democracy. At the time it did things that no other party anywhere in the world has been able to deliver. But what about tomorrow, what has it got to offer in a competitive environment? We have to change more rapidly and perhaps more profoundly. Mthunzi Mdwaba and Adv. Brenda Madumise are both BUSA Vice-Presidents and members of the ANC. They write in their own personal capacity.

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TRANSPORT

BEE targets of the

highest

form Siyabonga Gama, the CEO of Transnet Freight Rail (TFR) tells Transform SA his division has earmarked R5.3 billion for the 2010/2011 financial year to spend on broad based black economic empowerment (BBBEE), including procurement, women-owned SMMEs, 100 percent black-owned companies. Written by Mzwandile Jacks

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Images: Transnet Freight Rail

enterprises and triple BEE


TRANSPORT

S

omehow he remains a figure of unperturbed equanimity. As state-owned enterprises wobble under all sorts of criticism, Siyabonga Gama, the CEO of Transnet Freight Rail (TFR), has been quietly making sure that his unit achieves transformation targets of the highest form. Gama recently told Transform SA his division had earmarked R5.3 billion for the 2010/2011 financial year to spend on broad based black economic empowerment (BB-BEE), including procurement, women-owned SMMEs, 100 percent black-owned enterprises and triple BEE companies. Gama, speaking in an exclusive interview with Transform SA, said BB-BEE performance for 2010/2011 was 75 percent against a planned spend of 70 percent. “We have achieved this by assisting suppliers to improve their BB-BEE status by guiding them on procurement policies and procedures,” Gama said. TFR, the wholly-owned subsidiary of Transnet, is the largest division within the transport utility, which is a commercialised organisation with the state as its sole shareholder. Transnet has affirmed its commitment to affirmative procurement since 1994. Black Economic Empowerment (BEE) has been integrated with the tender rules and procurement policies to assist historically disadvantaged communities (HDC) and empower TFR's managers to effect affirmative procurement without compromising specifications, safety and standards. “In order to promote the development and support of suppliers and contractors from disadvantaged communities, TFR has decided that a large portion of the available total procurement expenditure be spent in such a manner that it advances BB-BEE,” Gama said.

“This will continue to be done by setting targets at various levels, which include: complying with all TFR’s BB-BEE requirements when submitting tenders. As a precondition for selection, a potential supplier must submit a signed BB-BEE certificate, a detailed scorecard and any other documents that may be required by TFR. These shall form one of the critical requirements in the valuation of BB-BEE. Pre-qualification on BB-BEE credentials is a key determinant on whether a supplier is evaluated on the technical and financial aspects of bid evaluations. This demonstrates our commitment to economic redress and ensuring we move small business and black business from the periphery to the centre over time.” TFR subscribes to Transnet’s Procurement Procedures and does not only support BEE, but also has a role to encourage other companies to ensure a level playing field in South Africa by removing the current inequalities in business. Social and economic transformation will assist our country to avoid the kind of polarisation brought about by too few participants in the economy and will create jobs in underserved communities.

“We have achieved this by assisting suppliers to improve their BB-BEE status by guiding them on procurement policies and procedures,” Gama said.

TFR prefers to do business with business enterprises who share these same values. Gama said of the R5.3 billion, BB-BEE spend, 16 percent went to black owned business (51% Black owned) for full year 2011 and 11 % to Black Women-Owned businesses (30% BWO) full year 2011. He said the other chunk would go to procurement spend on triple BEE companies. Actions are in place to improve spend on Black Owned and Black Women-Owned businesses. INFRASTRUCTURE DEVELOPMENT TFR will continue to invest in infrastructure in line with its strategy to lead and vigorously

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TRANSPORT

“In order to promote the development and support of suppliers and contractors from disadvantaged communities, TFR has decided that a large portion of the available total procurement expenditure be spent in such a manner that it advances BB-BEE,” Gama said.

drive supply chain transformation to unleash rail efficiency at internationally competitive prices. Its logistic system plays a critical role in positioning the country’s economy in a globally competitive domain. In this regard, TFR will continue to collaborate with the mining houses to optimise and leverage productive capacity by reducing transit times. TFR always ensures that its investment in infrastructure development will promote meaningful BEE and the growth of local industries. All the deals that have been signed so far meet these criteria. “We will continue to invest in infrastructure development until 2040 and this is indicative of what we see as a market trend. We will also look at the installation of new rail tracks and the stabilisation of civil works below rail tracks,” Gama said. TFR will also mobilise all resources to contribute to volume growth and greater tonnages transported efficiently by rail, rather than road, to reduce the cost of transport in the country. A key focus will be on service delivery to customers and to motivating employees to contribute meaningfully to the success and sustainability of the business. TFR is targeting significant growth in the export coal and iron ore lines as well as in mining and heavy manufacturing industries over the next five years.

entry-level operations jobs for the container and automotive business. Many of TFR’s operations are in smaller municipalities and rural areas, leading to economic stimulation in those areas. This is coupled with skills development programmes in operational and technical fields and professional support to improve human capital development. The ’Graduates in Training’ programme resulted in 36 of the 48 participants attracted for an 18 – 24 month period being successfully placed in the organisation. The remaining 12 are still undergoing training; we are now in a process of implementing the second intake intending to bring in additional 295 GIT’s for the next two years. Of the 19 ‘people with disabilities’ who were given internships, 40 percent completed their training successfully while the remainder remain in training. The ‘Engineering Development Programme’ was successfully launched and implemented, with the first intake of 10 depot engineers and five trainee depot engineers starting their programmes in December 2010. The ‘Management Development Programme’ was successfully launched and piloted. Of the 12 candidates who attended the pilot programme, seven have already been appointed as operations trainee managers. TFR achieved and exceeded the employment equity target of 77 percent by giving preference to the recruitment of black, female and disabled job applicants.

The potential general freight five-year volume target has been validated and significant demand exists. This presents opportunities for future growth, which will be targeted in line with national objectives and particularly in those areas identified by the New Growth Path (NGP).

This was achieved by filling positions with suitably qualified candidates, using the broad guideline of 70 percent black, 30 percent white and 15 percent – 20 percent female candidates.

The aim is to achieve volume growth and increased market share while reducing the cost of externalities.

TFR training spend was 2.2 percent in 2011 as a percentage of personnel costs. This is slightly higher than the target of 2 percent. Compared to the national percentage benchmark of 5 percent and a benchmark internationally of 10 percent.

JOB CREATION TFR has initiated the ‘1 800 operators’ recruitment campaign nationally to enhance the operational feeder channels, including the creation of 119

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In the year ahead, TFR will continue to recruit new skills in fields such as econometrics, economic research and economic regulations to position the business strategically.


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S h u t t l e s , G ro u p Tr a n s f e rs , F l e e t & Tr a v e l M a n a g e m e n t Volume 2 • 2012

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PROPERTY

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PROPERTY

Finding

solutions in property sector While it is undeniable that the government land reform policies have been slow and only partly successful, the writer submits that it is erroneous to adopt policies that are (arguably) unconstitutional. South Africa remains a role model to the rest of the world in its political transformation. Written by Rui Marto Volume 2 • 2012

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T

ransformation in the property sector and land reform in South Africa is a massive and complex challenge. There are many differing and often competing views offered to resolve this issue. It is my view that despite the complexity, we must stay the course and rely on the Constitution as our compass to find the solution. Let us kick-start with some background. Racial inequality during apartheid was based on a land program. This was enforced through the Natives’ Land Act of 1913 and 1936 followed by Group Areas Act of 1950. The legislation enforced a separation and dispossession of land through group areas system. The undoing of the consequences and legacy of this legislation is central to the transformation process.

of willing buyer-willing seller. This principle appears to no longer be supported by the government as evidenced after the tabling of the Expropriation Bill and more recently the Green Paper on Land Reform. The proposed legislation suggests that expropriation can take place in some instances below market price and it takes away some of the remedies that have existed to date for landowners. There has been widespread resistance to the proposed legislation. The main argument against its acceptance is that it is unconstitutional. I will revert to a discussion of certain aspects of the Green Paper on Land Reform. Property Rights and our Constitution

The government has until recently supported a policy of land redistribution using the principle of willing buyer-willing seller. This principle appears to no longer be supported by the government as evidenced after the tabling of the Expropriation Bill and more recently the Green Paper on Land Reform.

The terms “land reform” and “transformation” in the property context are used broadly and sometimes to mean different things. The postapartheid legislation has sought to address the racial dispossession in terms of three broad programs, including land tenure, land restitution and land redistribution. Land tenure program deals with rights of those who occupy land. The Extension of Security of Tenure Act of 1997 seeks to ensure that “the law promotes the achievement of long-term security of tenure for occupiers of land, where possible through the joint efforts of occupiers, landowners and government bodies;” and “that the law should extend the rights of occupiers while giving due recognition to the rights, duties and legitimate interests of owners.” Restitution of Land Act of 1994 aims to “provide for the restitution of rights in land” in respect of those communities whose land was dispossessed. The restitution is achieved through either restoration of land rights and title, provision of alternative land or compensation. Land redistribution aims to provide the poor with access to property. The latter is by far the most contentious. The government has until recently supported a policy of land redistribution using the principle

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The Constitution introduced the fundamental right to property and right of access to adequate housing, as contained in section 25 and 26 of the Constitution. Section 25 confirms that no one may be deprived of property and no law may permit arbitrary deprivation of property. “Property may be expropriated only in terms of law of general application (a) for a public purpose or in the public interest; and (b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.” The section includes provisions on compensation stating: “The amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including: (a) The current use of the property; (b) The history of the acquisition and use of the property; (e) The market value of the property; (d) The extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and (e) The purpose of the expropriation.”


PROPERTY

The section further sets out the context in which these provisions are relevant, stating: “For the purpose of this section, the public interest includes the nation’s commitment to land reform and to reforms to bring about equitable access to all South Africa’s natural resources. “No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination.”

“No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination.”

Section 26 grants the right to housing. The clause states: “(1) Everyone has the right to have access to adequate housing. (2) The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right. (3) No one may be evicted from their home, or have their home demolished, without an order of court made after considering all the relevant circumstances. No legislation may permit arbitrary evictions.” Market approach After much debate prior to 1994, the government adopted a market approach to land reform which was supported by international community as the most viable. This was supported by World Bank. The property rights entrenched in the Constitution form the basis of the government land reform policies, to date. Twenty five years later, it is argued that not enough has been done. Critics of the willing buyer-willing seller principle argue that: 1. It is a disregard for history in that blacks were dispossessed of their property in the first instance; 2. It is unworkable in that there is a lack of funds to allow for redistribution at a speed required for transformation. It is unreasonable to expect those who have been dispossessed to wait for redress indefinitely. There is an increased restlessness and criticism

of government policies. There is a greater fear that inaction will lead to Zimbabwe-style land grabs. Change in Approach: Green Paper on Land Reform This appears to have resulted in government’s change in approach as outlined above in moving away from the market approach. The Green Paper on Land Reform 2011 appears to do just that. It seeks to establish a Land Management Commission which, many believe, infringes on the jurisdiction of SA Courts. The commission gives a Valuer-General control of determining the amount of compensation payable for expropriated land and a state bureaucracy is given the job of “invalidating” title to land. It is argued that the Constitution already allocates these powers to the courts. The Green Paper also introduces a limitation on land in private ownership. It requires commercial farmers with more land than the maximum to dispense with the ‘excess'. The state could decide to expropriate ‘excess' land at valuations decided by the Valuer-General. Certain provisions of the Green Paper appear to attempt to bypass the Constitution. Conclusion While it is undeniable that the government land reform policies have been slow and only partly successful, I submit that it is erroneous to adopt policies that are (arguably) unconstitutional. South Africa remains a role model to the rest of the world in its political transformation. The Constitution was at the heart of that success. It is said about democracy that it is the worst system in existence, except for the alternative. The same argument can be made for the market approach. It is imperative to maintain the rule of law and uphold the Constitution. Rui Marto is a practicing attorney and director of Marto Lafitte & Assoc Inc, specialising in Property and Commercial Law.

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PERSPECTIVE

Retailers ignore BB-BEE at own peril, says activist

Written Mzwandile Jacks

“H

ow can this be?” angrily asked Theo Botha, South Africa’s well-known shareholder activist recently. “Have listed retail companies not heard of the increasing… black spending power?” And so, in almost all respects, it seemed these companies have not heard about this power, otherwise they would have implemented BBBEE in their operations a long time ago. Botha, irritated by the retail companies’ reluctance to have people of colour invest in their companies, asked why other companies in other sectors have implemented more than one BEE transaction while companies like Pick ‘n Pay, South Africa’s biggest retailer, had not. Botha is an unassuming man. But few would have been surprised were the Pretoria-based shareholder activist to reveal that he has now become a BB-BEE militant.

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Image: iStockphoto.com

A well-known white shareholder activist calls for South Africa’s retail companies to give people of colour a chance to invest in the JSE, saying it is important to have a wide spread of shareholders in companies listed on the local bourse.


PERSPECTIVE

He used to be only involved with JSE-listed companies which had white shareholders as a majority.

middle class was mentioned four times in the annual report,” Botha said.

Other white shareholder activists may find fighting for BB-BEE hard, but Botha is already pushing back in this regard.

Turning to the Government Employee Pension Fund (GEPF), which is the power behind Public Investment Corporations’ (PIC) throne, Botha said they have failed to drive the process of BB-BEE in the retail companies.

Speaking at the Black Management Forum (BMF) conference, Botha said: “In my opinion I think it is critical to have people of colour investing in the JSE as it is important to have a wide spread of shareholders in listed companies. “In other words you will be increasing trade ability. And in that way we start creating a strong middle class. But more importantly this gives the employees the opportunity to become shareholders.”

“In other words you will be increasing trade ability. And in that way we start creating a strong middle class. But more importantly this gives the employees the opportunity to become shareholders.”

Botha made these comments shortly after analysts attacked the retail industry for dragging its feet on empowerment. Analysts said these companies were doing this because they were not under direct pressure from the government as their main customer base was the man on the street. Spar, another food retailer, said it planned to sell 10 percent of its business to empowerment partners for R1 billion. Its shares rose 2.53 percent to R60.80 on the back of the news while the retail index fell 1.63 percent. Retailers such as Clicks, Truworths, Foschini and Lewis have not done any deals to date, at least at ownership level. Syd Vianello, a retail analyst at Nedcor Securities, warned that at some point the government would force these companies to put BEE schemes into place. Empowerment deals in the sector were an eventuality, but retailers did not consider it important enough, Vianello said “Edcon 2011 annual report states that clothing & footwear spend as a percentage of household expenditure has increased, in part as a result of a rapidly emerging black middle class, which has more than doubled in size since 2000. The words black

“The PIC is the biggest shareholder in retail companies. These companies are also supported by the rapidly growing black middle class, Botha said. “I can therefore conclude the GEPF engagement policy with retail listed companies in regards to empowerment has failed.” So what is the way forward? Botha urged the BMF to engage with the GEPF around the issue of BB-BEE in retail companies. Meanwhile, BMF said BB-BEE Economic Advisory Council was toothless and needed to become a fully-fledged chapter nine institution with a full-time secretariat to handle problems. Tembakazi Mnyaka, deputy president of the Black Management Forum, said BMF was also concerned that the amendments to procurement regulations would continue to benefit the white majority. These amendments are due to come into effect on December 7 and will enforce up to 75 percent local procurement. Earlier this year, a summit of black business groups – including the Black Lawyers Association, the Association for the Advancement of Black Accountants of South Africa and the Association of Black Securities and Investment Professionals – called for the advisory council to be elevated into "a structure that takes a form of a commission or ministry". BMF president Jimmy Manyi called it "scandalous" that this far down the track sufficient headway had not been made in addressing the under-representation of black people in the top echelons of business organisations and companies. It was worrying to see in the latest employment equity report that white people occupied more than 70 percent of top management positions.

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CSI

South Africans

give less, says global survey

According to the UK-based Charities Aid Foundation’s (CAF) second annual World Giving Index, South Africa ranks poorly, making transformation too slow. Written by Mzwandile Jacks or most developed economies like the US, the UK and Netherlands, hunger is a fleeting inconvenience, easily elucidated by stepping out to the stores or ransacking the fridge. However, persistent hunger is part of everyday life for many people in the rural backwaters of South Africa.

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is that South African corporates and individuals give less than those in developed countries like the US, the UK and the Netherlands. This is too sad for words because South Africa, as one of the pre-eminent transforming nations of the world, should be ranking high in the giving stakes as it has millions of poor people.

Halving the proportion of people in South Africa’s rural areas who do not get enough to eat is one of the goals of the country’s corporate social investment (CSI).

South Africa ranked an embarrassing 108th position out of 153 in the World Giving Index released recently, tracking sub Saharan African, which ranked poorly in general against other parts of the world.

Reducing hunger and poverty are a complicated matter it seems. At this stage, many South Africans are getting poorer. Yet the indication

Recently, the UK-based Charities Aid Foundation (CAF) released its second annual World Giving Index, which seeks to measure the

Image: iStockphoto.com

F


CSI

“The spirit of a giving civil society in the post1994 administration has dissipated. These days there is very little enabling policy, though of course legislation does require all listed companies to plough one percent of their net profit into the communities they serve,” Du Toit said.

amount of philanthropy and volunteerism within the polled countries.

made a donation. Ireland and the Netherlands are jointly third with 75 percent each.

The report – which is compiled by CAF using Gallup polling information, is based on three measures. These are ‘giving money’, ‘volunteering time’ and ‘helping a stranger’.

However, this report drew the ire of Tshikululu Social Investments which manages grant-making funds and trusts for large and medium sized businesses in South Africa.

The global average of the three giving behaviours in 2011 was 32.4 percent, compared to 31.6 percent in 2010.

Gina de Villiers, Tshikululu’s Senior Communications Specialist, says South Africans do in fact have a strong culture of giving and in the case of some companies, have done for many decades.

Colleen Du Toit, the CAF Southern Africa CEO, says South Africa and the region needed an increased social investment as large amounts of foreign aid money were being withdrawn from the country. “The spirit of a giving civil society in the post-1994 administration has dissipated. These days there is very little enabling policy, though of course legislation does require all listed companies to plough 1 percent of their net profit into the communities they serve,” Du Toit says. “These days, companies aren’t content to just throw money at anyone who asks. Corporate social investment isn’t just about giving anymore. Companies want to see tangible benefits. But this doesn’t mean that the process need be painful for either the company or the non-profits organisations involved.” CAF specialises in trying to nudge companies in the right CSI direction. CAF will even arrange so-called employee corporate social investment, where company workers who want to volunteer their time and energy can do so through the intervention of CAF. Unsurprisingly, the index ranked the USA as the number one giving country in the world, with Ireland coming second and Australia coming in close third. According to the study, the UK is the second most generous nation globally in monetary terms, with 79 percent of the population donating to charity each month. The highest-ranked country for ‘giving money’ is Thailand with 85 percent of the population having

But de Villiers says corporate social investment (CSI) in South Africa can become smarter. “Every research report can be questioned, the methodology attacked, the number of interviewees disputed and the results dismissed. Instead of picking at the CAF research, I’d like to offer some alternatives…,” de Villiers says. “The 2010 Barclays Wealth report entitled “Global Giving: The culture of philanthropy” indicated that the wealthy in South Africa were second only to the USA in philanthropic giving. I believe that this report surveyed individuals, not companies, but as the CAF research included individuals, I thought it made an interesting comparison.” Regarding corporate giving, de Villiers urged CAF to consider the 2011 edition of Trialogue’s CSI Handbook, a guide to CSI in South Africa that is well-regarded in our “industry”. For this, the 14th edition, 148 respondents from 97 “large” South African companies were interviewed face-to-face and their responses combined with “publicly available secondary information” and Trialogue’s own databases. “They state that companies invested R6.2 billion into CSI in 2010/2011. This is quite a bit more than the R4 billion mentioned in CAF. Whether this improves the impression of the private sector’s culture of giving is, of course, up for debate, but here are two more numbers that I find interesting. Again according to Trialogue, “82 percent of the companies surveyed allocated additional contributions over and above their CSI expenditure” and “over the past ten years CSI has outstripped inflation by 77 percent”.

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PERSPECTIVE

Where is JSE's real

BEE anyway? The fact that there was no increase in black direct ownership in the the past year (2011) shows that the Top 100 JSE companies have not done any new BEE deals since 2010. Written by Mzwandile Jacks

“H

Other BEE practitioners, mainly supporters of the government’s BEE policy, roared back their approval. Theirs, after all, should be a country of equal opportunity, a beacon to the world as, Nelson Mandela, the first black president of the country, claimed. Just a few days earlier, the JSE, Africa’s biggest exchange, had released figures showing

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Image: ShutterStock

ow much real empowerment is actually taking place on the JSE?” Ajay Lalu, the MD of Black Lite Consulting, thundered recently. “In my view very little.”


PERSPECTIVE

that there was no significant change in the number of black South Africans holding stakes in listed companies.

seriously involved this time around to avoid the heavy criticism they received last year when the first JSE ownership report was released.

The JSE said black South Africans held at least 17 percent of the companies listed on the bourse. It said the 17 percent included 8 percent (direct ownership) through empowerment stakes and 9 percent mandated investments such as pension funds.

It was accused of not properly getting involved in BEE issues and for failing to align the mining charter with the codes of good practice.

This showed that nearly 18 years since the end of apartheid, efforts to increase black ownership of JSE-listed companies have run aground. This is because JSE’s Top 100 companies have failed to strike enough BEE deals in the past year. In late 2011, October to be exact, the JSE said black direct ownership of listed companies stood at 8 percent. As a proportion of the 44 percent of the JSE's total available share float at the time, black shareholders held an 18 percent beneficial ownership, it said then. “The fact that there was no increase in the past year shows that the Top 100 JSE companies have not done any new BEE deals,” Lalu told Transform SA. “Many of the deals are in fact unwinding, like the Investec and Bidvest BEE deals which means one can expect a real decrease (in ownership) next year.” Patrick Craven, the Cosatu spokesperson, said it was “extremely dissappointing” that after so many years of the BEE introduction in South Africa the wealth of the country is still in the hands of “a few white males.” “The JSE-listed companies are supposed to be at 80 percent black direct ownership. The current approach needs to be changed. We need more corporative wealth to be created,” Craven roared. “The current approach is enriching a few people many of which are already rich. This is deplorable.” Sandile Zungu, a member of the BEE Advisory Council, said the numbers released by the JSE “looked suspect.” “We are currently looking at this matter. We are going to engage with some members to see what we can do,” Zungu said, declining to divulge more information. His comments show the council wants to be

It is not clear why South African corporates have not been striking BEE deals in the past year but a Johannesburg-based economist, Mike Schussler, said blacks have done very well economically in the past few years. “The fact that there has been a slow down in big BEE deals, should not rule this out,” Schussler said. The latest figures suggest no progress has been made in the past year and also underscore the fact that a lot remains to be done in increasing black economic participation in the Top 100 companies. The Department of Trade and Industry's codes of good practice require a company's black economic empowerment (BEE) interest to be calculated by taking the total share capital and excluding mandated investments, investments held by the state, treasury shares and foreign operations. The JSE’s analysis was prompted by an extensive debate which has for some time taken place about black ownership on the JSE, which is seen as a good indicator of economic progress and transformation.

“Many of the deals are in fact unwinding, like the Investec and Bidvest BEE deals which means one can expect a real decrease (in ownership) next year.”

The JSE commissioned the research with the aim of determining and presenting “accurate percentages.” The analysis was conducted by an independent research house Trevor Chandler & Associates using data from the share registers. Russell Loubser, the former CEO of the JSE, said the first survey, did not take into account shares held indirectly by the black public through mandated investments. “Although direct black ownership remained at 8 percent, I am heartened by the fact that it did not decrease, considering the difficult market conditions,” he said.

Volume 2 • 2012

31


OPINION

BEE Commission

to crack whip

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OPINION

It is 17 years since BEE became a buzzword in SA business lexicon. But there has been talk that many companies were not implementing this honestly. The government has taken steps to address these complaints Written Mzwandile Jacks

Volume 2 • 2012

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OPINION

B

EE Commission, to be launched this year, is due to lay formal charges against those who commit fronting or the other BEE related crimes. Dozens of suspected South African companies now live under the fear that they might be targets of the commission because the crime of fronting is really widespread among JSE-listed companies.

“Further, the commission will deal with noncompliance and circumvention by introducing penalties for offences, among other aspects, while the Independent Regulatory Board of Auditors (IRBA) will provide for the regulation of the verification industry,” he told the media at a press conference recently.

The Department of Trade and Industry (DTI) in December finally agreed to launch the BB-BEE Commission, which will monitor all issues relating to BEE. Since 2009, BEE experts like Ajay Lalu, the MD of Black Lite Consulting, have been calling for this launch after talk that BEE had failed got widespread. DTI Minister, Rob Davies said the department planned to establish a BB-BEE Commission, which will be tasked with establishing an institutional environment for monitoring and evaluating issues pertaining to BB-BEE.

Turning to the enterprise development, the DTI stated that enterprise development (ED) was one of the significant elements that could contribute towards the broader aims of government to support the growth of small enterprises and job creation.

Davies said the commission would play an important role, including, but not limited to, overseeing, supervising and promoting adherence to the Act and the Codes of Good Practice in the public interest.

In the light of a new drive towards creating effective black-owned and black-female-owned enterprises, the department has elevated enterprise development to also focus on key sectors of the economy.

He did not specify exactly when the commission would be formally launched.

“Further, the commission will deal with noncompliance and circumvention by introducing

www.transformsa.co.za

BEE rating agency Empowerdex MD Lerato Ratsoma said the formation of the commission would provide the public with an institution to go to when reporting unfair practices relating to BB-BEE. “A fulfilling part is that there are penalties for misrepresentation of BB-BEE information, as well as provision for government to cancel contracts where information provided was found to be fraudulent, especially, since there is always litigation concerning government tenders,” Ratsoma said.

The commission, he said, would be tasked with strengthening and fostering collaboration between the public and private sectors, to promote good governance and safeguard the aims of BB-BEE.

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penalties for offences, among other aspects, while the Independent Regulatory Board of Auditors (IRBA) will provide for the regulation of the verification industry,” he told the media at a press conference recently.

“With regard to the points system, we have ensured that entities cannot score a certain level without doing some work on ED. Preferential procurement has also been elevated in terms of the points system, with [greater] emphasis being placed on black-owned and female-owned enterprises,” Davies said. The Employee Share Option Plan (Esop) would also


OPINION

become part of the scorecard. “When correctly applied, Esops have the potential to drive wealth and capacitate employees, as seen with iron-ore giant Kumba’s model,” he explained. Meanwhile, Davies lashed out at claims that the gazetted amendment bill had brought confusion over who the beneficiaries of BB-BEE were in SA. “There is no confusion regarding the beneficiaries of the BB-BEE. The gazetted B-BBEE Amendment Bill has not deviated from the original beneficiaries as defined in the BB-BEE Act and further qualified in the Codes of Good Practice,” Davies said. ‘The definition in the current B-BBEE Act of black people is a generic term which means Africans, Coloureds and Indians. The current Amendment B-BBEE Bill does not propose to change the beneficiaries of BB-BEE at all’ said Davies. Davies also dismissed the recent media reports that the Amended Bill will see companies will no longer receiving BEE grading for appointing white women and people with disabilities. Members of the public have less than 30 days to comment on the BB-BEE Amendment Bill that has been gazetted by Davies. The gazetting of the Amendment Bill is the culmination of the recommendations done by the Presidential BB-BEE Advisory Council.

general, male, female and people with disabilities. There has never been any discussion about deviating from the original beneficiaries as defined in the BB-BEE Act. Therefore, the statement should be dismissed with the contempt it deserves, and the market should not give credence to such statements’ he said. The Minister added that the proposed amendments to the BB-BEE Act are intended to achieve key strategic objectives. ‘These objectives… are to align the BB-BEE Act with other legislation impacting on BB-BEE and with the Codes; establishment of the BBBEE Commission to establish an institutional environment for monitoring and evaluating BB-BEE; provide for the regulation of the verification industry by the Independent Regulatory Board of Auditors; and deal with non-compliance and circumvention by, inter alia, introducing offences and penalties’ added Davies. The Bill also introduces inclusion of specific statutory offences involving fronting and other forms of fraudulent misrepresentation of empowerment status and the specification of penalties and blacklisting of entities and/or management for those offences.

The proposed amendments to the BB-BEE Act intend to align the BB-BEE Act with other legislations impacting on BB-BEE and with the Codes.

The bill also makes provisions for empowering the Special Investigations Unit to investigate all offences involving fronting or corruption committed by both the public and private sector with regard to the application of the Act and BB-BEE Codes of Good Practice.

“These statements about the bill are misleading as BB-BEE is intended to empower black people in

Members of the Public have until February 2012 to comment on the BB-BEE Amendment Bill.

“A fulfilling part is that there are penalties for misrepresentation of BB-BEE information, as well as provision for government to cancel contracts where information provided was found to be fraudulent, especially, since there is always litigation concerning government tenders,” Ratsoma said.

Volume 2 • 2012

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SECTION PERSPECTIVE TITLE

Wealth distribution:

or hostile takeover?

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Image: iStockphoto.com

An investment


SECTION TITLE PERSPECTIVE

Economic transformation is needed in South Africa to accelerate growth and help overcome challenges of income inequality. South Africa is ranked in the world’s top 10 countries where income gap between the rich and poor is ever widening. Written by Tshetlhe Litheko

T

here are patterns in economics, which have a significant influence in the make-up of society. An Italian engineer-turned-economist named Vilfredo Pareto, discovered one such a pattern, when he developed the distribution of wealth array in 1897.

everyone that we have fewer rich people than we have impoverished ones. It was the discovery of a Pareto’s principle, which essentially says 20% of the people own 80% of the wealth of a given country, that recent calls for wealth redistribution have found relevance.

Different nations have varied resources to yield different kinds of products. Some rely on agriculture, while others may rely on other natural resources or technology.

The concept of redistribution of wealth is seldom argued through an Economic Tetris that places a level of comfort that as a society we are striving towards an economic turnaround. Redistribution of wealth is defined as the transfer of income, wealth or property from some individuals to others caused by a social mechanism such as taxation, monetary policies, welfare, nationalisation and so forth. It is often a progressive redistribution, from the rich to the poor.

Coupled with the fact each nation’s population has different backgrounds, skills, and levels of education, Pareto’s discovery made the distribution of wealth appear as universal as the law of gravity. The concept goes something like this: If we took a list of all South African’s who are worth say, R10,000 and built on that list by adding groups of other members of society with many other levels of wealth, both large and small, and we plot the results on a graph, the result will be a

Countries would chose to use the mentioned tools to redistribute wealth for ethical, sociological or economic reasons. Firstly, at an ethical level, any society needs to be altruistic with how it cares for its poor. Secondly, taxing

The concept of redistribution of wealth is seldom argued through an Economic Tetris that places a level of comfort that as a society we are striving towards an economic turnaround. Redistribution of wealth is defined as the transfer of income, wealth or property from some individuals to others caused by a social mechanism such as taxation, monetary policies, welfare, nationalisation and so forth. It is often a progressive redistribution, from the rich to the poor. sliding graph, where many individuals are at the lowest end of the scale and fewer and fewer are higher up as we progress along the graph toward higher levels of wealth. However painfully obvious this could be to

the wealthy at higher rates will not affect their life chances, compared to taxing the less wealthy, particularly the lower and working classes, at equal rates. Thirdly, to prevent revolt on the part of poor, who may feel excluded or exploited. Fourthly, to ensure workers can buy

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PERSPECTIVE

goods and services that are produced, as house hold consumption has a bearing on the success of businesses and wealth creation. Fifthly, to even the playing field, because wealth breeds wealth and rags to riches cases are a rarity. Lastly, to avoid corporate subsidies that are extreme and taxing the wealthy at higher rates is one way to offset these subsidies. In 2010, the ANC Youth League brought up the subject of the nationalisation of mines as wealth redistribution mechanism and subsequently commentators such as Desmond Tutu have suggested concepts such as rich people tax. What are the alternatives to wealth redistribution instruments that have yielded economic turnarounds for other world economies? And can we suggest these for the necessary economic transformation in our economy? Are the current commentators talking out of turn or is there some merit to their comments? Let’s explore two cases, where wealth redistribution is taking a mutually beneficial framework. Ireland 90’s Success Story Beginning in the early 1990’s, unprecedented economic growth saw the level of Irish real GDP double in size over the course of a little more than a decade. There have been many reasons advanced for Ireland’s success over this period, including a concept called “co-ordinated social partnership agreements”. The first of these agreements involved the labour market accepting moderate increases in wages in exchange for the long term development of various industries. In return, both government and business remained committed to labour unions to honour them once the targeted growth is achieved. In November, Kumba Iron Ore announced the final results of its spectacularly successful Envision employee share ownership plan: a R2.6 trillion distribution to 6 029 workers. After tax, the distribution was as much as R345 000 a worker. This and many other Employee Share ownership (ESOP) schemes are examples of how the private

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sector could be trusted to honour long term commitments to the labour sector as labour allows business to survive economic recessions. Malaysia Economic Transformation Blueprint Malaysia has been an economic darling of the Asian-Pacific region for many years with a sustained 8% GDP growth from the 80’s to the 90’s. Perhaps their most exemplary programme for South Africa is their transformation blueprint. The plan recognises the role played by the private sector in the development of the economy. A platform for investment was created with 92% expected from the private sector.

Malaysia has been an economic darling of the Asian-Pacific region for many years with a sustained 8% GDP growth from the 80’s to the 90’s. Perhaps their most exemplary programme for South Africa is their transformation blueprint. The plan recognises the role played by the private sector in the development of the economy. A platform for investment was created with 92% expected from the private sector.

The sector was involved in the planning of this transformation blueprint in partnership with government. Collectively the partnership identified 12 National Key Economic Activities (NKEA). From NKEA the partnership has identified 131 entry point projects, which will be prioritised in government planning and funds allocation. Policies will be amended to facilitate fast track implementation of such activities, including liberalising the market and removal of bottlenecks.

Economic transformation is needed in South Africa to accelerate growth and help overcome challenges of income inequality, where South Africa is ranked in the top 10 countries in the world. The gap between the rich and poor has grown by 4% from 0.66 to 0.70, between 1993 and 2008. As income continues to be concentrated on a few, we need to approach wealth distribution as an investment opportunity and not a hostile transaction. The global economy is converging ever closer with each passing day, the ominous challenge being a South Africa that reacts to economic changes, instead of a forward thinking country. Tshetlhe Litheko is Johannesburg-based writer.


FAST FACTS

FAST

FACTS Compiled by Mzwandile Jacks

One: The tiff between banks and the unions in the financial sector has been about preferential procurement in the sector. True or False? False: The battle has been over black direct ownership in JSE listed banks and insurance companies. Unions want it to be raised to 15 percent. It currently stands 10 percent. Two: Big Johannesburg-based law firms represented the big four banks and insurers in this battle for ownership? True or False? False: The banks were represented by the Banking Association of South Africa (BASA), an industry body. Three: Banks and insurers believe that increasing black direct ownership to 15 percent would lead to another run on

banks since the collapse of the second tier bank Saambou in the early 2000s. True or False? False: Banks and insurers believe this would lead to another costly restructuring of all BEE deals in the sector. This could cost more than R20 billion. Four: Unions agree it is impossible for banks and insurers to increase ownership to 15 percent. True or False? False: Unions believe the banks can do this, citing Investec, the JSE listed investment and private banking group, which has more than 15 percent black direct ownership. Five: The financial sector charter was gazetted in 2008. True or False? False: The charter could not be gazetted in 2008 and the banks and unions missed the deadline. This meant the battle for ownership in the sector had not been resolved.

BBBEE Compliance may not be important to you... but it is CRUCIAL to your business! Introducing Kbonga BEE Verification Agency (Pty) Ltd Kbonga BEE is a 100% black owned B-BBEE Verification Agency and has been accredited by SANAS. We provide Broad Based Black Economic Empowerment assessments, verification and certificates for enterprises and sectors that are required by legislation or the Codes of Good Practice to become B-BBEE compliant. Through our expertise, we are able to provide reliable, accurate B-BBEE Ratings to enterprises at value based costs. Kbonga BEE is taking Broad Based Black Economic Empowerment to a new level of excellence.

The Benefits of Verification Why should you get verified? 1. BBBEE compliance enables a company to get preferential procurement from the Government, Parastatals and the Private Sector. 2. BBBEE compliance enhances your competitive advantage. 3. BBBEE compliance enhances workforce diversity in your company 4. By being compliant and verified yearly, you benefit from the key principles of BEE, namely that: • Black economic empowerment is broad-based, • Black economic empowerment is an inclusive process, • Black economic empowerment is associated with good governance, • Black economic empowerment is part of South Africa’s growth strategy.

Tel: +27 21 421 4940 • Fax: +27 21 421 8284 / 086-2960912 • Email: info@kbee.co.za / nazo@kbee.co.za


LEGISLATION

Oil sector lacks

women

Image: iStockphoto.com

CEOs

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TransformSA  
TransformSA  

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

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