BBBEE Commissioner on work of Commission

Meeting report

Briefing by the Broad Based Black Economic Empowerment (B-BBEE) Commissioner on the work of the B-BBEE Commission
The delegation comprised of Ms Zodwa Ntuli, Acting Commissioner; Ms Nontokozo Nokhwali-Mboyi, Director: Operations; Mr Siphamandla Kumkani, Director: Investigations and Enforcement; and Ms Lindiwe Madonsela, Deputy Director: Compliance.

The B-BBEE Commission was formed in terms of section 13B of the B-BBEE Act. The Commission started operating on 1 April 2016 within the Department of Trade and Industry (DTI) and had a staff complement of 14 members. The Commission was formed to deal with fronting practices which had become very complex and was still continuing. There was also misalignment and inconsistent interpretation of the B-BBEE Act. The problem was that legislation was applied without monitoring. As a result, it was difficult to say what the state of economic transformation in SA was. The Commission itself did not know what the progress in implementation of B-BBEE was. The Commission tried its best to accelerate transformation and to create an inclusive economy.

The Committee was given insight into what B-BBEE was in terms of its five elements i.e. ownership, management control, skills development, supplier and enterprise development and finally socio-economic development. Members were also provided with explanations on how entities were classified in terms of the B-BBEE Codes. The classifications were based on annual turnover, gross receipts or allocated budget. The Committee was also given a comprehensive layout of the institutional framework that surrounded the B-BBEE Act. The functions of the Commission were set out in section 13F of the B-BBEE Act. One of which was to receive complaints or to initiate investigations. Some of the penalties outlined in the B-BBEE Act could be the cancellation of contracts or awards (section 13A) and the exclusion from doing business with government for up to 10 years (section 13P). The Commission under its administration had the Compliance Programme, the Investigations & Enforcement Programme, the Relationship Building & Stakeholder Relations Programme and lastly the Research, Analysis & Reporting Programme.

The Committee was given detailed information regarding operational implementation of the Commission as at 30 September 2016. A total of 134 complaints had been received with 112 specifically pertained to fronting.  23% of complaints received related to transport, 15% to mining and 9% to construction. The Commission had also received five Black Industrialist Scheme applications from the DTI to be reviewed for possible fronting. The Commission had made two presentations to the Presidential B-BBEE Advisory Council on its activities. Members were provided with a schematic breakdown on the types of complaints that had been received. Some of the types of complaints received were on fronting, B-BBEE Certificates, contracts and also misleading adverts/ information. One of the major barriers of entry for B-BBEE was financing. Black people continued to face challenges in accessing finance for B-BBEE transactions. Other challenges included the lack of monitoring by government on contracts, awards, licences etc. and also the abuse of B-BBEE arrangements with there for example being “willing frontees” in exchange for financial gain.

Discussion
The Chairperson said it was all good and well that legislation was in place but the question was whether it was achieving what it had been intended for. How did the B-BBEE Commission ensure that there was implementation?

Dr Y Vawda (EFF, Mpumalanga) stated that the reality in SA was that there was a stark division between the rich and the poor. Corruption was widespread and greater policing was needed. As a rule, transformation needed to be done within two years. The work of the Commission had been for around 12-15 years already. It seemed as if extreme solutions were needed. There was firstly a need to nationalise and secondly a need to expropriate. He was a bit disappointed that socio economic development as an element of B-BBEE was only allocated five points.

Ms Ntuli, on nationalisation, said that the work of the Commission was only limited to monitoring B-BBEE. It could only do things that were mandated by the B-BBEE Act.

Ms Madonsela said that now that B-BBEE was broader it covered both black and nonblack when it came to socio economic development. Socio economic development normally took place in rural areas.

Mr M Rayi (ANC, Eastern Cape) said the briefing had alluded to the fact that since the inception of the B-BBEE Act in 2003 up until the present the pace of progress had been slow.  There were also low levels of transformation and economic development as well as high poverty, inequality and unemployment. He felt that the Committee needed to be workshopped on B-BBEE. If the budget of the Commission was through the Department of Trade and Industry, did the Commission have its own strategic plan? He asked whether Ms Ntuli was a full-time commissioner. He was glad that there was alignment between the B-BBEE Act and other pieces of legislation. He asked whether practises by some businesses were not barriers to entry for B-BBEE. He was convinced that there would be anti-competitive practises. He was concerned about the capacity of the Commission on compliance, monitoring and enforcement. The Department of Labour had inspectors which the Commission did not even have. Was it correct that the Commission only had 14 staff members? He felt that the Commission had a huge task at hand. He noted that the 6% figure on skills development did not say anything about who the beneficiaries of skills development were.

Ms Ntuli said that as Commissioner she had been seconded by the Minister of Trade and Industry. It was a full time position. She regarded access to finance as a barrier to entry. For B-BBEE to succeed government needed to improve access to finance. It was something that needed to happen in order for meaningful transformation to take place. For example, in construction subcontractors were supposed to gain entry into the industry after subcontracting for four or five times. This did not happen. Many of them remained subcontractors for twenty years. Many subcontractors struggled to eke out a living. The practice in construction now to was use cheap foreign African subcontractors. The Commission had a working relationship with entities like the Competition Commission.

Ms Madonsela, on the 6% skills development figure, said the focus was on accredited training. There was also the incentivising of people who did learnerships. Skills development had to be linked to management development.

Ms Nokhwali-Mboyi said the Commission had its own strategy and Annual Performance Plan (APP). She confirmed that at present the Commission was funded by the DTI but that it was only an interim measure. The Commission would in the future receive its own appropriation from National Treasury. The fact that the Commission only had 14 staff members was also only an interim situation as the staff complement would grow. Once funding was received then the organisational structure would be implemented.

Mr J Londt (DA, Western Cape) noted that it was only six months since the Commission had become operational and it was based in the Gauteng Province. He asked how far the reach of the Commission was geographically. According to the briefing most of the cases dealt with by the Commission were in the Gauteng area. He also asked whether the Commission was engaging provincial and local governments on B-BBEE. A breakdown of figures provincially and locally would be appreciated. The Commission was further asked whether fluctuations in the turnovers of businesses were taken into account when it came to assessing companies on B-BBEE. The briefing had also alluded to the fact that there were verification agents that were problematic. He hoped that the Commission had compiled a list of verification agents that had been red flagged.

Ms Ntuli agreed that statistics on provinces would be useful. She conceded that most of the cases dealt with were in and around Gauteng. There was also a great deal of complaints from the Free State Province. There were also cases from other Provinces like the Western Cape and KwaZulu-Natal. The strategic plan and APP of the Commission had been approved by the Minister. She confirmed that there was a list of accreditation agencies that had been red flagged. The Commission would release reports on investigations that had been done. The 14 staff members were only the interim structure of the Commission. Even if the Commission had its proper structure there would never be enough staff.  

Ms Madonsela said it was correct that classifications were done on the basis of turnover but in instances where there was no profit, industry norms were looked at. She confirmed that there was a blacklisting of certain verification agents. Verification agencies could be suspended.

Mr S Mthimunye (ANC, Mpumalanga) asked that the Commission provide its strategic plan and annual report to the Committee in future.  He asked what the role of the Commission was on revolutionary economic transformation. He spoke about where contributors to pension funds that lived in villages/townships had their funds invested in places like Menlyn when it should have been invested closer to home. The Commission was asked whether it looked at international best practises.

Ms Madonsela noted that one of the programmes of the Commission was about doing research. The Commission did look at countries that had similar economic patterns as SA. Normally investments were done through the Public Investment Corporation (PIC). If entities invested funds, there needed to be benefit.

Ms Ntuli on the question of pension fund investments, noted that this was where the advocacy work of the Commission came into play. The manner in which investments were done should drive transformation. State Owned Entities (SOEs) and government departments had to set the example on how transformation should take place. The state needed to drive the transformation agenda. The Commission did perform benchmark studies and also looked at international best practices. She stated that the Commission for Employment Equity received reports on an annual basis. This was not the case with B-BBEE. However, with the amendments to the B-BBEE Act the Commission could also now have reports and do monitoring on an annual basis. The Commission could thus intervene in sectors where change was not taking place.  

Mr W Faber (DA, Northern Cape) said it did not look like much progress when B-BBEE growth in the private sector over the last 18 years had only been 15%. He believed that efforts needed to be more inventive. At present B-BBEE was failing the people of SA. As it was at present only a few connected people were benefitting from B-BBEE. He felt that only a few select people were benefitting from the Black Industrialist Scheme. The poor were not benefiting. New ventures and incentives were needed. Incentives needed to be offered to companies to come on board. The system for B-BBEE also needed to be made simpler. He also felt that the process on Small, Medium and Micro Enterprises (SMMEs) could be speeded up.

Ms Ntuli agreed that companies changed their ownerships to 51% black owned when they heard about the Black Industrialist Scheme. There were individuals out there who were ready to be fronted. The Commission worked with the DTI on picking up on these types of practices. She said that enterprise and supplier development could be a good job creator.

The Chairperson said transformation was a big challenge and the Commission’s efforts would go a long way towards it. It was not only about the redistribution of economic resources but also about the sharing of wealth and creating value in the economy.

Mr Londt was interested on the efforts of the Commission regarding individuals who made themselves available for fronting. What could be done about it?

Ms Ntuli stated that the B-BBEE Act already dealt with the issue. Both the fronter and the frontee were looked at.

Committee Minutes
Minutes dated the 21 September 2016 were adopted unamended.

Oversight Report of the Committee on its visit to Johannesburg and Pretoria, 29 August 2016 – 2 September 2016
The Chairperson asked Mr Hlupeka Mtileni, Committee Secretary, where the Oversight Report as requested by Members was.

Mr Mtileni responded that the Oversight Report could not be completed as Committee Staff working on it was still waiting for recommendations which members still had to make on it.

Mr Rayi said was clear that the Oversight Report was not completed and suggested that Committee Staff be given time to finalise it. He further suggested that the Committee adopt the Oversight Report on 26 October 2016 when the Committee next met.

Mr Londt asked which Committee Staff was waiting on inputs from Members. When were Members asked to submit recommendations on the Oversight Report? He and Mr Faber wished to be shown the emails requesting such inputs.

Mr Mthimunye said that Members had the day before in the meeting of the Select Committee on Economic Development instructed Committee Staff to have the Oversight Report ready for the present meeting. He did not wish to delay the matter of the Oversight Report for another two weeks as Mr Rayi had suggested. He felt that Committee Staff was not doing their work as they should.

The Chairperson felt that the excuse given was unacceptable as it was not even in writing. He requested that Committee Staff submit an official explanation to the Committee by 5pm the present day on why the Oversight Report was not finalised. If no official explanation was received by the Committee, there would be consequences. He agreed with Mr Londt that the Committee should be shown evidence that emails had been sent to Members asking for recommendations to be made on the Oversight Report.

The meeting was adjourned.