 |
| Nelson Sebati ushering out Minister Lindiwe Zulu & Premier David Makhura at the GEW 2017 in Johannesburg.... |
 |
| Nelson Sebati with David Petersen at GEW 2017........ |
Wednesday 15 November 2017
Nelson Sebati attends the Launch of the Global Entreprenuership Week (GEW) 2017.....
Monday 23 October 2017
Nelson Sebati Attends The Gauteng Province and GE Memorandum of Understanding (MOU) Signing ceremony.....
 |
| Gauteng Premier, David Makhura & Chief Empowerment Officer, Nelson Sebati. |
Nelson Sebati was in attendance when the Gauteng Province and GE Signed a Memorandum of Understanding to Advance Economic Development. The MoU covers collaboration in the Energy and Healthcare sectors.Through the collaboration, GE will support the Premier's Office “Tshepo 1 Million" youth empowerment programme, which focuses on creating employment and entrepreneurship opportunities for the Gauteng youth.
Speaking at the signing ceremony, Gauteng premier David Makhura said; “We are delighted to be going into a partnership with a world-renowned company such as GE which not only supports our vision of turning Gauteng into a globally competitive City Region, but will also help us create an inclusive economy that will see the youth of Gauteng become active agents in the economy........https://www.cnbcafrica.com/apo/2017/10/13/the-gauteng-province-and-ge-sign-memorandum-of-understanding-to-advance-economic-development/
Saturday 7 October 2017
5 Questions with Nelson Sebati......
 |
| Nelson Sebati, Chief Empowerment Advisor. |
A: I work for a boutique Economic Empowerment Consultancy that contributes to the South African dream by crafting economic empowerment & deep transformation strategies and policies for our private & public-sector clients that contribute to business sustainability & social cohesion while ensuring compliance to B-BBEE & other Transformation legislative requirements. As a multi-disciplinary “deep transformation” enabler, our advisory team are subject matter specialists in customised B-BBEE consulting, facilitation & implementation solutions.
Q: What services do you offer?
A: We partner with clients to develop customised B-BBEE solutions for:
- Strategy Development;
- Policy Development;
- Enterprise Development;
- Supplier Development
- Supplier Diversity;
- Preferential Procurement;
- Ownership & Management Control;
- Verification preparedness.
- Dashboard Software for B-BBEE compliance monitoring and tracking.
A: In the last 3 years we have advised, developed & implemented B-BBEE/ESD projects with a combined value of over R611 Million, which has led to the creation over 300 new Black-Owned companies & 5000 net new jobs i.e these are jobs for people who had never worked before. This includes direct and indirect jobs. My clients have a collective annual turnover above R91 Billion and together we have unlocked over R2.8 Billion worth of supply chain opportunities for Black-owned businesses.
Q: What is the role of the Chief Empowerment Advisor?
A: My role includes amongst other things;
- Providing guidance & direction to clients on matters related to “deep transformation”, B-BBEE regulation & the Sector Charters;
- Assigning “deep transformation” targets to business units & monitoring performance against set B-BBEE targets within client organisations;
- Reporting progress on “deep transformation” initiatives to EXCOs & the Transformation Committees.
- Educating Stakeholders on the B-BBEE Charters & RCoGP emphasising impactfullness & sustainability;
- Monitoring & keeping up to date with changes in the Codes of Good Practice & different Sector Charters, i.e., Tourism, Property, Construction, Forestry, Financial Services, Mining, Aviation & ICT;
- Preparation & presentation of Scenarios to Executives in organizations to assist them in the identification & implementation of “deep transformation” strategies.
Q: What qualifies you to do this work?
A: As an Entrepreneur several times over, who has successfully negotiated and concluded numerous high value transactions, I understand the need for B-BBEE initiatives that are rooted in business growth, supported by sound commerical drivers and lead to an enhanced outcome. I am Certified BEE Champion, BEE Master, Empowerment Technician, SETA accredited BEE Practitioner plus I have completed the Management Development Programme in B-BBEE at UNISA School of Business Leadership and a member of the Association of BEE Verification Agencies (ABVA now ABP).
Further to I studied Law at UNISA and Entrepreneurship at Wits Business School. I am also a Non-Executive Director/Associate in several companies including a Law firm, a Recruitment company, a specialized IT services company, a diversified Investment holdings company and finally I am involved with a three Non-Profit Organisations as part of my PSI (Personal Social Investment) mission.
Contact me on nsebati@murason.co.za for help with B-BBEE compliance and accessing B-BBEE benefits. I assist corporate companies and entrepreneurs alike.
A: As an Entrepreneur several times over, who has successfully negotiated and concluded numerous high value transactions, I understand the need for B-BBEE initiatives that are rooted in business growth, supported by sound commerical drivers and lead to an enhanced outcome. I am Certified BEE Champion, BEE Master, Empowerment Technician, SETA accredited BEE Practitioner plus I have completed the Management Development Programme in B-BBEE at UNISA School of Business Leadership and a member of the Association of BEE Verification Agencies (ABVA now ABP).
Further to I studied Law at UNISA and Entrepreneurship at Wits Business School. I am also a Non-Executive Director/Associate in several companies including a Law firm, a Recruitment company, a specialized IT services company, a diversified Investment holdings company and finally I am involved with a three Non-Profit Organisations as part of my PSI (Personal Social Investment) mission.
Thursday 24 August 2017
Part 2 - Cognac & Conversation with Nelson Sebati: Understanding The Modified Flow Through Principle....
Cognac & Conversation with Nelson Sebati: Understanding The
Modified Flow Through Principle.
www.enterprisesupplierdevelopment.co.za recently met up with Chief Empowerment Advisor, Nelson Sebati at a Global Entrepreneurship Network South Africa (GEN SA) function for some "cognac and conversation" on understanding the Modified Flow Through Principle. Listed below is some of the information that he shared...
 |
|
| Nyeleti Shirilele: Board Chair GEN SA, David Petersen:Head of Procurement & Enterprise Supplier Development., Minister of Small Business Development, Lindiwe Zulu & Nelson Sebati: Chief Empowerment Advisor. |
What
is it?
Let's start with the flow through principle. It says, for example, if a company (A) is 24% black owned and it owns 10% of another company (B), then Company B is 2.4% black owned. (24% times 10%.) If Company A is 100% black owned and it owns 25% of Company B, then Company B is 25% black owned (100% times 25%). There is no controversy over the use of the flow through principle, but the modified flow through is different!
Let's start with the flow through principle. It says, for example, if a company (A) is 24% black owned and it owns 10% of another company (B), then Company B is 2.4% black owned. (24% times 10%.) If Company A is 100% black owned and it owns 25% of Company B, then Company B is 25% black owned (100% times 25%). There is no controversy over the use of the flow through principle, but the modified flow through is different!
The
codes state the following;
3.4 Modified Flow-Through Principle
- 3.4.1 A Measured Entity applying this Modified Flow-Through Principle cannot benefit from the Exclusion Principle.
- 3.4.2 The Modified Flow-Through Principle applies to B-BBEE owned or controlled company in the Ownership of the Measured Entity.
- 3.4.3 In calculating Exercisable Voting Rights under paragraph 2.1.1, and Economic Interest under paragraph 2.2.1 of the Ownership scorecard the following applies:
- 3.4.3.1 Where in the chain of Ownership, Black people have a flow-through level of participation of at least 51%, and then only once in the entire ownership structure of the Measured Entity, such Black participation may be treated as if it were 100% Black.
- 3.4.4 The Modified Flow-Through Principle may only be applied in the calculation of the indicators in paragraphs 2.1.1 and 2.2.1 of the Ownership scorecard. In all other instances, the Flow-Through Principle applies.
What
the codes are saying is there is an extra benefit to a black owned (at least
51% black owned and controlled company) in having shares in your company. That
benefit will manifest itself in the calculations of certain indicators on the
ownership scorecard.
These
indicators are:
- 2.1.1 Exercisable voting rights in the entity in the hands of black people (4 points with a target of 25% plus one vote) and
- 2.2.1 Economic interest in the entity to which black people are entitled (4 points with a target of 25%).
How
it works:
The modified flow though allows us to increase the level of black ownership, from for example 51% to 100%. If Company A is 51% black owned and it owns 10% of company B, then instead of using the Flow Though Principle and stating that Company B has Voting rights in black hands of 51% times 10% = 5.1%, we can state that Company B has Voting rights in black hands of 100% times 10% = 10%. The 51% has been increased to 100% because Company A has at least 51% black ownership. From a points perspective Company B will earn 1.6 points for voting rights (10%/25% times 4) instead of 0.82 (5.1%/25% times 4).
The modified flow though allows us to increase the level of black ownership, from for example 51% to 100%. If Company A is 51% black owned and it owns 10% of company B, then instead of using the Flow Though Principle and stating that Company B has Voting rights in black hands of 51% times 10% = 5.1%, we can state that Company B has Voting rights in black hands of 100% times 10% = 10%. The 51% has been increased to 100% because Company A has at least 51% black ownership. From a points perspective Company B will earn 1.6 points for voting rights (10%/25% times 4) instead of 0.82 (5.1%/25% times 4).
The
exact same will apply to indicator 2.2.1 for Economic Interest. It can be seen
that the modified flow though principle has a significant effect on the
scorecard. In line with clauses 3.4.3 and 3.4.4 it cannot be used for any other
indicator, e.g. "Exercisable voting rights in the hands of black
women".
The
controversy applies to the next section “Net Value”: Net Value is the most
important indicator on the Ownership scorecard. Net value uses the economic
interest value used for indicator 2.2.1 ie "Economic interest in the
entity to which black people are entitled". The question is which number
must be used? The value based on the modified flow through or the standard flow
though? The number used for Net value is the one that is printed on a BEE
verification certificate showing percentage black ownership.
Using
the above example do we use an economic interest of 5.1% (using the flow
though) or 10% (using the modified flow through)? This makes a huge difference.
If we use the modified flow through then 10% is sufficient to achieve the
priority element status level of 10% (assuming all other requirements are met).
If we use 5.1% then the entity will drop a level.
A
better example is where a company is 51% black owned and it owns 51% of the
entity. Using the flow through principle the entity is 26.01% black owned.
Using the modified flow through the entity is 51% black owned. This has huge
ramifications - EMEs and QSEs are automatically level 2 and generics are seen
as 51% black owned. Any company that procures from these companies will earn
procurement points via procurement from 51% black owned entities.
As
always certain entities seemed to look for shortcuts. Their usual way to
achieve 51% black ownership is as follows: The owner sets up a 51% black owned
entity and he retains 49%. The entity is often a trust where he can exert
indirect control. The trust owns 51% of the entity, with the original owner
retaining 49%. The original owner owns 49% directly and 49% indirectly of the
other 51%, i.e. in total 74% of the business. However, the entity is seen to be
51% black owned and obtains its valid BEE certificate on this basis.
To
us this sounded wrong. We saw the modified flow through as only applying to
certain indicators - nowhere in the codes does it refer to actual levels of
ownership. The objectives of the Codes and key principles seemed to frown upon
not following the substance rather than the legal form of the codes.
What
is right?
Most, if not all verification agencies recognise the use of the modified flow though principle in calculating levels of ownership. Many state on BEE verification certificates "Modified Flow Through Principle: YES". SANAS, and previously also IRBA were well aware that the modified flow though principle was being applied by the agencies they were/are regulating. Recently the B_BBEE Commission issued a Practice Guide on the subject: (the Commission only mentioned EMEs and QSEs.)
Most, if not all verification agencies recognise the use of the modified flow though principle in calculating levels of ownership. Many state on BEE verification certificates "Modified Flow Through Principle: YES". SANAS, and previously also IRBA were well aware that the modified flow though principle was being applied by the agencies they were/are regulating. Recently the B_BBEE Commission issued a Practice Guide on the subject: (the Commission only mentioned EMEs and QSEs.)
Its
conclusion in paragraphs 12 to 14 was:
- 12. The introduction of this intervention brought about an exception to the extent to which entities can rely on the modified flow through principle to calculate black ownership. It is our view that this limits the calculation of 51% and 100% black ownership for EMEs and QSEs only through the application of the flow through principle, in line with the B-BBEE objectives outlined in section 2 of the B-BBEE Act.
- 13. While we do recognise that the Codes have not explicitly provided limitations of the applications of the modified flow through principle in claiming the enhanced recognition status for black owned and controlled EMEs and QSEs, it must not be applied to circumvent the policy objectives. Therefore, it is the effect of the application of the principle that in our view limits its application to the extent that it would undermine the objectives of the Act.
- 14. Therefore, the B-BBEE Commission in accordance with the requirements to advice on the interpretation of any provision of the Act as per section 13F(1)(a) and (3)(b) (ii) of the B-BBEE Act, hereby concludes that the modified flow through principle cannot be used to benefit from the enhanced recognition status reserved for 51% and 100% black owned EMEs and QSEs. Any contrary advice would be regarded as a misrepresentation of Entity B’s B-BBEE status which is an offence in terms of section 13O (1) (a) of the Act.
To
emphasise, The B-BBEE Commission "concludes that the modified flow through
principle cannot be used to benefit from the enhanced recognition status reserved
for 51% and 100% black owned EMEs and QSEs."
The
BEE Commission is saying that an EME and QSE cannot use the modified flow
through principle to state that they are 51% to 100% black owned to take
advantage of the enhanced recognition to be an automatic level 1 or level 2.
As
mentioned the guideline only referred to EMEs and QSEs and enhanced
recognition. It did not mention Generics or other entities' ownership levels.
We would think that its conclusions for the modified flow through principle
would apply to Generic entities as well, i.e. do not use the modified flow
though principle to calculate effective ownership, but it does not say so.
What
to do??
If your entity is a EME and QSE and it is relying on the modified flow though principle to state it is 51% or more black owned, the BEE Commission may take action against you for fronting.
If your entity is a EME and QSE and it is relying on the modified flow though principle to state it is 51% or more black owned, the BEE Commission may take action against you for fronting.
If
your entity uses the modified flow though for any other purpose to state
ownership levels, you MAY have a problem. In general, if your entity's
ownership percentage is relying on the modified flow through principle, start
planning now to change this and get a plan B.
Nelson Sebati: Meeting with Gauteng Premier, David Makhura & MEC Barbara Creecy discussing the Tshepo 1 million jobs initiative....
 |
| Gauteng Premier David Makhura, MEC Barbara Creecy, Chief Empowerment Advisor, Nelson Sebati. |
 |
| Chief Empowerment Officer, Nelson Sebati |
Cognac & Conversation with Nelson Sebati: Understanding The Mandate Of The B-BBEE Commission
Cognac & Conversation with Nelson Sebati: Understanding The Mandate Of The B-BBEE Commission
www.enterprisesupplierdevelopment.co.za recently met up with Chief Empowerment Advisor, Nelson Sebati at his favorite after-work chill-spot for some "cognac and conversation" on the mandate of the B-BBEE Commission. Listed below is some of the information that he shared....
Due to ‘rife fronting’, the establishment of a B-BBEE commission was announced in October 2015 by the Minister of Trade and Industry. The commission, which began its operations in April this year, has a mandate to investigate and deal with fronting, fraud, and other B-BBEE transgressions.
The original BEE codes were implemented as far back as 2007 to reduce inequality, promote the growth of the black middle class, and reduce unemployment. However, in addition to a lack of meaningful transformation, there’s the issue of fronting which, according to the DTI, is ‘a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes’. Until recently there was no established institution to monitor, oversee, and regulate the empowerment laws, which resulted in:
Incidences such as these have slowed the process of transformation and creating a dire need for an independent BEE commission to properly regulate industry.
Along with policing, fronting and fraud, the commission assess B-BBEE transactions and ensures that these contribute towards the long-term goals of the National Development Plan. Functioning as a state organ within public administration, but outside the public service, it is headed by a commissioner who is responsible for all functions and administration. As per the Broad-Based Black Empowerment Act, the commission works with other organs of state such as the Special Investigating Unit (SIU), the South African Revenue Services (SARS), the Independent Regulatory Board of Auditors (IRBA), the National Prosecuting Authority (NPA), and the South African Police Services (SAPS). The commission also supervises B-BBEE rules and maintains a record of major BEE transactions.
As it is a criminal act to knowingly engage in BEE fronting practices, business owners found to have engaged in BEE fronting can be prosecuted. Penalties are up to ten years imprisonment, and a hefty fine of ten percent of turnover, or both. Another consequence – the company may be disqualified from doing any business with state organs or public entities for a period of ten years. These penalties may seem harsh, but government is serious about resolving transgressions and preventing them from occurring in the future.
For more information visit: https://bbbeecommission.co.za/
 |
| Chief Empowerment Officer, Nelson Sebati |
www.enterprisesupplierdevelopment.co.za recently met up with Chief Empowerment Advisor, Nelson Sebati at his favorite after-work chill-spot for some "cognac and conversation" on the mandate of the B-BBEE Commission. Listed below is some of the information that he shared....
Due to ‘rife fronting’, the establishment of a B-BBEE commission was announced in October 2015 by the Minister of Trade and Industry. The commission, which began its operations in April this year, has a mandate to investigate and deal with fronting, fraud, and other B-BBEE transgressions.
The original BEE codes were implemented as far back as 2007 to reduce inequality, promote the growth of the black middle class, and reduce unemployment. However, in addition to a lack of meaningful transformation, there’s the issue of fronting which, according to the DTI, is ‘a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes’. Until recently there was no established institution to monitor, oversee, and regulate the empowerment laws, which resulted in:
- Business owners employing black individuals and misrepresenting them as directors, shareholders, or management;
- Organizations with B-BBEE ratings falsely claiming to have a high percentage of black ownership;
- Companies appointing black directors and shareholders and preventing them from having signing powers, access to financial records, or active participation in the company
- Black employees appointed to management roles being paid considerably less than, or not having similar responsibilities, compared to white employees in the same role;
- BEE-rated companies who won government tenders sub-contracting the work to non-compliant entities;
- The economic benefits received as a result of an entity’s B-BBEE Status did not flow to black people, as per relevant legal documentation.
Incidences such as these have slowed the process of transformation and creating a dire need for an independent BEE commission to properly regulate industry.
Along with policing, fronting and fraud, the commission assess B-BBEE transactions and ensures that these contribute towards the long-term goals of the National Development Plan. Functioning as a state organ within public administration, but outside the public service, it is headed by a commissioner who is responsible for all functions and administration. As per the Broad-Based Black Empowerment Act, the commission works with other organs of state such as the Special Investigating Unit (SIU), the South African Revenue Services (SARS), the Independent Regulatory Board of Auditors (IRBA), the National Prosecuting Authority (NPA), and the South African Police Services (SAPS). The commission also supervises B-BBEE rules and maintains a record of major BEE transactions.
As it is a criminal act to knowingly engage in BEE fronting practices, business owners found to have engaged in BEE fronting can be prosecuted. Penalties are up to ten years imprisonment, and a hefty fine of ten percent of turnover, or both. Another consequence – the company may be disqualified from doing any business with state organs or public entities for a period of ten years. These penalties may seem harsh, but government is serious about resolving transgressions and preventing them from occurring in the future.
For more information visit: https://bbbeecommission.co.za/
Subscribe to:
Posts (Atom)