Blogs

Clarity About Investors Will Aid Graft War

Renewed attention to legal overhang from the sanctions-busting era resonates with global calls for business transparency

SOUTH African company law has historically favoured those wishing to obscure corporate ownership. The clandestine section 15A of the Companies Act of 1973 allowed apartheid ministers of trade and industry to disallow the disclosure of certain categories of subsidiaries published in the annual reports of JSE-listed companies in cases where such publication was deemed to be not in the “national interest”. It was common knowledge that these undisclosed subsidiaries were engaged in sanctions-busting or supplying goods and services to the state security apparatus. Between the publication of the 1988 edition of Who Owns Whom and the 1992 edition, about 900 subsidiaries of JSE-listed companies “disappeared”. In terms of section 113 of the Companies Act of 1973 (amended 1978 and 2001), the shareholder registers of private companies were open to inspection by the public: “Any person may apply to a company for a copy of or extract from the register of members and the company shall either furnish such copy or extract on payment by the applicant of an amount of R10 or such lesser amount as the company may determine for every page of the required copy or extract, or afford such person adequate facilities for making such a copy or extract.” Twelve years into our new democracy, this right was dropped from the initial drafts of the New Companies Act of 2008. Fortunately, this omission was picked by up Stefaans Brummer of the Mail & Guardian and a successful joint submission was made by the Mail & Guardian and Who Owns Whom to have that prerogative reinstated in section 26. This now reads: “The register of members and register of directors of a company must, during business hours for reasonable periods, be open to inspection by any member, free of charge and by any other person, upon payment for each inspection of an amount not more than R100.” Unfortunately, we neglected to request to have the word “beneficial” inserted before the word “members”, so companies are only required to provide the primary register, and not subregisters listing underlying beneficial holders where these exist. The global fight against corruption, money laundering and terrorist-funding activities has made the issue of increased transparency an international trend. The subject of corporate beneficial ownership is high on the agenda of the Group of 20 (G-20) countries and all members, including SA, have undertaken to introduce legislation that ensures the disclosure of corporate beneficial ownership. “The G-20 considers financial transparency, in particular the transparency of beneficial ownership of legal persons and arrangements, as a high priority. The G-20 Leaders’ Declaration from St Petersburg states, ‘We encourage all countries to tackle the risks raised by the opacity of legal persons and legal arrangements.’ (2014 G-20 summit in Brisbane).” David Lewis of Corruption Watch says: “Our demand is that all companies bidding for public contracts be required to disclose who their beneficial owners are. This would go a long way towards curbing the conflicts of interest and corruption.” Who Owns Whom has made a further submission to the Department of Trade and Industry to amend the act as follows: wTo include the requirement to disclose beneficial owners of private companies;

South African Taxi Industry

Taxi drivers are not the most popular people the world over, most certainly in South Africa. But there can be few more successful examples of creating order from chaos as that of the South African national Taxi Council (SANTACO) in its 13 years of existence. Taxi related violence as recorded by the SA Institute for Race Relations caused the deaths of more than 2000 people from 1991 to 1999. Eleven years later in 2010 SANTACO launched its TR3 2020 strategy for the industry, which includes smartcard and tracking technology, free WiFi at all taxi ranks by December this year and in all registered taxis by 2017. In July 2013 SANTACO introduced a Taxi Fare Index which determines taxi increases by taking into account the costs of short versus long distance taxi operations as well as coastal and inland cost differentials. SANTACO, which was established in 2001 with the mandate to restore stability to and unify the industry, has evolved into a structure today consisting of a National Council, nine provincial structures, 69 regional bodies and 1300 local associations. It is recognised by government as the official representative of the taxi industry to the exclusion of competing associations. According to the Who Owns Whom report on the Minibus Taxi and Bus Industry, the minibus taxi industry carries 69% of the 80% of the South African population who use public commuter transport. It contributes R40bn to the GDP, employs 650 000 people, spends R30bn annually on fuel, R5bn on insurance and R800m on tyres. SANTACO is an association not a company but to give a context the combined turnover of its members is twice that of Tiger Brands. There are 300 000 permitted taxis on the road with an average ownership of two taxis per operator which translates to roughly 150 000 entrepreneurs. If the newly created Department for Small Business Development was wondering where to find entrepreneurs with the experience of running a business they need look no further. The Department of Transport introduced the Taxi Recapitalisation Programme (TRP) in September in 2013 under which taxi owners were paid a scrapping allowance for old taxis to be used to purchase a new vehicle, or leave the industry. Under the programme 58 000 taxis have been scrapped but SANTACO’s view is that the scrapping allowance was insufficient to make the purchase of a new vehicle viable. In addition owners were obligated to buy TRP-compliant vehicles which many believed are not suitable for the purpose and those leaving the industry were not offered support to establish a new business outside of the industry. The industry faces a significant threat from the Bus Rapid Transport Systems which have been installed in Johannesburg, Tshwane and Cape Town as well as the replacement of the municipal metro bus fleets and the metro rail rolling stock. A short term opportunity has been created by the phasing out of contracted metro busing where private operators have been subsidised for years on a month-by-month contract and consequently there has been no investment in their ageing bus fleet. SANTACO has also lodged a complaint with the Competition Commission that the subsidisation of buses should extend to taxis otherwise it constitutes unfair competition.

Waste Not Want Not

On his seven hour journey in February this year from Moscow to the Russian town of Rybinsk on the Volga River Philip Malandrinos did not know if his headache was caused by the temperature of -16°C or the deafening noise made by the studded tyres of the aging Renault van on the iced road. Philip runs a medical waste incineration business in the Cape Town suburb of Delft and was on his way to inspect a Russian manufactured incinerator which uses a new clean burning technology based on the design of the jet engine. Medical waste is categorised as ‘dry waste’ and ‘wet waste’ and I will not elaborate on the latter other than to say that regulations governing the industry stipulate that the incinerated result has to be dumped at hermetically sealed sites. Currently 90.1% of the 108 million tons of waste generated annually by South Africans goes to landfills. This presents a spectacular opportunity as highlighted by Deputy Minister of Environmental Affairs (DEA), Rejoice Mabudafhasi in her statement ‘ ..imperative for the country to introduce innovative approaches in dealing with waste particularly for diverting waste to other waste management options’. The other waste management options to which she refers are essentially converting waste into energy. Anaerobic digestion, fermentation and composting are processes which convert food waste to energy as a gas or liquid fuel and plasma conversation turns solid waste into gas as was demonstrated in the movie ‘Back to the Future’ when Dr Emmett Brown shoves garbage into the flying car’s fuel tank. Technology has effectively revolutionised the sector by placing value on what was previously, well, rubbish. South Africa is well on track to leverage this opportunity with enabling legislation and state allocated funding as well as research conducted by the CSIR which has resulted in a ten year Waste R&D and Innovation Roadmap (2102 to 2022). A Green Fund of R800m to support the implementation of innovative waste management solutions was established by the Development Bank of SA in 2012 which is partly financed by the World Bank Clean Technology Fund. The industry has had historical difficulties with poor management of municipal landfill sites and claims that the environmental regulation authorities tend to focus their attention on private operators while ignoring the errant municipal sites. South Africa generates 45000 tonnes annually of medical waste and tender irregularities at state hospitals resulted in the illegal storage and dumping of some of this waste four to five years ago which is still being prosecuted. The sector provides informal employment to ‘reclaimers or waste pickers’ which are identified in two categories ‘LWPs’ who operate at landfill sites and ‘SWP’s who collect waste in the suburbs. The LWPs particularly are exposed to considerable health and safety risks and a number of initiatives including the Department of Science and Technologies report on Current and Required Institutional Mechanisms to Support Waste Management innovation seeks to develop SMME ‘s in the sector in a sustainable manner. The JHB metro has introduced centralised sorting facilities at landfills to remove LWPs from the tip face and is looking at providing reflective clothing and better trolleys to SWPs for improved road safety. The potential to create jobs has been recognised by the DEA with the National Waste Management Strategy which plans to create 69 000 new jobs and 2 600 additional SMME’s in the sector by 2016 and The Youth Jobs in Waste programme has created 3 577 youth jobs in the waste management function within municipalities.

Aviation in the DRC (CA)

It was reported that Mobutu Seso Seko president of then Zaire chartered the Concorde to visit his dentist in Paris. He built a runway long enough to land the Concorde in the rain forests near his home town of Gbadolite on the border the Central African Republic in the far North of the country which remains one of Africa’s longest runways. The Democratic Republic of Congo (DRC) is a country of 2.3m square kilometres which straddles the Equator and borders nine other central African countries and is ideally positioned to be an air traffic hub between Europe and Southern Africa. Air travel in Africa follows a ‘hub-spoke’ pattern with international long-haul and regional carriers flying to major centres from where passengers and cargo are dispatched to their destination on regional or domestic flights. If it is to achieve hub status the DRC aviation industry requires a significant raising of safety standards as 50% of all African air crashes, or 22 per annum, occur in the DRC. All DRC registered airlines are blacklisted by the European Union and in their attempt to more rigorously impose air control legislation the DRC’s Air Transportation Board revoked the licenses of 13 local airlines in the first quarter of this year. The DRC has 54 airports of which 26 have paved runways. The French company Alpha Airport is currently erecting a temporary terminal at the N’Djili-Kinshasa International Airport and a feasibility study is being conducted to build a new terminal at a cost of R6bn. An R190m upgrade of the runway and control tower at the Lubumbashi_Luano International airport was completed last year. African airports handled 164 million passengers in 2012 of which 63 million where carried by African airlines and the balance by foreign international carriers. International carriers servicing the DRC include Air Canada, KLM, Air Mali, Delta, Lufthansa, Turkish airlines, South African Airways and South African Express. The DRC is endowed, or perhaps cursed, with abundant natural resources such as copper, iron, gold, diamonds, tin, tungsten, tantalum and oil and has been brutalised by colonialists and successive African ‘strong-men’ which is why it remains one of the poorest countries in the world. While it was a Belgium colony the practice of cutting off hands of workers for not meeting production targets in the rubber plantations was introduced by Leopold II and Mobutu’s rise to power and the consequent murder of inspirational leader Patrice Lumumba was orchestrated by the CIA for which they should hang their heads in shame. In 2013 the DRC experienced its eleventh consecutive year of economic growth achieving an 8.2% rise in GDP in that year and the IMF predicts average growth of 8.6% for the years 2013 to 2017. Boeing forecasts an annual growth in air traffic on the continent of 6% for the next 16 years and in countries like the DRC, where road and rail infrastructure is poor, air travel is the most reliable mode for both passenger and freight. The inexorable economic rise of the African continent creates many spaces to be filled not least of which is dire need for new and replacement infrastructure. • McGregor is MD of Who Owns Whom