Erasibo

Congratulations, you’ve landed a new contract a public sector institution (PSI). This may have not been your first time being awarded a contract from a PSI, so you feel confident that you will manage this contract successfully and get paid on time.  You deliver the the service to specification and contract terms of reference. You have reasonable expectation that you will receive payment on time, as outlined in your contract. This however turns out not to be the case. What are your options to getting what you earned?

Firstly you need to understand that the South African government has as its policy intention the aim of both growing the economy and redistributing the countries wealth through its own procurement processes. This implies supporting SMMEs to become involved in the delivery of public sector programmes. This applies equally whether your service is a high end strategy for government or a catering facility.

After much failure and criticism about the way the public sector operates, government being led by the Presidency and National Treasury are driving forward performance improvement approaches in the public sector to do away with issues like late payment and weak contract management. There is a clear understanding by the leadership in government that there are many within the public service who don’t do their jobs as required and thereby slow down the overall process of transformation in the country. These people hide behind the power of their institution. The leadership in government have started cleaning house and putting into place systems to allow you to complain better so that they can improve the functioning of the public sector. Recently,  the Presidency has signed Performance Agreements with Ministers. The plan is for all the accounting heads of government agencies to be tied into this Performance Agreement process. The intention behind these agreements is to link the political structure together with the delivery structure. However government is still notorious for being a poor payer and hamstringing small business, especially small black business, by paying late or not following their own procurement procedures on supply chain management.

Small companies have to think carefully about their options to recoup what is owed to them. They have to think carefully because the legal route is expensive and long drawn out and in the meantime you are burning up your cash reserves.

So what can you do in addition to following the remedies in your contract? In most cases your contract would specify an arbitration clause which should be followed first. We’d like to suggest a combination of tactics that are not mutually exclusive from each other. The tactics we suggest are intended to place pressure on an institution to quickly resolves and prioritise your issues, otherwise you might end up being a low priority.

You need to make sure that your payment is being held back for reasons other than non performance. The approach we are spelling out only works for issues where non payment is linked to a SCM violation by your public sector client. You as the owner of your business needs to determine whether you need a soft strategy to get your funds out from your non paying client – and this is typically favoured where your cash flow is not being eminently threatened by the non payment, or a hard strategy where you are weeks or even days (in the case of SMMEs) away from cash flow woes.

Other contract related matters such as contesting of results require more specific specialist intervention i.e. get a good contract lawyer. Contact us and we can recommend a few if you need referrals.

1.     Do a situational analysis: Important questions and steps before you decide on a course of action:

• Examine your contract to see if the terms and conditions are clearly outlined and that you have met these obligations.
• Where deviations or changes to the contact have taken place, do you have approval of these confirmed in writing by the client. If no,  a client could contest that these were required and not pay for the changes or resulting contract deviations.
• Have you invoiced according to the specifications? You need to make sure you invoiced using the correct procedure spelt out by your client. you also need to make sure you have provided them with all your substantiation documents – e,g, some contracts require an auditors sign-off on the invoicing.
• Before taking any action you need to formally approach your client about the delayed payment. You need to ask in writing of your contract manager where your payment is. If you get no response we suggest contacting their finance department directly to enquire about your payment. All too often what has taken place is that your late payment is as a result of someone not pushing through the payment on time. If this your problem, a friendly reminded of payment should get your funds through to you. Simple.

  The simple route is always the best route, relations are important and you always want to keep them going. However if you can’t access your contract manager or get assistance from the finance department you are left with limited options and cash burning out, in this instance consider the following further steps.

2.     Go to the head of the organisation: Once you have confirmed that you have both a payment and communications problem with the client go to the institution’s head. Don’t wait, the institution’s head is the accounting officer and is responsible for dealing with late payments. Please remember that late payment for a PSI is an issue the Auditor General’s office will want to know about. It is in the interest of the agency’s head not to have the AG asking questions about simple SCM issues.

Write a calm letter to the head of the institution explaining in detail the problem and your attempts to resolve the issue, and appeal for their assistance. We also suggest that you copy the letter to your contract manager. You should notify the contract manager so that the contract manager can feel some pressure from your approach to the institution’s head.

If appealing to the agencies head does not resolve your issue. You have a few more options available to you.

3.     Going to the reporting National Department: Your next level of complaint is to go directly to the reporting department.  For exampl,  if your client is a Sectoral Education Training Authority (SETA) their reporitng department is the National Department of Higher Education and Training,  and if your client is a municipality, their reporting department of is the Department of Cooperative Governance and Traditional Affairs (COGTA). You can find out who the reportng department is for your client by vising your client”s website and looking at their annual report.

Once you’ve identified who the reporting department is, you need to know who to speak to within the department. You either contact the Chief Director under whom the agency reports or if this is not clear complain directly to the Director Generals office of that department.

In your letter, stipulate your facts in detail, as in the case with the head of the agency previously, but this time include the facts around your request to the head of the agency failing to provide you with resolution. As in the previous action copy the head of the agency and your contract manager on the communication with the national department.

By now you should be getting a response from your client. They wont want you to be causing waves, impacting on their performance agreements by showing them to be inefficient.

If however you still do not get resolution you now need to escalate the matter to the highest structure you can, outside of the courts, and this is the relevant Minister’s Offices and the Portfolio Committee in Parliament.

4.     The Presidency, The  Minister and Parliament: It sounds daunting – the idea of sending anything to the President, a Minister or to  Parliament. Remember they are accountable to you, they actually do want to hear from you because ultimately you are the end user of what they deliver and you can vote them out.

Parliamentarians also like to find issues to hold government agencies accountable. They can be a great leverage point.

You need to copy your letters to the head of the agency, the Chief Director and Director General, to the President, the Ministers Office and to a member of the Parliamentary Portfolio Committee that holds oversight over the agency you are struggling wit, notifying them that:

• The agency is in breach of SCM rules,
• They have not paid you for services you have rendered. If they have used your work without paying for it – there could also be copywrite violations
• The damage being caused to your business and
• The interest being accrued by the agency in question on the outstanding payment, which is a wastage of public funds.

You can email the Presidents Office on: president@po.gov.za or try the Presidential hot line on 17737. You can find the contact details for the Minister’s Office on the relevant national department’s website – we suggest calling the Ministry and asking for the Minister’s PA’s email address and you can find the details for the relevant Portfolio Committee at Parliament by visiting www.parliament.gov.za and searching for “committees”.

If your payment difficulty is truly down to incompetence or inefficiency or even just spite on the part of your client, but you have stuck to the terms of the contract, this process should see you exert enough pressure on the agency to see you paid on time.

This article was published in Your Business Magazine

Getting Paid by Government_DecJan 2011_Your Business Magazine

If you woke up feeling 2011 was going to be the year you took on the world and capitalized on the fact that you have come through the recession intact, think again if running a small business is what you do. If the Amendments to the Labour Relations, Basic Conditions of Employment, Employment Equity and Employment Services Acts come into being, you might have to seriously reconsider if it is viable to remain in business or not.

If your business model is based upon the employment of employees on a temporary or casual basis, than your business will come under attack. Ensuring that all employees, outside of much defined circumstances, will under the new Act, be forced to be made permanent. This will have drastic impacts on certain industries, especially service related industries where income and job security is linked directly to performance of employees.

Bet you didn’t factor this “unknown known” into your strategy planning.

South Africa historically has been pro-employer. Since 1994 workers have seen their rights entrenched and empowered under the South African constitution, various pieces of legislation and institutions such as the CCMA. South Africa is no longer viewed as pro-employer, however because of the rights won by workers and the high level of “labour action” these rights allow workers, South Africa is described as a country where” Cost competitiveness has been jeopardized by insider dominated wage bargaining..”

Now South Africa has a set of draft Amendments to most of the significant labour relations legislation. We want to touch on what are the implications of the Act and how will this affect your business?

The Amendments were tabled to address the undermining of general conditions of employment of workers that occurs through companies outsourcing their employment of employees via labour brokering firms.  The unions argue that labour brokering is equivalent to “a form of modern slavery” and further that in order to ensure “decent work” for South Africans, the term “decent work” needs to be synonymous with “permanent” employment and that labour brokering should be banned outright.

While, nobody wants to perpetuate “modern slavery” and surely everyone is entitled to “decent work” the Amendments being debated heatedly have high implications for the way you do business. It must be pointed out that many countries use a combination of approaches that allow fixed-term contracts to play their legitimate economic role while preventing abuse. The concern with the Amendments

Some of the key issues you should be concerned about as a business owner are:

• The amendments preclude the employment of foreigners over national citizens. If your business runs on the employment of foreign nationals, this practice will now be illegal and heavy penalties will be enforced.
• Ensuring that all fixed/temporary contracts become permanent and all employees are directly employed by a company as opposed to intermediaries, such as labour brokers, places increased risk on companies. Companies will need to seriously prioritise posts needed which will affect the number of people they will be able to hire within the confines of the required minimum wage and conditions of services.
• There is the possibility that as many  jobs could be at risk if employers chose to convert current temporary contracts to permanent ones. Coming out of an economic recession, where industry is risk averse and not confident of growth, job losses will seriously impact on the country. These job losses don’t just mean increased unemployed, it means less consumers to consume the services and good being sold by particularly small South African businesses.
• The amendments would violate the Constitution of South Africa; in that it would infringe on the right to choose a trade, occupation or profession freely. An employee could also not choose temporary employment as an option. This will have huge impacts on for instance, women, who need to work on a temporary basis to cater for the care of children and young people working informally to support themselves through university, etc
• The amendments across the Labour Relations Act (and other linked labour specific legislation) could destabilize institutions such as the CCMA and UIF by significantly increasing the workloads on these intuitions. These institutions will have to increase their capacity, which in the meantime will result in huge backlogs in unresolved cases. In addition to the cost of capacitating these organizations which will be borne by the State, businesses will have to cover the cost of maintaining employees of suspension for longer periods of time.
• If the amendments go through unchanged, your business could be faced with the situation where you need to let go of your current workforce and be fighting several claims at the CCMA.

These amendments could very well be a game changer. How does one plan to expand your business not knowing how drastically your rules will be changed? The unions need to start getting to grip with the concept of the bottom line, if there’s no bottom line there’s only the welfare line.

There are other ways of regulating this practice – that could even do away with the labour brokering all together, not that this is really a good idea to start with. Why use a stick when a carrot could work. Were no alternatives considered, such as tax breaks or quick access to business support financing, should they not be considered?

So what can you do about all of this? Should you shut up shop now fearing the worse? Don’t despair, should this amendment go through parliament it won’t come into effect immediately and there are still legal avenues for challenge, avenues that lead all the way to Constitution Hill and this probably where this fracture between business, government and the Unions will be splint.

If you are a business that makes use of temporary workers, you must start planning for the changes to the labour brokering environment that will be coming in the near future.

Whether you are considering buying a business for a few thousand rand or for a few million rand or whether you are considering starting up a business, a due diligence exercise will prove most useful in providing you with a degree of peace of mind prior to putting pen to paper on the business agreement.

I want to stress that regardless of the size of the deal and regardless of who the parties to the deal are, make sure you undertake a due diligence. I will always advocate for the most thorough due diligence you can afford, this is money, time and effort you should spend in order to save you money, time and effort later. Also remember, you often get the value of service you pay for, so don’t cut corners.

In researching this article I have been staggered to see how little information is readily available on public platforms on the subject of due diligence. What is available is very pricey and usually only talks to high level issues. This is worrying considering how vital a due diligence exercise is, especially to the first time business owner.

What is Due Diligence?

For the purposes of this article, Due Diligence should be understood as an exercise to be undertaken as part of the purchase of a new business. Simply put, due diligence is an investigation into a business with the purpose of proving to the initiator of the due diligence (typically the buyer) whether the facts offered up by the other party to the deal (typically the seller) are in fact a true reflection of the business.

Who should do the Due Diligence?

In order to do a due diligence well you will need two key role players:

1. Professional Assistance: Due Diligence’s exercises are technical in nature and if you have the funds available make use of a professional firm that has done these types of exercises before. Apart from all the certificates and client references that you will get from the firm you hire, check to see if any of the people who will work on your due diligence have ever run businesses before – you cannot under estimate the value of experience.
2. You: Your personal involvement in the due diligence process is vital. The professionals you bring on board work for you, but will not always understand, amongst other issues, precisely what your vision is for the business, what your appetite is for risk is and how you would deal with problems that will be encountered.

I would encourage a more hands on, engagement with your team so that at the end of the day you are getting a due diligence report that will allow you to take an effective decision. You don’t just want a report that says, “Yes do it” or “No don’t do it”. A due diligence is not simply a synopsis on the business you want to acquire or startup. In fact your due diligence report (which will be a detailed report on all aspects of the investigation) can serve as a great tool for guiding your future business plans and strategies for the business should you acquire it.
Some finance houses and banks will offer to do a due diligence for you. Be wary of this service; be wary of any due diligence exercise where the companies doing the exercise for you will profit from your deal outside of the fee you pay for the due diligence.

A Due Diligence Model

Non-Disclosure Agreement

The due diligence exercises should always start with a Non Disclosure Agreement (NDA). Characteristics of the NDA that you should be aware of are:

• The NDA is to be signed between yourself and the seller.
• This agreement essentially protects both parties from the having their confidential business information made public.
• A confidentiality period must be specified. Please remember that the confidentially clause does not apply to illegal activity.
• The NDA should talk to you requiring a Due Diligence and it should specify the high level areas that the Due Diligence will cover. The seller must agree to this. If the seller does not agree to this, walk away.

Due Diligence Areas

A good due diligence exercise will cover the following nine areas1. In addition you (or your team) will need to acquire from the seller the following documents for your due diligence exercise. These documents should be made available to you quickly as the seller should already have these available. If the seller is unable or unwilling to provide this information this would be a cause for serious concern. The fundamentals of running a good business are record keeping.

: *please note the Due Diligence Item column is not exhaustive*

Due diligence is your safety belt, often you only realize that you need it, when the deal has gone sour and your business is in crisis. Do not make that mistake and overlook this process.

Our post “Why be the first franchisee” has been published in Your Business magazine (Volume 15 No.1).  Not a bad start to 2010.

This is the fourth article in our series on franchising (especially restaurant franchising). Best to familiarise yourself with our other articles which sets our tone.

Continuing on our series of articles on the franchise industry in South Africa, we want to look at the Consumer Protection act and what it’s impact is on the franchise industry?

The Consumer Protection Act is the second major development in favour of consumer protection in recent years. The first being the National credit Act which is designed to improve transparency; prohibit unfair contract terms and practices; and prohibit anti-competitive practices. The Consumer Protection Act is designed to protect consumers from exploitation and unfair practices by unscrupulous businesses, and to empower consumers to make wise purchasing decisions. Together these Acts entrench the protection of consumers as prescribed under the Constitution of the Republic of South Africa.

Rights of Consumers

Under the act, franchisees are regarded as “consumers” and franchisors as “suppliers.” Franchisees are given a number of consumer rights, including the right to equality, privacy, choice, information, disclosure, fair and responsible marketing, honest dealing, fair agreements, fair value, good quality, safety, and supplier accountability. Franchisees are also protected against undue influence or pressure; unfair tactics; and false, misleading, or deceptive representations concerning material facts. This would also apply to the contracting arrangements between franchisor and franchisee.

Franchise Agreements

Under the Act a franchise agreement is defined as an agreement where a franchisor grants to a franchisee for consideration a right to carry on business under a system or marketing plan substantially determined or controlled by the franchisor. In addition, the franchisee’s business is substantially or materially associated with advertising schemes or programs or with the trademarks of the franchisor, or any combination of these that are licensed to the franchises. The agreement must be in writing and signed by at least the franchisee. The Act allows for a cooling of period of 10 business days, wherein a franchisee may cancel a franchise agreement they have signed without incurring any cost

The right to full disclosure is entrenched in the Act. This is in recognition of the number of cases where franchisees had been devastated financially after investing their life savings into franchises that were sold to them on the premise that the franchises would be far more profitable than they ever actually would be. Under the act, franchisors will be required to disclose certain information to prospective franchisees, as provided in regulations to be promulgated by the Department of Trade and Industry.

Monopoly on the Supply of Goods

Currently, franchisees in South Africa have limited protection against unfair practices by franchisors under that country’s Competition Act, particularly in relation to the tying or bundling of unrelated products by a dominant franchisor or when it comes to exclusive dealing. Complaints stemming from these activities are, however, difficult to prove, and the franchisor in question has to be dominant or have market share.

The Act has taken the foregoing prohibitions in South Africa’s Competition Act and applied them regardless of whether the franchisor is dominant. The new law prohibits bundling or tying of products by a franchisor, unless the franchisor can show either (i) that the bundling results in economic benefits for consumers or (ii) that the convenience of bundling outweighs any restriction on consumer choice. Alternatively, the bundled goods or services must be offered separately and at individual prices.

The Act guards the right to consumer choice by generally providing that franchisors must not require, as a supply condition or as a condition of entering into an agreement, that the franchisee purchase goods or services from the franchisor or from any other designated supplier. It is a valid defense to show that products or services that the franchisee was required to purchase are reasonably related to the branded products or services that are the subject of the franchise agreement. It remains to be seen how closely linked to the brand “reasonably related” will need to be to excuse such a requirement by a franchisor. As a result, many franchisors will no longer be able to be the sole supplier of goods and services to a franchisee, unless it can be shown that the products and services are “reasonably related” to the brand.

Franchisors should take care to ensure that products and services essential to the protection of their brand are explicitly listed in their franchise agreements, to reduce any later issues regarding interpretation. In other words, the Act suggests that franchise agreements provide for core and non-core products. Core products or services would be the primary, unique products related to the brand.

With regard to transitional provisions, it appears that the Act will not apply to pre-existing franchise agreements (or transactions) entered into before the general effective date, expected to be October 2010. However it will apply to renewals of contracts. The Act highlights a number of factors relating to fair and honest dealings and unfair unreasonable and unjust contract terms. The Act allows for the cancellation of contracts, whole or part should it be deemed to have contravened these principles as detailed in the Act.

Closing

The Act will have huge implications for the franchise industry. For while it has boomed has also become a place for corrupt, fly by night operations.  The Franchise Association of South Africa has expressed concern with regard to the implication of the Act and the burden it will place on its members. This is a concerning position as the Act can only create credibility for the franchise industry by ensuring that it closes the gap for illegitimate franchisors to operate.

Surely this would be a benefit to FASA, to cleanse the industry of undesirable operators. Franchisors who lack the capacity for adequate, transparent contracting and operations shouldn’t be selling off franchises. Organisations like FASA shouldn’t be accepting these franchisors as members or providing a potential front for their operations.

This is the third article in our series on franchising (especially restaurant franchising). Best to familiarise yourself with our other articles which sets our tone.

Commercial banks are part of legitimate business. We trust them with our savings, we store our incomes in them, and we borrow money from them, all the time assuming that the transactions are legitimate and reasonable and regulated to some extent. We rely on them for every aspect of functioning of civilised life-homes, cars, business, school fees and personal events.  We also expect that they will exercise reason in their interactions with us because their survival depends on the patronage of their clients. So their responses to us are based on good credit lending praFFrctices and when banks make errors in planning, governments are hard pressed not to finance their recovery with taxpayer’s money, as in the case of the US recently. Banks are essential to the stability of our economy; citizens and the banks share a common investment in our economic future.

But have banks gotten too big for us. Do they represent something untouchable? So when they repossess homes and cars in a panic about the money that is being lost like a waterfall without following the specified due processes outlined in those contracts is this acceptable under the circumstances or is this just a case of bullying. And what really is their responsibility as the credit provider?

In responding to this question I will share with you our own insightful experience with the banking environment recently, which has been the cause of much debate within our own inner circle.

We took out a loan to finance a franchised restaurant. After the bank evaluated our application they informed us that we were not disadvantaged enough to qualify for any form of BEE preferences (the words used were “not black enough”). This opinion of the banks was nether policy nor constitutionally justifiable. However, we were in love with the business idea, so we didn’t make a scene. We put up 40% of the financing required for the franchised restaurant we wished to buy. The bank confirmed that it had done a due diligence on the restaurant and the franchisor and was extremely happy with the results and would finance the deal.

In fact the franchisor was so highly credible to the bank, that the bank offered them great deals on banking and transacting facilities for their franchisees and they offered the group an approved financing facility for all new franchise restaurant setups. Since we knew what the obligations placed on the bank were by law to thoroughly assess any new deal we felt extremely confident in all the new “benefits” the bank was offering the franchisor.

So when the figures provided to us and the bank by the franchisor turned out to be deliberately exaggerated and show that a fraud was committed by the franchisor so as to ensnare us in the business deal the issue of what exactly is the responsibility of banks in this circumstances was raised by us. The answer apparently is that the banks have no obligation. The bank completed a FICA assessment of the franchisor; their results didn’t cry out any kind of foul – it should have. There was evidence of their foul practice’s aplenty, which at the time was outside of our sphere of access.

Now that the bank is aware that there was a fraud committed by the franchisor does it discontinue giving out loans to new franchisees wishing to purchase restaurants in the same group or does it blacklist the group? No of course it does not.

Granted our matter hasn’t been to trial yet, but we can supply details (irrefutable forensic evidence) to the banks legal department and they can make a judgment about the caliber of clients they want to maintain or their obligation to new investors. If the bank continues to give out loans to unsuspecting buyers wishing to take up opportunities within the same group, would the new franchisees be able to sue the bank for facilitating a fraud since the bank has knowledge that the franchisor is suspected of fraudulent behaviour?

At the very least the bank should consider suspending any new deals pending our case going to trial and being decided on, because should we win our case the franchisor may not be able to operate anymore and new franchisees would be placed at risk of defaulting on their loans, which is a risk to the banks bottom line.

At the very minimum this franchisor has committed FICA fraud? Should the bank not have called in SARS immediately? The bank leverages their risk on personal sureties signed by borrowers – the franchisees, so whatever happens with the business, the bank will get its money one way or the other. But should they? The National Credit Act outlaws irresponsible lending and by this it means that the banks assessment of whether a borrower is suitable for credit has to do with an assessment of the borrower’s ability to pay. If the borrowers ability to pay has everything to do with the business’s capacity to generate a certain profit, and the business was in fact never able to do that as the figures provided were a fake. Is the bank not responsible for irresponsible credit provision?

I’m not suggesting that the banks share responsibility for your business decisions or mine. You go to the bank for financing not buying into your idea. But they do have a role to play in not perpetuating a fraud when they know about it and they do have a job to ensure that there facilitation is not being used for money laundering or other such activities. The new Consumer protection Act certainly talks to the issue of facilitating fraud and specifies the right to have contracts cancelled in this case. What does that mean for a bank that knowingly provides financing to fraudulent franchisors. Can those loans be cancelled and they held responsible for the transaction?

On the cross side asking the banks to take more responsibility will be ensuring that loan facilities become even harder to access and you will pay for this risk in the repayments.

If you are hoping to see your banker as a partner in your business, best check out the development bankers, such as the Industrial Development Corporation or National Empowerment Fund. Since they accept a high percentage of risk they are better at evaluating the risk with you. If the business collapses they lose their cash too. So if you have to go after a franchisor that has defrauded you have a big partner on your side and you are out a considerably less amount of cash.

This is the complete unedited article written by Ravi Naidoo. Ravi is Group Executive for Research & Information at the Development Bank of Southern Africa. He writes in his personal capacity. A edited version was printed in the Sunday Times a few weeks back.

Every action, and failure to act, has a consequence. And at certain times, the actions are more urgent and the consequences more critical. Today, as we collectively look back over the many things achieved since democracy in 1994, we must take responsibility for much of what has not worked since that time. Almost fifteen years on, our ability to credibly blame our current failures on the Apartheid legacy is fast fading. Indeed, for better or worse, South Africa’s democracy is harvesting what it has sown.

To be sure, the list of achievements is long and is some cases remarkable. Few societies could have undertaken such a wholesale and simultaneous change of laws and institutions, right across the State, private sector and civil society.

Our overriding achievement has been to put in place an extensive framework of individual rights, backed up with a deliberate and active focus on driving through measures to promote redress and equity. In terms of numbers, there has certainly been redress. Today, there are more young people attending schools than ever before. People’s access to water has reportedly increased from 62% in 1996 to 88% in 2007. Similarly, access to electricity for cooking has increased from 47% in 1996 to 67% in 2007. In fact, a reading of the Presidency’s Fifteen year Review gives an overly full list of the achievements.

Yet, here we are. We all know that things are not nearly so rosy. There have been thousands of local community protests and behind the political ruptures today is a fundamental concern about the performance of government. So what is going on?

At the heart of our failures are the choices we have made.

First, we have chosen, in practice, to make equity and redress the focus of our transformation. Equity and redress is clearly necessary and no one can argue that we do not need this given our history of systematic deprivation and inequality.

But the focus on equity has come at the price of excellence. In focusing on quantity the focus on quality was lost. Perhaps it is because differentiation (the necessary focus on the best) is confused with unfair discrimination. However, access to mediocrity is no way forward. Thus we have increased access to education whilst the quality of education for South Africa as a whole has deteriorated. Teacher development and performance has been neglected. Up to 50% of children in grade 6 fail literacy and numeracy tests, placing South Africa among the worst performers in the world, below our far more resource-constrained African peers.

Our response to that includes allowing learners to attain scores of 33%-40% to matriculate, after your grades have been inflated. The quality of the passing student leaves you in no doubt as to why universities are struggling to improve their graduation rates. Based on international tests, less than 10% of South African learners can compete with the best 75% in the developed countries. Quite frankly, if we continue to produce such results from primary school through to universities the future for a broad-based economy built on quality jobs will remain bleak.

This is the second choice that has been made post-1994: it is rare that anyone is held accountable for poor results. In the private sector, in a competitive market, if people don’t like your product, they will stop buying it. In the public sector, the theory is that the citizen will change or withhold their vote, and hence the political party will be forced to ensure its service providers do indeed serve the people well. Clearly this has not happened. While this is worse in conditions of a one-party state, the mere existence of political competition will not change this unless the political contestation becomes a contestation about service delivery. Indeed, patronage-based rivalry could actually be negative for service delivery, as it will retain incompetent managers who are key role players in dispensing patronage.
A third choice is the manner in which we have defined “transformation” to mean a change in the complexion of the management of institutions. Clearly many of the Apartheid era managers had to go. And many of the new, black managers were world-class. But transformation often ignored the core business of institutions, the need to deliver to the people and to empower citizens to get on with their lives. Ironically, as competence became de-emphasized in appointments, even the best black candidates lost out. Hence, in the angst over the need for better municipal basic services, we find 66% of municipal managers having neither a degree nor more than five years experience. The no-degree figure rises to 85% for CFOs and 90% for heads of technical units. To be sure, South Africa does have enough black and white skills to fill the most crucial of these posts.

A fourth choice is the dismantling of discipline. Yes, Apartheid discipline was bad. But what have we put in its place? The answer is that we have dismantled Apartheid discipline without putting in place an effective system of discipline appropriate to a democratic order. Discipline has deteriorated in hospitals, schools and the public service in general, with severe consequences for staff morale and work organization. The ANC in Polokwane introduced a “non-negotiable” resolution for teachers, that they must be in-class, on-time and teaching. That such a resolution was needed in the first place tells its own story. In a similar vein, COSATU-think tank, Naledi, found that discipline had collapsed in some hospitals.

A fifth choice is the avoidance of honest reflection on the outcomes we have achieved. If you do not measure your outcomes honestly and create a safe space to discuss them then you must fail. Because of the acrimonious debates and a breakdown in the social compact since the mid-1990s, mainly due to disagreements over economic policy choices, we have reverted to defensive evaluations. Much of it is spin.We have avoided putting in place management information systems that reflect the real outcomes. And we have avoided real discussions between social partners. Yet, in reality, implementation can never be centrally determined because most programmes – whether education or inflation targeting. It can only be achieved with cooperation from key stakeholders that must implement (be it government, organized labour or communities). This does not mean giving everyone a veto, but it does mean measuring everyone’s performance, even those of stakeholders, and holding everyone publicly accountable for their contribution.

As South Africa heads into its next term of government, we need to honestly reflect on the lessons of the past fifteen years. South Africa’s performance in the past.

Fifteen years has been mediocre. There is an opportunity and imperative to do better in future. But this will not arise from any economic “miracle” or massive increase in resources. If anything, the domestic and international economy will be more constrained over the next five years. Improved outcomes will come from the tough choices we make. In his election campaign, Barack Obama coined the phrase, “We are the ones we’ve been waiting for.” That applies fully to South Africa, where – whether we like it or not – we are living in the season of consequences.