THE FLYING SQUAD, MODEL T, ITS GRAVITY TANK AND BEE

In the final week of a two-year engagement to train Deloitte’s staff in capital gains tax,

I was part of a Deloitte team presenting a seminar on the Corporate Rules in the Income Tax Act. (The rules enable one to form sensible business combinations and transfer assets without paying tax.)

As the first speaker of the day, I had an early meeting with the sound technician to check the audio equipment. All in order, he left before we got underway. Unbeknown to the sound technician, he had set up the hotel’s audio equipment on the same wavelength as the Johannesburg Flying Squad. In consequence, earnest explanations of the corporate rules were irregularly but frequently interrupted by transmissions from the Flying Squad, enlivened by squealing tyres and expletives.

The sound technician had decamped for the day, so there was only one way to deal with the problem; make light of it and share the joke with the audience. This tactic succeeded beyond my expectations.

In the audience were tax boffins from both Sasol and Goldfields. Goldfields was in the process of rationalising its Venezuelan gold mining assets; Sasol wanted to spin off a division into an empowered subsidiary company. Both needed tax advice; meat and drink to a tax lawyer setting off on his own.

It was the Sasol engagement that was to open a new professional chapter for me. BEE was then in its infancy, but it was clear it would drive many transactions in which tax analyses would play a critical role. Back then, there was little available authoritative commentary to explain a complex system. So, I wrote a book about it recently with coauthor Chris van Wyk, forming the Lexisnexis BEE Service.

So much for the Flying Squad. But what has the Flying Squad to do with a Model T Ford? Bear with me.

As a young country doctor, my father’s first car was a Model T Ford.

The Model T had no fuel pump. Instead, it had a gravity tank mounted at the back of the car and a level above the engine. Above the engine, that is, unless you were going up a steep hill. Then fuel would flow, not from the tank to the engine, but from engine to the tank. To this, there was a clear answer: steep hills were approached in reverse.

As for the Model T and BEE: inspired by Sasol, I developed a tax-effective approach to the admission of black participants as shareholders. This approach – my BEE Model A – ran well for years, until the law was amended to put a spoke in its wheels.

Perhaps inspired by the Model T, I “reversed” BEE Model A to produce BEE Model B … and it runs very efficiently in reverse!

WOUTER SCHOLTZ

Via email

[Hi Wouter, thank you for your Jeremy Clarkson-inspired mail. I know precious little about the intricacies of BEE, but certainly enjoy a good story, especially one that involves a Model T Ford and a string of seemingly unrelated topics. Your writing was a welcome addition to our mailbox. I hope our readers enjoy it as much as I did – editor.]