Chemical Technology November 2015

HSE terminology and the requirements. It is not always easy to recruit employees who speak a common language and therefore to avoid the risk of miscommunication, it is always advisable to make extensive use of interpreters/translators who understand the technical jargon. On larger projects where the project duration is a few years and if there is a common local language eg, English, French, Swahili, etc, then it would be beneficial to get all employees to learn it formally. You may also consider Fanagalo as a common site language if the project is in the southern regions of Africa, because Fanagalo has a simple grammar and its vocabulary is 65 % based on Zulu and Xhosa, which are Inguni-based languages. There are languages in South Africa, Swaziland, Malawi, Tanzania, Zambia and Zimbabwe, which are based on the Nguni group of Bantu languages and therefore the people of these regions will learn Fanagalo very quickly. When communicating with the locals in a foreign country, even if they can speak your language, beware of cultural sensitivities, courtesies, hand gestures and other man- nerisms because they may be interpreted differently from what you understand them to be and could set the trend for adversarial relationships. It is always wise to investigate the culture of the people before embarking on a foreign project assignment. What bureaucracy and red tape is involved? Work and residence permits are generally a problem to secure. The Government wants to ensure jobs for their citizens versus the contractors wanting to use as many of their experienced personnel as possible. The government’s labour department generally requires good justification for why the work, including that of managers, cannot be done by the locals. There are many countries in Africa that have people qualified in engineering, finances, land surveying, quantity surveying, contract administration, etc, but who generally have not had the opportunity to gain experience in construction and its related disciplines, such as cost control, scheduling, warehouse management, document control, etc. in order to fill these positions. Some countries insist on the employment of a high per- centage of local citizens and make it difficult to obtain work permits for expatriates. High percentages can be achieved amongst some of the construction contractors due to the higher numbers of skilled and semi-skilled workers versus supervision and management. On the other hand, where there is a separate construction management contractor, which is composed mainly of experienced management, engineering and supervisory personnel, it is not possible to achieve the numbers. In order to obtain work permits, it is advisable to make use of a local citizen or local com- pany, which has the correct experience, has government department contacts, knows the culture and speaks the local language. The requirement to award contracts to local contractors can also be a challenge and a risk. Generally the lack of productivity will have an impact on cost and schedule. There will also be a lack of knowledge in the areas of HSE and quality. In order to meet the client’s requirement, it is thus best, in many cases, to award three or four main contracts,

the taxable income is fair and equitable. Documentation is critical in ensuring that your accounting systems can sup- port an audit. Failure to adequately support transfer pricing arrangements can lead to penalties and interest payments, which often may exceed the actual tax value. Tax authorities look carefully into these arrangements, as South Africa wants to ensure that it receives its fair share of income tax, otherwise all profits could be left in the US and South African tax authorities get very little. Tax authorities have the right to review these arrangements and if they rule that the transactions between related parties are not ‘arm’s length’ they may levy taxes on what they view to be the taxable income of the company. So if they rule that your income should have been R50-m instead of the R6-m you declared, you will need to pay income tax on the R50-m and fight the battle in court. ‘Double Taxation Agreements’ (DTA) need to be thor- oughly understood otherwise the income generated by the organisation could be taxed in the hands of both tax authori- ties. In countries where there are no DTAs, the multinational organisation needs to be aware of the tax implications. In addition, dealing with tax authorities may be chal- lenging if the language of business is different from that of the organisation, eg, English versus Portuguese. In South Africa there is a dispute between the South African Tax authorities and the Mozambique Tax authorities over the interpretation of the Double Tax Agreement. On the RSA side, the agreement is in English but on the Mozambique side, it is in Portuguese. Both should say the same, but the interpretation of the clause is read differently in English to that of Portuguese. This has resulted in some companies being subject to tax both in South Africa and Mozambique for the same income, ie, they have been taxed twice. An organisation needs to make sure that if it creates a permanent establishment within the foreign country, it registers for tax and understands the various taxes specific to that country. Failure to attend to tax matters can lead to hefty penalties and interest. Legal arguments can last for long periods and are costly. The lesson here, in order to avoid the pitfalls, is that an organisation needs to have a thorough understanding of the tax laws prior to signing any contracts or starting any work. Obtain tax advice and preferably make use of two or three tax experts to investigate the specific country’s tax laws because they do not all specialise in everything and have different interpretations of the laws. Overcoming the language barrier Whenever work is done by foreign nationals who do not speak the language of the native country or where there is not a common language of understanding, there will be difficulties in communicating. History has shown that of the projects that fail or have difficulties, it has been found that in about 60 % of the cases, poor communication has been a major factor, even when parties are speaking, and supposedly understanding the same language. It is therefore very important on projects, especially during construction, that everyone working on site has a means of understanding what is being communicated. It should be a requirement that everyone fully understands

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Chemical Technology • November 2015