Skills Development: Diagnose, Plan, Act

Now that we have a clearer understanding of the benefits awaiting those organisations able to embrace Skills Development as a non-negotiable BEE compliance strategy, our next endeavours should revolve around diagnosing, planning and then jumping into skills development action mode.

Current Status and Future Planning

Inaugurating your skills development strategy should commence with a ‘’where are we now’’ exercise, aka the Skills Audit. While the word “audit” may bring about nightmares of black and white suits, staring at you unapprovingly from behind their laptops while you are trying to make excuses for gaps of noncompliance, this reality check is necessary for you to move forward.

An audit is necessary to provide actual figures and metrics to compare with required BEE targets. The pain (and fines) for not complying is far worse than coming to terms with the BEE voids in the company.

The skills-based audit exercise will also amplify the exact training requirements of your organisation as to align future spending to those areas where maximum gains can be earned regarding BEE points and also monetary benefits in the forms of rebates and grants.

Once the skills needs analysis is complete, the structuring of your Skills Development plan can begin. Noted, this may be quite a lengthy exercise of setting up learnerships, creating internship programmes, designing short courses and establishing bursary initiatives. While there is no A for effort awarded during this stage, the “BEE” scored received will be well worth the struggle.

Say YES to the Skills Development Element

Considering the economic “almost” recession we find ourselves in these days, money certainly does not grow on trees especially for the SME business sector. Hence, you need the most “BEE bang for your buck” when investing in skills development and learning activities

The YES initiative aligns perfectly with the B-BBEE Codes of Good Practice and by participating in this programme your company can significantly improve its BEE Rating.

By achieving YES targets either by offering internships to unemployed youths or with the sponsorship of unemployed youth stipends at another company, one can move up one recognition level on scorecard. For the overachievers exceeding the YES minimum requirements by achieving double on the target, will result in moving up two recognition levels on the scorecard.

Follow the Leaders

When in doubt, just follow the leaders. A skills development strategy reaches beyond traditional in-house training and development mechanisms. Some organisations have made tremendous inroads towards maximising their efforts in the Skills Development Element of the BEE scorecard, during the last couple of years:

1) Learnership to Permanent

  • South African Breweries is empowering youngsters through learnerships and training programmes as per the guidelines of the BEE Act, but with a twist. These learners are in fact offered permanent employment long before their learnerships come to an end, which enable them to start contributing to the SAB business environment and provides them immediate job security.
  • These learnerships are open to all graduates with a B average attained at university. The SAB Learnership programme is a perfect example of how business in South Africa can create new pathways for full-time employment.

2) Secondary and Tertiary Bursaries

  • Sponsoring employees or non-employees via bursaries to complete a tertiary qualification is deemed as contributions towards the Skills Development Element and improve overall BEE status. Paying for a black individual’s secondary education also counts towards skills development points.
  • Old Mutual established their School Grant Fund in 2015 together with the Public Investment Corporation and the Government Employees Pension Fund as outside partners. In the three years of operation, this fund has awarded over 60 bursaries to previously disadvantaged individuals.
  • Nestle boosts their skills development score by offering bursary schemes for employee’s children, to study at an accredited university up to undergraduate level.

3) Upskilling the Community

  • Medium-sized enterprises are often subject to the challenge of capacity availability where internship or learnership intakes are concerned. Fortunately, the skills development pillar allows for companies to earn points when involved in community upskilling projects.
  • T-Systems has made a sizable investment in the form of a Digital Learning Centre in Hazyview, with the aim to develop critical IT, English and Tourism skills within members of the community in Hazyview, as well as surrounding areas.

4) Funding Independent Training, Mentorship & Incubator Programmes

  • Sometimes its just easier to give money and be done with it. Well, you can still earn Skills Development points by providing funds to Training Platforms and Mentorship Programmes such as those offered by the South African Institute for Entrepreneurship (SAIE).
  • Companies like ABSA, Anglo American, Astrapak and Coronation allocate funding to the SAIE for the development of training materials, courses, workshops and mentorship alliances in critical areas such as education, agriculture, information technology and enterprise development.
  • Heineken contributes to its skills development goals by sponsoring candidates to partake in entrepreneurial training and development hubs (incubators) running for a ten month period each year.

5) Think Global, Act Local

Quite a fitting tagline for Investec’s SATRep’s Global Exposure programme to train and develop young entrepreneurs by exposing them to global business thinking practices. Selected applicants are sent on a week-long trip to an international destination to meet and engage with influencers from leading companies in a specific business field or industry.

These exposure ventures aim to provide youngsters with an opportunity to experience international business firsthand and return with global insights, learning innovation, potential funding prospects and collaborative partnerships to take their businesses forward.

6) Work Readiness Programmes

You don’t have to be in training to provide training. Global consulting firm Mazars is mostly known for their accounting, risk management and actuarial consulting services. However, they are making a valuable contribution to skills development and learning with their Job Readiness Training Programme which offers an extensive 60-day course to unemployed youths as a method to prepare them for their future world of work. They present programmes in Durban, Gauteng and Cape Town.

Negative Narratives into Positive Prospects

According to the Deloitte Human Capital Trends report of 2017, only 28% of organisations in South Africa are actively involved in skills development initiatives. The concept of BEE is often subject to negativity, apathy and a reluctance to participate to such an extent that its positive prospects in terms of business sustainability are often overlooked or ignored.

To overcome our adversities of poverty, unemployment and economic regression, embracing skills development as a viable solution to create prosperity should definitely be on the 2019 New Year’s Resolution list for businesses in South Africa.

Skills Development: Good for Business, Good for BEE

The skills disconnect is becoming more and more evident as traditional approaches to training and education are not responsive enough to keep up with the fast pace of changing business conduct. Technological advancement, consumer behavioural changes and the emergence of new competitive entrants into the marketplace on a daily basis, is forcing us to re-evaluate development, learning and training strategies sooner rather than later.

Continuous learning, reskilling and upskilling is cited as non-negotiables in a report by Mckinsey on the Future of Work beyond 2020. Well, that future is literally just over a year away, and even though groundbreaking progress has been made by a few companies within the corporate and commercial sectors in South Africa regarding the Skills Development Pillar of the BBBEE Act, there is still ample room from improvement in these sectors.

Also, the adoption and compliance to the Act from an SME perspective is still a contentious issue of lagging (or dragging) and noncompliance as shown by low BEE Scores or absence of BEE Scores for the larger percentage of South African businesses classified as Small & Medium Enterprises.

The concept of black empowerment in South Africa (BEE South Africa) is often still perceived as an annoying piece of legislation involving grudge purchasing of consulting service offerings from BEE companies to help navigate SME owners through the BBBEE maize of pillars, scorecards and strategies.

However, once momentum is gained and initial structures set up correctly, putting a serious amount of effort into the Skills Development Pillar of the BEE Initiative may prove to be extremely beneficial to your business and your BEE Status.

Subsequently the higher your BEE score the more benefits you gain as a business and so the positive circle continues.

Why is skills development good for business?

Increasing skills development efforts ultimately result in a domino effect of business wins and gains:

  • Adequate training in accordance with operational needs and future growth prospects will empower staff by improving knowledge, productivity and competency.
  • In addition, employees will become more engaged, loyalty will rise, and retention levels will improve.
  • As a result, an increase in the quality of services or products will follow suit.
  • Due to elevated standards, customer service and consumer demand will escalate.
  • In the end business performance will improve, in turn having a positive effect on profit and shareholder value.

Why is a Skills Development focus good for BEE?

The Skills Development Pillar of the BBBEE Act can contribute up to 20 points of a company’s BEE rating and also add a potential 5 bonus points if specific criteria are met. With the challenges of the Ownership and Management Control elements (each now increased by 5 points), adding extra pressure for small and medium-sized companies to retain their scores, a focus on the skills development element is a great way to boost points.

For example, the intelligent structuring of training interventions, at a R 1 700 000 expense may render points as if a R 6 700 000 training investment was made. (Read more about BEE aligned training initiatives here)

With a bit of clever manoeuvring, most companies can benefit from allocating a more substantial budget towards skills development and score maximum points:

  • Up your scorecard by 8 points when investing 6% of payroll spent towards training black employees.
  • A further 4 points are up for grabs if you allocate 0.3% of total payroll expenditure on learning programmes for disabled black employees.
  • An additional 5 points may be earned if your unemployed learners are offered permanent employment after their learnerships come to an end.
  • You can also claim 4 points when enrolling 2.5% of your employees into learnership programmes and another 4 points if the total headcount of your company has a 2.5% unemployed learner representation participating in various training programmes.

Why BEE Compliance is good for business?

Skills development is a priority element of BEE and the more points gained here with a comprehensive skills development programme, the better your BEE score will be.

A solid BEE rating results in a trickle-down effect of economic benefits:

Competitive Edge

  • Your business will gain a competitive edge in the market gaining entry rights to participate in the formal South Africa Economy. BEE compliance is a pre-requisite when entering into ventures with large entities in the corporate sector (and as a bonus you also reap the rewards of the Preferential Procurement forming part of the Social & Enterprise Development element of the BBBEE Act).
  • An improved rating provides access to numerous government tenders especially aimed at SME’s as part of the government’s Socio-Economic Development Targets
  • If you are BEE compliant, other companies wanting to up their preferential procurement would most likely engage with you rather than your ‘’uncompliant competitors”.
  • Applications for licenses, permits and public sector opportunities prove to be much less of a hassle, with a high BEE Status.

Tax Benefits, Rebates & Grants

  • An array of tax incentives are available to businesses with a compliant BEE Status, which add up to significant savings and exemptions.
  • You may claim back between 20% – 69.5% of skills development levies paid to SARS annually on condition that you register a SDF (Skills Development Facilitator), submit a WSP (Workplace Skills Plan), offer a Pivotal Plan of training provided during the year and present SETA accredited training programmes and courses.
  • Tax rebates from learnerships include up to R80 000 for abled learners and up to R120 000 for disabled learners. Your business may also qualify for a tax rebate (youth subsidy) of up to 50% on the remuneration of all employees below the age of 29 years. An additional tax expense of R60 000 may be claimed on all registered learnerships.
  • SETA will fund a 20% mandatory grant (of your 1% total annual payroll) and a 50% (or more) discretionary grant (of your 1% total annual payroll) towards training and skills development costs if your organisations adhere to its specific requirements.

What’s Next?

With all the technical jargon, rules and regulations, it is easy to plunge down the rabbit hole of codes, minimum requirements, point allocations and recognition levels. Let us not forget THE WHY (purpose) of the whole Skills Development exercise: a critical vehicle to facilitate economic growth, stability and improved social development in the quest to eradicate poverty, inequality and unemployment.