President Cyril Ramaphosa told Members of Parliament on Thursday that government would not scrap the broad-based black economic empowerment, although he acknowledged that the policy had been slow in achieving the economic transformation it was intended to.
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.
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:
- 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.
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.
There has been no significant change in the levels of transformation in the South African economy with black ownership declining to 25.2% in 2018, says the Broad Based Black Economic Empowerment (BBBEE) Commission, reports the SA Government News Agency.
Click here to read the full article.
The Department of Trade and Industry, has gazetted the revised Chartered Accountancy Profession B-BBEE Sector Code (CA Charter) for public comment. The aim of the revised code is to empower and grow the number of Black people in the chartered accountancy profession.
Revisions to the Code include drastic changes to the skills development element.
Individuals who want to comment on the new CA Charter, should e-mail the DTI (for the attention of Sipho Solfafa) at firstname.lastname@example.org by no later than 26 June 2019.
See full CA Charter here.
Services SETA has released a draft discussion paper on improving the quality of Business Advisory Services in South Africa, with the aim to stimulate debate, policy consideration and strategies. See PDF document here.
The Broad Based Black Economic Empowerment (BBBEE) Advisory Council has called for the declaration of a Transformation Week in the country to showcase best B-BBEE practice.
“There was consensus at the meeting that there is a need to declare a Transformation Week in the country to showcase best B-BBEE practice, create awareness, and educate, with platform to share progress and introspect regarding economic transformation,” said the Council.
Council held its meeting, chaired by Trade and Industry Minister Rob Davies on behalf of President Cyril Ramaphosa on Friday.
The B-BBEE Advisory Council is a body appointed by the President in terms of the B-BBEE legislation to advise him and government on B-BBEE and transformation of the South African economy in order to achieve an inclusive economy.
The collective also acknowledged that the country’s procurement laws need to be strengthened to embed B-BBEE compliance in their content.
Friday’s meeting recognised that progress has been made in the implantation of B-BBEE policy over the last five years.
The Black Industrialist Programme, noted the meeting is among one of the achievements of that can be counted. The programme intends to create majority black-owned entities in the productive sectors. To date the Department of Trade and Industry (dti) has supported 138 beneficiaries.
The meeting held at the dti campus in the capital, also counted the establishment of the B-BBEE Commission to effectively monitor implementation and progress as one of the other successes.
“Understanding the primacy of B-BBEE in the government’s drive to effect fundamental change and economic redistribution, the Council discussed and number of issues that have an effect on the implementation of B-BBEEE,” it said.
Issues discussed at the meeting include the role of development financing institutions (DFIs) in financing and supporting empowerment. The gathering stresses that the role of DFIs, should be complemented by the financial sector to intensify funding for B-BBEE as per the commitment of the Financial Services Charter.
The Preliminary report of the B-BBEE Commission showed that vendor-financing is higher, followed by funding financial institutions in respect of major B-BBEE deals already registered, with government funding being the lowest.
It added that focus should be placed on financing SMMEs and Black Industrialists, particularly those in the productive sectors.
The Council emphasised the need to intensify efforts of ensuring that SMMEs get markets to sell their wares, and also appreciated the significance of public and private sector partnerships in this regard.
The Council also mulled on the appropriate way to utilise the 30% as contained in the procurement policies to empower SMMEs in local communities.
The collective acknowledged the veracity of the economic transformation work that still need to be advocated in society to educate and ensure increased B-BBEE compliance.
On black ownership target, the Council said the 25% target should be inclusive of active participation of the beneficiaries and not passive involvement.
In the same breath, the Council raised concern on the usage of broad-based ownership schemes, the abuse of the third party for enterprise development, supplier development and skills development.
It also expressed concern about the non-participation of black shareholders and directors in 51% black owned structures.
Acknowledging that fronting is becoming more sophisticated aided by consultants and verification agencies in the market, the Council urged government to finalise the development of regulation for verification agencies and B-BBEE practitioners to complement the work of the B-BBEE Commission and South African National Accreditation System. – SAnews.gov.za
The South African Qualifications Authority (SAQA) has commended the role players who have worked to get the National Qualifications Framework (NQF) Amendment Bill through Parliamentary processes.
SAQA on Monday thanked Higher Education and Training Minister Naledi Pandor and the Portfolio Committee on Higher Education and Training for being at the forefront of the amendment bill, which is now awaiting the President’s signature.
The NQF Amendment Bill aims to protect the integrity of the South African education and training system by giving SAQA the legal responsibility to verify qualifications and part-qualifications (an assessed unit of learning that is registered as part of a qualification).
The bill makes provision for the registration by the Higher Education and Training Department of all private education institutions and skills development providers, as well as for the accreditation of these providers by the Quality Councils.
It further makes provision for organs of State, employers, education institutions, skills development providers and Quality Councils to refer qualifications and part-qualifications to SAQA for verification and evaluation.
The bill also provides for the formulation of criteria for evaluating foreign qualifications.
“This means that in the case of national qualifications and part-qualifications, SAQA must verify that they are authentic. In the case of foreign qualifications, SAQA must first verify that they are authentic and then compare them with South African qualifications for placement within the South African NQF. By so doing, the quality of both national and foreign qualifications would be protected.
“The bill clearly defines authentic qualifications and part-qualifications. It also defines misrepresented as well as fraudulent qualifications. In the event that a qualification or part-qualification is found to be misrepresented or fraudulent, it will appear in the register of misrepresented qualifications and part-qualifications or fraudulent qualifications and part-qualifications. This will deter would-be qualification fraudsters from misrepresenting qualifications,” SAQA CEO Joe Samuels explained.
Another form of deterrent is the imposition of penalties to not only the qualification fraudsters but also to education institutions and skills development providers that falsely claim that they are registered and accredited to offer qualifications and part-qualifications, Samuels said.
“Hence, it is a criminal offence for an education institution or education skills provider to falsely claim to be registered and accredited, let alone offer qualifications that are not registered on the NQF. The penalties range from five to 10 years imprisonment or a fine or both. This means that learners will not be taken for a ride by unscrupulous providers,” Samuels said.
The penalties are not limited to qualification holders and providers but, also extend to anyone who makes or causes a false entry into the National Learners’ Records Database or the misrepresented or fraudulent database.
Samuels welcomed the changes brought about by the bill as they seek to protect the public against unscrupulous education and training providers, and also protect government and businesses from hiring people who do not have authentic qualifications.
“SAQA will continue to work together with all stakeholders to ensure that the quality of our education system is maintained and enhanced. SAQA will also ensure that once the bill is signed into law, it will be implemented for the benefit of all living in South Africa,” Samuels said. – SAnews.gov.za
Empowerdex, arguably the largest BEE verification agency, was suspended by SANAS on 5 April 2019 due to alleged fraudulent activity in the BOSASA scandal. More information is available on the Empowerdex website; http://www.empowerdex.com/news/item/86-re-judicial-commission-of-inquiry-into-allegations-of-state-capture and the SANAS website; https://www.sanas.co.za/?page_id=727.
Contact BEE Analyst, for more information on how to minimise your risk and exposure.
A pre-requisite to earning any points within the stipulations of the CSC300 code is the annual submission to CETA by 30th of April every year. Forget about this date and wave your B-BBEEE rating goodbye.
The following criteria must be fulfilled for the Measured Entity to receive points on the Skills Development Scorecard:
- Workplace Skills Plan
- An Annual Training Report
- Pivotal Report which has been submitted to CETA (Construction Education & Training Authority)
- Implementation of Priority Skills programme generally, and more specifically for Black People
SUB-MINIMUMS, DISCOUNTING & CHALLENGES
According to the scorecard measurement principles of the Skills Development element, any measured entity has to achieve at least 40% of the total weighting points as directed by each sub-element of the Skills Development Scorecard.
These include mentorship participation, facilitating learnerships, internships, apprenticeships and professional registrations, as well as skills development expenditure for black people and adjusted gender recognition parameters according to the categories of the Learning Programme Matrix.
Let’s have a look at the revised codes relevant to the classification of measured entities, discounting principles and foreseen challenges in more detail:
- Large Enterprises
For large industry players (Large Enterprises) compliance with all five priority elements will be compulsory, and Skills Development is viewed as a priority element for larger organisations in the construction sector. (page 41 of the Gazette)
The biggest risk here is that non-compliance to the threshold targets on any one of the five elements will result in the B-BBEE status being discounted by one or more levels depending on the compliance gap between actual and sub-minimum target points.
A prominent challenge for big business would be the potential disruption of services, production and manufacturing processes due to employee time spent in training and development activities and also for key staff involved in prescribed mentorship programmes.
- Qualifying Small Enterprises (QSE’s)
A measurable Qualifying Small Enterprise has more manoeuvrability in terms of the QSE Scorecard with a compulsory element of Ownership and then the choice of another element which may or may not include Skills Development. (heads up for growing concerns, skills development is a much more nimble element where maximum points can be earned far easier than for instance preferential procurement and supplier development elements)
If a QSE qualifies for an automatic B-BBEE level 1 or 2 status, compliance to the Skills Development element is compulsory as to avoid discounting. The challenging issue this scenario is that the modified flow-through principle cannot be used; only the standard flow-through principle is allowed in this case. For an explanatory infographic regarding the differences between these principles click here.
Another spanner in the works for automatic qualifiers on level 2 due to 51% black ownership is that they will be discounted by one level if a 40% subminimum in terms of the Skills Development element is not met. This change forces QSE’s to still spend funds on Skills Development despite qualifying for Automatic B-BBEE levels.
- Emerging Micro Enterprises (EME’s)
An EME with an annual turnover under 1.8 million for BEP’s and under 3 million for Contractors is not subjected to the discounting principles because they do not need to present B-BBEE verification certificates although proof of EME status is required.
Therefore, they are automatically released from being compliant to the QSE Skills Development Element as long as ownership percentages and annual turnover remains in the boundaries of EME classification. Kudos to Government for being considerate to ‘’small guys”.
However, as an Emerging Micro Enterprise (EME) with automatic B-BBEE status levels from 1 -4 the minimum expenditure target for Skills Development is 40% to avoid discounting action. (These are relevant to EME’s who choose to enhance their B-BBEE status levels)
A particular challenge for smaller construction companies who often find it difficult to achieve 30% black ownership is that they will be discounted from a level 5 to a level 6, by not obtaining a 40% subminimum in the skills development element. This means that their competitiveness in the market when bidding for tenders may be compromised significantly.
- Start-Up Enterprises
Start-up enterprises are by no means exempted from strict scoring regulations. During the first twelve months of operations, a startup will be measured as an EME regardless of expected revenue if below ten million.
However, tendering on any contract with a value of higher than 10 million (below 50 million) would immediately push the company into a QSE qualification. Similarly, a startup will be measured against the Large Enterprise Scorecard if any tender is made with a deal value higher than 50 million.
Therefore, the Amended Code expects increased compliance standards from a legitimate start-up the moment it secures a high value contract. Obtaining the required Skills Development subminimum will then become increasingly difficult for construction industry start-ups. (Note to all start-ups: Ramp up your internship and learnership recruitment processes with our eRecruitment Solution)
NITTY GRITTY, BUT IMPORTANT AMENDMENTS
Noteworthy changes to the Construction Sector Codes are concisely summarised in a recent SANAS publication. We have listed those that may have substantial impacts on future skills development strategies below:
- Stepped targets have been put in place for Skills Development expenditure with immediate effect, at the end of year 3 and then again from year 5 onwards, which provides for a much-needed scope in medium and long-term planning, to ensure Skills Development compliance.
- A welcome addition is the extra points being made available based on how and to whom the spend was allocated to, for example, African People, Black Management, Bursaries or Scholarships.
- The Learning Programme Matrix specially adapted for the Construction Sector now includes Category A Learners as well.
- Professional Registration Learnerships are capped at 5 years from now on, in terms of the maximum recognition period.
- Three additional points may be earned for Approved and Verified Membership Programmes going forward.
- A percentage change increase from 15% to 35% allows for additional informal training to be recognised in the construction sector. (specified in Categories F&G)
- Mandatory construction industry training cannot be included in the skills spend of companies, and these are clearly defined as Site, Project and Safety Inductions, Toolbox Talks and Operator Re-Certification. Effectively all other training not forming part of these specific mandatory training mechanisms may now be claimed for under the Skills Development Element.
BEE strategies created for the construction industry should be more than just ticking the boxes and adhering to bare minimums. At BEE Analyst and Associates we are ready to assist your company in adapting and achieving compliancy under the Amended B-BBEE Construction Codes and further optimise your scorecard levels in the most cost-effective manner.