Foundational Changes: New Construction Sector B-BBEE Codes

The Amended Broad-Based Black Economic Empowerment (B-BBEE) Sector Codes for the Construction were gazetted by the Department of Trade and Industry (DTI) on 01 December 2017. If you have nothing else on the to-do list today other than ‘’watch cement dry’’ you are welcome to work your way through the 85-page document here. Otherwise, have a scroll through this blog instead.

DO THESE CODE AMENDMENTS APPLY TO MY BUSINESS?

Changes in the Construction Sector Codes apply to all entities that derive more than half of their revenue from construction-related activities. (An easy tip: if your business has anything to do with cement, bricks and plaster from manufacturing, to using, to positioning...you’re in the construction industry and these code amendments will have an impact on your company)

 Formal differentiation by the Construction Sector Charter Council (CSCC) is as follows:

  • Material Suppliers, which constitutes manufacturers and suppliers of building material and equipment for the purpose of construction activities
  • Built Environment Professionals (BEPs), which includes all planning, design, and costing management entities in the construction industry
  • Contractors, which refers to any company providing project management and consultation services to the construction industry

These companies are required to submit their B-BBEE Certificates annually to the CSCC.

With no transition period provided to ease into the new lay of the land, construction industry players should take note of their verification validity first and foremost. All verifications signed off prior to the release date of the amendments will remain valid until the expiry date. However, B-BBEE verifications signed off following the publication date of the amended codes will have to be redone according to the new regulations.

The most noteworthy modification overall is the change to compulsory measurement where the ACSC (Amended Construction Sector Code) is deemed a holistic code of good practice for all activities listed in section 10 of the B-BBEE Act. In plain English: you do not have a choice of measurement going forward.

BASELINE PRINCIPLES OF SKILLS DEVELOPMENT

One of the primary elements affected by the amendments is Skills Development. Guess what; this is a good thing so no need to freak out about non-compliance yet.

Before contemplating the HOWs WHATs and WHEREs for hitting subminimum targets prescribed by this amended code series (CSC300), lets first summarise its purpose and general principles (page 39) in the bigger scheme of things. (aka for South Africa, your company, your employees and your community)

Principle 1: Aim to contribute towards achieving national economic growth and social development goals to create work opportunities and sustainable livelihoods for our population.

Principle 2: Promote skills and competence within the critical sectors of manufacturing and production which are mostly labour-intensive industries. Construction forms part of these critical sectors.

Principle 3: Support the creation, facilitation and implementation of Professional, Vocational, Technical and Academic Learning programmes. These are to be executed via Apprenticeships, Learnerships and Internships initiatives, that meet the criteria needs for economic growth and development.

Principle 4: Support active employment creation by strengthening the skills and human resource base within organisations by encouraging the support of skills development initiatives with an emphasis on skills and career path development mechanisms.

 WIIFM – WHAT’S IN IT FOR ME?

Apart from contributing to skills development and training of employees and individuals in the surrounding community (which in turn has a positive impact on quality standards within an organisation and upliftment of our national workforce), focussing efforts on compliance to Code CSC300 bring two quantifiable benefits to the table.

FIRSTLY, expenses incurred and recognised as Skills Development Expenditure allows for ‘’money back” into company treasury chests via tax rebates and grants.

Legitimate training expenses include:

  • Costs of training materials
  • Costs of trainers
  • Costs of training facilities including costs of catering
  • Scholarships and bursaries
  • Course fees
  • Accommodation and travel
  • Administration costs such as the organisation of training including, where appropriate, the cost for the Measured Entity of employing a skills development facilitator or a training manager
  • Funding and support of research at tertiary institutions aimed at improving the performance of the Construction Sector

 SECONDLY, getting maximum points and bonus points from the skills development element is less complicated in comparison to other scorecard elements such as Ownership, Supplier Development or Preferential Procurement.

There is no such thing as a free lunch, but implementing smart training strategies will indeed make your money go further. For example, an R 1 700 000 expense may render points as if an R 6 700 000 training investment was made. (Read more about BEE aligned training initiatives here)

 ENTER THE LEARNING PROGRAMME MATRIX

For each training programme listed and claimed for as part of a company’s B-BBEE verification submission, there must be a classification. The Learning Programme Matrix is an excellent ‘’cheat sheet’’ to easily ascertain to which Categories (A-G), every single training cent should be allocated.

Training Programmes can be matched to this matrix in accordance to Category, Narrative Description, Delivery Mode, Learning Site and Learning Outcome which simplifies the verification process and also assists in validating the level of success (return on training investment) of these programmes.

This matrix has also been adapted for the construction industry, and an updated version thereof can be viewed on page 41 of the Gazette.

 NOTABLE CHANGES TO THE DRAWING BOARD

To ensure that your skills development plan, goes according to plan (pun intended), we strongly advise that someone in the organisation actually reads the 85 pages as referred to earlier in this blog, preferably with a highlighter to take note of a few important amendments.

  • Demographics related to race and gender are applied with additional recognition for African employees especially from management level upwards
  • Calculation of training initiatives and expenditure for African staff is subject to adjusted recognition for gender and also in relation to management level in the organisational hierarchy
  • Mandatory sectoral training is categorised by site, project or safety inductions, toolbox talks and operator recertification
  • Training for Categories F & G may not exceed 35% of total skills development expenditure
  • Salaries may only be claimed for B, C, and D learnerships with recognition for Category C learners falling away after five years
  • External training of African individuals not forming part of staff headcount will also contribute to overall skills development scores

 In our next blog, we will unpack classifications, targets, the compulsory scores to avoid discounting actions and the potential challenges these amended codes may pose to businesses operating in the construction sector for 2019 and beyond.