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.

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