BBBEE CODES

Skills development to the rescue

Amended BBBEE Codes_120451624.jpg

Preamble


One would be vindicated in thinking that the last thing that business needs in a difficult economy is more regulation. We are expecting a draft of amended and/ or new statute in 2014, including the following:


• Amended BBBEE Codes (and the alignment of sector codes)


• Amended LRA, BCEA and the Employment Equity Act


• The new Employment Services Bill


• The Women’s Empowerment and Gender Equality Act


• The Employment Tax Incentive (which is great on the face of it).


It is not the actual statute but rather the nature and extent of the impact thereof that is the issue. The complexity of the trading environment will reach an all time high in 2014.


A number of commentators have stated that the average verification level will be a level 7 under the new codes! The opportunity then, lies in the ability to interpret the amendments and develop a BBBEE strategy that allows for a stronger BBBEE outcome than one’s competitors and at a more cost-effective rate.


Big-Ticket Items


• Recalibration of BBBEE verification levels
The recalibration means that you now need more points in order to remain at a particular level. This amendment alone has the capacity to dilute most businesses by at least 1 level. Refer to the diagram hereunder.

• Introduction of Priority Elements


Ownership, Skills Development (which are traditionally the most expensive elements to comply with) and Enterprise & Supplier Development are the priority elements and large businesses will have to achieve scores within 40% of the targets set in order to avoid being diluted by 1 level. QSE’s must comply with Ownership as well as any one of the other two elements to avoid demotion by a level.


• Weighting Changes


Management Control and Employment Equity which were separate elements with a total combined weighting of 25 points are now combined into one element which is weighted 15 points. What will sink most businesses in this notoriously poorly performing element is the new requirement to mirror the exact sub-race and gender demographics of SA’s EAP on a national basis as per the statistics presented in the Employment Equity Commission’s report every year.


Skills Development weighting is increased by an additional 5 points to 20 and there are an additional 5 bonus points on offer if you are able to convert unemployed learners into secure employment. This presents a great opportunity to recover some ground by partnering with a training provider that is able to work with you in offering the full skills development proposition and the category B, C and D programmes such as learnerships and imternships. Once again, however, the national EAP once again applies and it will be necessary to have very well thought-out and executed skills plans.


Enterprise Development, which was previously 15 points and pegged at 1% of NPAT is now diluted to 5 points and 1% of NPAT. Supplier Development is introduced and counts 10 points at 2% of NPAT and requires detailed plans of action to incorporate majority black-owned businesses with annual turnover of less than R50m into the core supply chain. Preferential procurement stays pegged at 25 points but in order to score highly in this regard, your suppliers will have to be “Empowered Suppliers”.


“An “Empowering Supplier” is a BEE compliant entity that complies with all regulatory requirements of SA & should meet at least 3 or 1 if it is a large or QSE respectively:


1. 25% of COS excluding labour cost & depreciation must be procured from local suppliers/producers (in service industry labour costs can be included but are capped at 15%.


2. 50% of jobs created are for Black people (provided the number of black employees are maintained)
3. 25% transformation of raw material/beneficiation which include local manufacturing, production, assembly, packaging.


4. Skills transfer – spend 12 days pa of productivity deployed in assisting Black EME’s & QSE beneficiaries to increase their operational or financial capacity.


• EME’s & Start-ups are automatically recognised as “empowering suppliers”


• Skills Development


The skills development scorecard is set out hereunder:

Observations:


1. With a weighting of 25 points in total, this is an element to focus on.


2. The 6% of payroll spend requirement can be used for optimal ROI by projecting talent needs per race and gender category and using the money in bespoke projects such as bursaries, internships, learnerships, apprenticeships and other programmes.


3. The ability to thereafter integrate the said individuals into employment is crucial and adds the additional 5 bonus points. This makes proper pre-assessment practices essential to give you the best chance of converting the said persons into full employment.


4. There is a limit of 15% (of the total soend amount claimed) in claiming expenses associated with the skills development (eg travel, accommodation and catering) and furthermore, mandatory training (e.g. FICA, FAIS, OHS) is not recognized. Uncertified learning is also capped at 15% of the total spend claim.


Conclusion


A fully integrated approach to BBBEE, Talent Management, Employment Equity and Skills Development Compliance is what is required. It should be designed and managed centrally with an innovative, relevant and responsive training partner.


For more information please contact info@pmi-sa.co.za or visit www.pmi-sa.co.za

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