Asset 4.png


Fees must fall drives BEE changes


Proposed amendments to the B-BBBEE codes will see more budget made available for education and training.

There's increasing demand for affordable education in South Africa, underscored by the volatile ‘fees must fall' protests of the past two years. There's also a generally acknowledged lack of skilled and qualified people across most sectors.

Sivarajan Naidoo, Director, EduPower.

While the broad-based black economic empowerment (B-BBEE) codes have always included a training element, proposed amendments to these codes will see more targeted spending on upskilling those who can't afford the high costs of further education.

On 29 March 2018, the Minister of Trade and Industry issued proposed draft amendments in the Government Gazette that impacted the skills development and ownership elements of the B-BBEE codes. Sivarajan Naidoo, Director at EduPower, says while the proposed changes are still open for public comment, it's worth unpacking the thinking behind them.

The first major change is aimed at addressing the need so clearly evidenced by the ‘fees must fall' campaign. Naidoo says: "It's clear that fiscus is unable to support the request for free higher education. An alternative way of finding funding is through the B-BBEE codes. Currently, each B-BBEE entity has to pay 6% of its annual wage bill over to training. The amendment to the code proposes that 2.5% of that 6% must go towards bursaries for higher education.

"This is actually a good change considering that the private sector is the major beneficiary of skills development and is a major catalyst for growth in the economy and associated social change."

The second major proposed change is around the Youth Employment Service (YES) campaign that President Cyril Ramaphosa mentioned in his State of the Nation Address. YES is aimed at encouraging business to provide more jobs and apprenticeships for South Africa's youth.

Tax incentives for supporters of YES encourage businesses to employ youth (18-35-year-olds) for a 12-month period so they can get much-needed job experience, rendering them more likely to attain formal employment thereafter. This initiative was not previously linked to the B-BBEE codes, but a proposed amendment will prove attractive to large corporates and multinationals that may not qualify for the ownership requirements of the B-BBEE scorecard.

Naidoo explains: "Businesses that are internationally owned miss out on the local ownership portion of the B-BBEE codes, but according to the proposed amendments, if they can meet the YES and skills development requirements, they can make up those lost points to achieve a higher B-BBEE ranking."

Criteria that need to be met include taking on a predefined number of youth for a year and spending the 2.5% referred to earlier on higher education bursaries. Entities that are unable to create a sufficient number of new jobs in order to meet their targets may also sponsor new placements in exempt micro enterprises (EMEs) or qualifying small enterprises (QSEs). "This is significant," says Naidoo, "because it seeks to benefit the black youth through work experience and assist small businesses to grow by reducing their basic cost of labour."

The third major proposed change is for large enterprises that have in excess of R50 million turnover per annum and that qualify for level 2 or level 1 B-BBEE recognition based solely on black ownership of at least 51% or 100% determined using the flow through (and no other) principle.

Naidoo clarifies the proposed amendment: "There has been much debate around whether large, black-owned companies that are generating that amount of revenue have, in fact, transcended the historical disadvantage and should be contributing towards the economic development of the country."

Naidoo believes the country needs all the help it can get. He continues: "Many of these large enterprises were themselves recipients of B-BBEE in their early days, which contributed to their success. It only seems fair that they should pay that forward. If you have become an advantaged company, you should contribute towards the economic development of companies that are not. This is where B-BBEE becomes about economic inequality as opposed to class."

These are three major changes to the B-BBEE scorecard and Naidoo anticipates they could come into effect by the end of this calendar year. He says: "For years, youth unemployment has been the overriding challenge and threat to our economy and nation's future. The YES initiative and proposed changes to the B-BBEE codes could provide some major relief to this complex challenge by calling on corporate South Africa to become involved and engaged as business is a key component of the solution."



Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

57 views0 comments