Maximising your B-BEEE scorecard at the lowest possible cost - Part 1

Posted 06 May 2014 Written by Jako Liebenberg and Arnold Cornelissen

The revised Broad-Based Black Economic Empowerment (B-BEEE) codes represent both a threat and an opportunity for companies. In this article, the first in a series, Jako Liebenberg and Arnold Cornelissen show how it is possible to improve your B-BEEE rating at minimal cost.

Skills development has long been seen as the problem child for all businesses wanting to improve their B-BBEE (Broad-Based Black Economic Empowerment) rating. Qualifying Small Enterprises (QSE’s) were able avoid this B-BBEE pillar by selecting other pillars for B-BEEE verification.

The Revised B-BBEE codes have changed this scenario as verification of all pillars is now required. The biggest challenge that all businesses face is the high costs involved in providing training to staff.  In this article we will only touch on some of the highlights of the changes made in the new codes of good practice and in subsequent articles we will go into more detail on each of these aspects.

Changes in the new B-BEEE codes

Some of the changes that have been implemented in the new codes are as follows:
  • The target for skills development training has moved from 3% to 6%
  • Adjusted Recognition for Gender has been taken out
  • Bonus points are available for companies that meet the targets
  • There are a more points available on the scorecard
  • Skills Development is a priority element. Non-compliance results in a one level penalty.
If we now look at each of these elements in more detail, what does this mean for your company and more importantly, what opportunities can be unlocked by complying with the new codes?

The target for spend on skills development has been increased. Companies that do not take this into consideration will fall short of their target and thus not get all the points available on the scorecard for total spend on skills development.  We can only attain this target if we know exactly what it is and what we need to attain the goal that we would like to meet.  Companies are rewarded for bigger spend of skills development (6 points for total spend in the old codes and 8 points for total spend on the new codes).

One of the biggest changes is that the "Adjusted Recognition for Gender" has not been removed from the new codes.  This used to be one of the biggest challenges facing a lot of companies, specifically in the manufacturing sector, as female artisans are just not as plentiful as their male counterparts. The implication of this was that companies implementing a Learnership or Apprentice programme would be penalised by the Adjusted Recognition for Gender element in the codes.

Another change that has been implemented is the bonus points that have been allocated for successfully creating permanent employment for people placed on a learnerships or apprenticeships.  Five points have been allocated to reward companies for this.  We will at a later stage go into more detail on learnerships and apprenticeships as this is one of the elements that will either make or break your scorecard.
 
Opportunities

Now we need to think what opportunities or threats the new codes can hold for our organisations and how we can best meet these new challenges.   The biggest challenge to all organisations is the high cost of training and development in the form of both resources and time spend in training them to a certain level.  This is however one of the most important aspects for the future growth of your organisation.  If you think about the average age of the artisans working in your organisation, how many of these people will be available in five years’ time?  And this is a short term outlook.  Organisations that can best meet these challenges are most likely to thrive and grow in future.

Solutions
  • Discretionary grants from Seta's
  • Mandatory Grants from Seta's
  • Tax Rebates
  • Youth wage subsidy
  • Sponsored incentive programs
  • Government subsidised training programmes.
As with all things in life, the devil is in the detail. The challenge is to let all these different programmes speak to one another and integrate everything into a workable solution.  The companies that can successfully implement these programmes will find that their training bill will be largely subsidised.

We also have to remember that skills development is verified on historical information, the implication being that the points that will be scored on this element are already fixed once the financial year ends.  We thus have to plan ahead to ensure maximum future benefits from this element.

In future articles we will cover some other aspects of the revised B-BEEE codes, showing how companies can score maximum points at the lowest possible cost.

Jako Liebenberg is a Director and Business Development Consultant with LDSW Incorporated Chartered Accountants and Auditors and is registered as a Public Auditor who may conduct B-BBEE verifications. Jako is involved in the structuring of B-BBEE transactions, B-BBEE verifications and advises clients on B-BBEE policies and structures. Jako can be contacted at e-mail: jako@ldsw.co.za

Arnold Cornelissen is a Director of Zukrastax (Pty) Ltd and a registered Skills Development Facilitator. Arnold provides Skills Development and B-BBEE consultation services and actively manages B-BBEE portfolios of his clients. Arnold can be contacted at e-mail: arnold@zukra.co.za
 

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