Understanding B-BBEE Skills Development
A B-BBEE certificate is essential if your business intends to trade in South Africa. It is simply the mandate to increase the number of previously disadvantaged people who own, manage, control, and gain employment in South Africa’s economy.
A B-BBEE certificate applies to Qualifying Small Enterprise (QSE) businesses with an annual revenue of R10 million to R50 million and less than 51% black-owned. QSEs may, however, use a BEE affidavit as a certificate should the business be 100% black-owned (which automatically qualifies you as a level 1 contributor) or 51% black-owned (which automatically qualifies you as a level 2 contributor).
An Exempt Micro Enterprise (EME) is a company with an annual turnover of less than R10 million and that is less than 51% owned. These businesses automatically qualify for a BEE Level 4 rating. Increasing black ownership to 51% or more will qualify an EME as a Level 2 contributor, while 100% black-owned EMEs qualify as Level 1. Exempt Micro Enterprises can submit an affidavit that functions as their B-BBEE Certificate.
Generic businesses have an annual turnover of R50 million or more. To determine their level and status, they must comply with all B-BBEE scorecard elements.
B-BBEE Scorecard Categories Explained:
Your B-BBEE status level is determined by the number of points your business receives across the five B-BBEE elements. The higher your status level, the more your company will receive procurement recognition.
- Ownership (25 pts) – the level of black ownership in your business.
- Management Control (15 pts) – the number of black individuals holding top managerial roles influencing decision-making.
- Skills Development (20 pts + 5 bonus points) – the extent to which your company invests in skills training for your employees, the unemployed, and disabled black individuals. Five (5) bonus points are available when the individuals get absorbed into your company at the end of their leadership program.
- Enterprise and Supplier Development (40 pts) – the amount of spending you put into Preferential Procurement, Enterprise Development, and Supplier Development of small, developing businesses.
- Socio-Economic Development (5pts) – the contribution to a black individual, group of individuals or a community. The contribution can be monetary or nonmonetary.
TOTAL = 118 points
Compliance with the Skills Development component of B-BBEE is critical but highly rewarding. The Skills Development pillar contributes up to 20 points (with an additional 5 bonus points) on the overall scorecard. It is a “priority element,” and 40% of the targets set out in the Skills Development Element must be achieved to score total B-BBEE points. If the Skills Development measured entity fails to comply, one level from the level achieved across all five elements will be discounted.
B-BBEE Skills Development simply assesses how much your business invests in skills training for employees, the unemployed, and disabled black individuals (African, Indian, and Coloured). Disabled people include those who have a mental or physical impairment (recurring or long-term) that has limited their prospects of entry or advancement in employment.
It is essential to hit the following targets:
- Monetary Spend on Skills Development for black people as a percentage of total payroll: How much your business spends on Learning Programmes for black people and black employees with disabilities. Large generic businesses have a monetary target of 6% of their payroll on B-BBEE skills development training, while QSEs have a target of 3%.
- The headcount of black people enrolled in learnerships, internships, or apprenticeships or structured work-based learning programs as a percentage of total employees: By enrolling and funding learnerships or any other in-service training program for black people and black unemployed people. Businesses have a target to train 5% of their total headcount.
- Bonus points may be earned if your business absorbs black people after they complete a structured learning program.
A learnership is a work-based learning program that leads to a qualification registered under SAQA or QCTO. A learnership consists of a structured learning component, includes practical work experience, and leads to a qualification related to an occupation. SDC offers SAQA and QTCO-accredited courses, each qualifying as a B-BBEE-aligned learnership.
A learnership agreement consists between a student, an employer and a training provider. Learnerships are typically funded by a business that is required to do so to earn B-BBEE points for Skills Development. Additionally, this business will pay a stipend to each learner – this will not be equivalent to a full-time salary but should at least cover transport and meals. At the end of the learnership, there’s no guarantee that the business that funded the learnership will employ the learner; however, bonus points can be earned if businesses absorb the learner after.
Organizations that adhere to the legal requirements receive numerous benefits.
- S12H Deductions: Tax Benefits Related to Learnerships
This deduction consists of an Annual Allowance and a Completion Allowance for businesses with students who are enrolled in registered learnerships and successfully complete them. These deductions are intended to incentivize employers who fund Skills Development training initiatives for black employees, unemployed people, and disabled people in a regulated environment, encouraging skills development and job creation.
The employer can claim a deduction based on the learner’s NQF level and disability status. Being an accredited training provider, we ensure that our clients are eligible for the TAX rebate of R80,000 per abled learner and R120,000 per disabled learner, referred to in Section 12H of the Income TAX Act of South Africa.
The training providers must submit the qualification accreditation, learnership registration with the SETA, and a declaration of performance or similar documents to assert these allowances. SDC offers a turn-key solution by hosting the learners on our campus and taking care of all administration and quality assurance of the process.
- Mandatory and Discretionary Grants
Employers registered with the South African Revenue Service (SARS) for PAYE and with an annual payroll over R500,000 must pay 1% of their payroll as a Skills Development Levy and register with a relevant SETA. Employers who pay skills levy can claim cash grants when they sponsor training initiatives. These grants can be used to offset learnership costs paid to the hosting institution and potentially provide a stipend for food and travel.
When SETA submissions open annually, employers must report their Workplace Skills Plan (WSP), outlining their scheduled training for the year, and their Annual Training Report (ATR) – detailing training that took place in the previous year. Subject to approval, the relevant SETA will reimburse up to 20% of the expenditure as a Mandatory Grant. Mandatory Grants are paid quarterly, and unclaimed funds are transferred to the SETA’s Discretionary Fund.
Employers can also claim back between 40% and 60% of their training costs through Discretionary Grants, which are paid out at the discretion of SETA management for Skills Development projects related to scarce and essential skills. SDC offers a value-added service through SDC Consult, which prepares WSP/ATR plans and handles your proof of submissions.