As the annual budgeting season begins, many corporates are facing the challenge of the cost of Broad-Based Black Economic Empowerment (B-BBEE) compliance, especially around Skills Development (SD), one of the highest spend-based elements on the scorecard.
According to Rajan Naidoo, the Managing Director of EduPower Skills Academy, Skills Development goes beyond mere points. Drawing from his two decades of experience, he states that B-BBEE compliance serves as a cornerstone for responsible business practices and holds essential significance within a corporate budget. “Financial Directors may have some reservations when allocating resources for Skills Development, but this element yields benefits that far exceed the 25 points it delivers for the scorecard,” he notes. “Skills Development has the potential to mobilise your workforce, drive your business goals, catalyse economic transformation, and address social challenges including poverty, inequality, and unemployment.”
Naidoo, leveraging his extensive experience in SD financial planning, offers his top practical insights for optimising Skills Development budgets:
Annual Skills Audit
Effective budgeting starts with an Annual Skills analysis. By comparing the skills your people have with what the company needs for the future, you can make informed decisions and tailor training so that you are strategically allocating resources to drive growth and transformation. This people-centric approach also creates a beacon of opportunity for your employees, fostering loyalty and engagement and increasing retention. When the importance of Skills Development is part of your company’s culture and has ownership at board level, organisational growth is at the forefront of your business.
Determining Your Spend
The target spend for Skills Development as an element of the B-BBEE scorecard is 6% of your annual payroll. This budget is divided into training for your employees, learnerships, internships, artisanal programmes and higher education initiatives or bursaries. This maintains equilibrium and ensures that every part of your workforce benefits. Fortunately, the scorecard provides guidelines for demographic breakdowns and spend allocations, so use it as a roadmap and allocate your investment accordingly.
Timing Your Spend for Optimal Impact
Timing is crucial, and when it comes to Skills Development, it’s a balance between annual spend targets and the fiscal year. You can wait until the end of the financial year to spend, but it’s smarter to keep the momentum going throughout the year. Adjustments can always be made to align with your fiscal goals.
Tapping into Tax Benefits and Grants
There are various financial incentives available that will make a significant difference to your budget and bottom line. The main incentive is Section 12H of the Income Tax Act. This section provides payments ranging from R30,000 to R120,000 per learner, based on factors such as the NQF level of the qualification, the start and completion of the learnership, and learners with disabilities. There are also the Mandatory and Discretionary Grants available from the various SETAs. This is how companies can recover the funds they pay as their Skills Levy (and more) but to qualify, your business must submit a Workplace Skills Plan and Annual Training Report (WSP & ATR) annually. These grants are determined and paid out annually and based on the quality of your submission, they can be sufficient to cover the costs of your internal and external training.
Bonus Points
Learnerships can work more effectively for your business through the process of absorption. When the qualification is relevant to your business and your learners are recruited to be a culture fit, you can offer learners permanent positions when they graduate. By actively adopting a policy of absorption, you then have the potential to secure up to 5 bonus points within the Skills Development category.
“In South Africa’s dynamic business environment, where B-BBEE compliance is valued and economic transformation is essential, a well-structured Skills Development budget is about more than just numbers; it is a powerful tool for growth, steering your company toward a future that’s both prosperous and transformative,” concludes Naidoo.