The impact of the National Minimum Wage Bill on Skills Development

Aug 1, 2018

The Skills Development Act was passed in 1998, to develop the skills of the South African workforce, increase their productivity and improve the quality of their lives. The Act set a framework for skills development strategies, integrated these strategies into the National Qualifications Framework (NQF), provided for learnerships that would lead to recognised occupational qualifications and stipulated how skills development would be financed.

The government then introduced the Skills Development Levies Act of 1999, where levies collected from qualifying employers were used to develop employees’ skills. These levies were paid to SARS, with 80% being distributed to Sector Training and Education Authority (SETA) systems. The SETAs were responsible for monitoring skills development and making funds available within their specific sector for education and training.

The government also introduced learnerships, managed by the SETAs, to help learners prepare for the workplace. These structured programmes deliver learning opportunities and practical workplace experience, which provide the learner with better employment opportunities.

There are primarily two types of learnerships: unfunded and funded. With an unfunded learnership, all training costs are for the employer’s expense and there is no stipend for the learner. With funded learnerships, an employer can apply to their relevant SETA for bursary funds for both employed and unemployed learners.

  • An employed learnership is where an existing staff member can obtain a formal qualification, with funds paid out by the SETA to cover training costs.
  • An unemployed learnership is where the SETA pays a stipend to supplement the salary of the learner during their learnership and they may also cover training costs.

The National Minimum Wage Bill

On 17 November 2017, the National Minimum Wage Bill (NMW Bill) was published in the Government Gazette, and it was adopted on 29 May 2018 by the National Assembly. Before it can be signed into law by South Africa’s president, it must pass through the National Council of Provinces.

Its purpose is to rectify income inequalities in the labour market. While Treasury has revealed that 750 000 job losses may occur, President Ramaphosa has argued that the income of 6.6 million workers will increase. The NMW Bill stipulates minimum pay and does not prevent people from earning more.

All employers have to pay their employees a minimum wage of R20 per ordinary hour worked, however, a different hourly rate applies to farm workers, domestic workers and workers on expanded public works programmes.

Schedule 2 of the Bill sets out allowances for learnership agreements, concluded in terms of the Skills Development Act. These vary from R301.01 to R 1755.84 per week, depending on the NQF level and the number of credits obtained, and for the most part they are below R20 per hour.

The impact of the NMW Bill

The Bill stipulates that no employer can pay wages below the minimum wage, which equates to R3 500 per month for a full-time employee. Currently, the SETAs fund R1 500 towards a learner’s stipend, which raises the question of who is responsible for the shortfall in order to comply with the new minimum wage? Does this responsibility lie with the relevant SETA, to sponsor a larger amount, or will this fall on the company? There is a misalignment between the minimum stipend and the NMW Bill, which is why legislation must be clearer in order to guide the industry.

Understanding the B-BBEE elements

Aug 1, 2018

There are five B-BBEE elements that make up the generic scorecard, with each element having a certain number of points assigned to it. An entity is measured against each element and their total across all elements will determine their B-BBEE status level.

The highest status level for B-BBEE is Level 1, which is 100 points or more, and the lowest is Level 8, where the entity achieves between 40 – 55 points. There is also a non-compliant level, where the entity gets less than 40 points.

OWNERSHIP

  • This is a priority element
  • Its weighting on the scorecard is 25 points
  • A sub-minimum of 40% of net value must be reached

Ownership refers to the percentage of ownership interests (voting rights, shareholding, etc.) which are held by black people in general and black women specifically.

MANAGEMENT CONTROL

  • Its weighting on the scorecard is 15 points (plus 4 bonus points)

Management Control relates to the proportion of black people who can impact the direction of a business, such as a board member or a person holding a senior management position.

SKILLS DEVELOPMENT

  • This is a priority element
  • Its weighting on the scorecard is 20 points (plus 5 bonus points)
  • A sub-minimum of 40% must be scored overall

Skills Development measures the investment an entity makes in the training and development of their black employees.

ENTERPRISE AND SUPPLIER DEVELOPMENT

  • This is a priority element
  • Its weighting on the scorecard is 40 points (plus 4 bonus points)
  • A 40% sub-minimum must be scored under each sub-category (Preferential Procurement, Supplier Development, and Enterprise Development)

This element is the largest on the scorecard and measures an entity’s involvement in supporting, developing and growing black-owned businesses and black-owned suppliers in their supply chain.

SOCIO-ECONOMIC DEVELOPMENT

  • Its weighting on the scorecard is 5 points

This relates to the extent to which an entity carries out corporate social investment efforts, to uplift black individuals and communities. The agri sector is the only exception, where a 1.5% contribution of net profit after tax will gain an entity 15 points.

SARS IS STEPPING UP

Jul 25, 2018

The South African Revenue Service (SARS) has been in the media spotlight recently for all the wrong reasons. It appears that they are now turning things around and this is positive news for South African businesses and the country’s economy.

On 21 March 2018, SARS and the B-BBEE Commission signed a Memorandum of Understanding (MoU), which was published on 6 July 2018 by the Department of Trade and Industry in the Government Gazette 41754.

The MoU is a collaborative agreement that outlines how the two departments will support each other. This includes sharing resources, information and expertise in rooting out corruption, fronting practices and tax abuse.

This MoU follows hot on the heels of Finance Minister Nhlanhla Nene’s extension of the preferential tax rates for qualifying companies operating in the designated Special Economic Zones (SEZ) of Coega (Port Elizabeth), Dube (KZN), East London, Maluti-a-Phofong (Harrismith) and Richards Bay. Companies in these zones are subject to a company tax rate of 15%.

Minister Nene also announced that the age restriction (29 years of age) in the Employment Tax Incentive Act will not be applicable in these SEZs. This means that the employment tax incentive can be claimed for all qualifying employees in the SEZs, irrespective of age. This will give a much-needed tax break to these businesses and encourage the employment of new job seekers in these zones.

It is clear from these two recent developments that SARS is stepping up as a critical department to “facilitate trade and as well as protect our economy and society.”

Murray Chabant, Managing Director of Signa Group, says, “The cooperation between SARS and the B-BBEE Commissioner makes a lot of sense, especially where abuses are taking place, as these undermine meaningful economic activity. I am particularly encouraged by the growth and job creation focus of Minister Nene’s extension of the SEZs.

“The bottom line is that unless B-BBEE is operating in an environment of economic growth, it is doomed for failure. Growth is necessary for B-BBEE deals to work and generate a positive return on investment for shareholders. Many B-BBEE deals end up under water when there is an economic downturn, and B-BBEE shareholders are left worse off than before the deal.

“It will be interesting to see whether further collaborations between the B-BBEE Commissioner and, for instance, the Competition Commissioner or the Special Investigating Unit, will take their lead from this cooperation agreement with SARS.”

Download the Memorandum of Understanding between the B-BBEE Commission and the South African Revenue Service.

Beware invalid B-BBEE certificates in circulation

Jul 25, 2018

The B-BBEE Commission recently put out a notice listing organisations that currently have invalid B-BBEE certificates in circulation. This was done as part of their mandate in section 13F (1) (a) to oversee, supervise and promote adherence to the B-BBEE Act in the interest of the public. Organisations identified were advised to withdraw the said B-BBEE certificates and given an undertaking to not use them.

Communication from B-BBEE Commission

To address this issue, the article below outlines the non-negotiable elements that must appear on a B-BBEE certificate and red flag areas. Remember invalid B-BBEE certificates will have a negative impact on the Imperial Sasfin Preferential Procurement Scorecard.

Beware “It’s a fake!”

It is logical to surmise that an organisation presenting a fake B-BBEE certificate as part of their credentials operates with no conscience. When an organisation is spending the time, money and resources on transforming, accepting a fake B-BBEE certificate, either consciously or subconsciously, both creates an illusion of transformation and defeats the objective of an organisation’s investment in transforming.

Although many organisations go to lengths to verify the legitimacy of B-BBEE certificates presented, others accept them at face value. Often this is a result of a lack of resources, budget or a holistic understanding of the impact that accepting a fake B-BBEE certificate has on an organisation’s scorecard.

A trained eye will easily identify a fake B-BBEE certificate. Hereunder are non-negotiable elements that must appear on a valid B-BBEE certificate, as well as red flags to look out for and tips to ensuring you receive a valid B-BBEE certificate.

Non-negotiable elements of a B-BBEE Certificate

  • SANAS accreditation to be accompanied by the SANAS accreditation logo
  • The allocated SANAS accreditation number issued to the verification agency
  • B-BBEE certificate number
  • Level of compliance
  • Date of issue and expiry
  • Scorecard type
  • Measurement criteria either on a Generic or Sector Code
  • Points attainted per element with specific reference to “Black” and “Black” Women Ownership
  • Application of the discounting principle
  • Empowering supplier status
  • Procurement recognition
  • Verification agency information:
    • Name and/or the logo
    • Company registration number
    • Name and signature of the person responsible for final sign-off
  • Measured entity information:
    • Full registered name
    • Full trading name
    • Company registration number
    • Company VAT Number, if applicable
    • Full physical address of the company

Red flags

Hereunder is a non-exhaustive list of typical traits found in fake B-BBEE certificates.

  • Spelling mistakes
  • The variation of font differences, which include the consistency of the use of the upper and lower case
  • A certificate that is not issued by a SANAS accredited verification agency. This applies to Large Enterprises and Qualifying Small Enterprises (QSEs) that have more than 51% “Black” Ownership
  • Incorrect SANAS logo
  • SANAS accreditation number does not match the one allocated to the verification agency
  • Measured on the incorrect scorecard
  • Ownership criteria that does not match the B-BBEE status level
  • Preferential Procurement recognition that is not aligning to recognition levels
  • When a VAT number on a B-BBEE certificate differs to the one appearing on an invoice presented for payment
  • If a site visit is not conducted during the verification process
  • When a B-BBEE solution through a B-BBEE consultant dictates the use of services of a specific verification agency

For peace of mind, organisations can always contact the verification agency that issued the B-BBEE certificate directly and provide the certificate number to verify the validity of the B-BBEE certificate. In most cases, the supplier application process double checks the information provided on the B-BBEE certificate.

It must be noted that a B-BBEE certificate issued by a verification agency to an Exempt Micro Enterprise (EME) or a QSE that has more than 51% “Black” Ownership is an invalid certificate. These organisations only have to provide a valid affidavit.

Organisations issued with a B-BBEE certificate must take the following into account:

  • An EME and QSE with more than 51% “Black” Ownership only needs to provide an affidavit
  • Never accept a B-BBEE certificate issued by a third-party
  • Never pay cash for a B-BBEE certificate -always ensure there is a paper trail to the issuer

 

YES programme aims to create one million jobs

May 31, 2018

Signa held a joint session with Mantis Networks in Midrand on Wednesday 19 May 2018 with over 110 delegates. Representatives included corporate B-BBEE officers, verification agencies and consultants to workshop the proposed new B-BBEE amendments and the introduction of the Youth Employment Service (YES) incentives into B-BBEE regulation.

 

Tashmia Ismail-Saville, CEO of YES opened the session to introduce the Youth Employment Service.

 

Youth Employment Service (YES)

The Youth Employment Service is a national movement to ignite the potential of South Africa’s youth.

28% of South Africa’s population is between the age of 18 and 35. The unemployment rate in this age bracket is estimated at 36%.

Finding solutions to youth unemployment is a national priority, and YES is a business-led collaboration with government and labour to address this priority.

Its intention is to stimulate demand-side job creation through company investment and leveraging existing Employment Tax Incentive and B-BBEE recognition.

The initiative focuses its efforts in 3 areas where employment creation efforts are likely to have the greatest benefits:

 

  • Creation of job opportunities in existing firms intended specifically for youth
  • Promoting the capacity of Small, Medium and Micro Enterprises (SMME’s) with paid for youth labour
  • Creating new Cohorts of SMME’s, through value chain initiatives and knowledge spill-over in collaboration with industry champions

 

Tashmia stressed that large enterprises cannot do this alone, and it is going to require buy-in from businesses of all sizes to meet these objectives.

 

The YES target is to create one million jobs

The Mining Charter Debate

May 31, 2018

The third proposed Mining Charter is highly controversial. It was gazetted in June 2017 by then Mineral Resources Minister Mosebenzi Zwane, but the Chamber of Mines, which represents the majority (90%) of the mining industry, took the matter to the high court. Their objection was that they had not been adequately consulted and that the charter had flaws that put jobs in the industry at risk and would drive many companies out of business.

One of the first steps taken by new President Cyril Ramaphosa, was to speak to the Chamber to get it to agree to temporarily suspend legal action, and to engage in further talks with government about the new charter. Ramaphosa also replaced Zwane with Gwede Mantashe, a mining industry veteran and leader of the National Union of Mineworkers (NUM).

Mantashe, as the new mineral resources minister, set an ambitious timeline of May, to finalise the Mining Charter. His main priority is to ensure policy certainty, with the aim of improving investor confidence.

The Mining Charter

All mines follow the Mining Charter’s guidelines in terms of B-BBEE ownership. The new charter seeks to reform the ownership of the industry and allow increased participation of black South Africans into the sector. Investors have raised their concerns and this uncertainty has deferred investment into a sector that accounts for 8% of GDP.

A key aspect of the charter is to increase black economic empowerment shareholding of all mines from a previous 26% to 30%. In addition, 50% of all board members and executive management at mines must be black, while 70% of all mining goods and 80% of all services in the mining industry must be procured from B-BBEE entities.

 

Further Court Action

On 4 April, the Chamber asked for a declaratory order to determine whether mining companies were required to perpetually “top up” the black shareholding of mines to 30% if existing black shareholders sell out. The North Gauteng High Court in Pretoria granted the order on the “once empowered always empowered” principle for B-BBEE ownership transactions, contained in the first and second Mining Charters. The judgement also questioned the legal power of the Mining Charters.

The Department on Mineral Resources has claimed that the declaratory order severely limits the reach of the charter and if it stands, meaningful empowerment cannot be achieved. They have since lodged an application for leave to appeal against the ruling. By contesting the ruling there’s little chance of meeting Mantashe’s self-imposed deadline.

 

Mantashe’s Vision

Mantashe has rejected the idea of scrapping this third charter and starting afresh, instead committing to using the controversial draft charter as a basis for negotiations to amend and correct contentious issues. When the charter is finalised, the industry will be legally required to follow its targets and regulations.

His vision for the final charter is transformation, with meaningful participation, management, control, and ownership by the black majority in the industry. Transformation, according to Mantashe, must benefit workers, producers, communities and the South African economy as a whole.

To rebuilt trust between stakeholders and the Department on Mineral Resources, Mantashe has formed two task teams, one to focus on transformation and the Mining Charter, and the other to engage on issues of growth and competitiveness.

The mining industry needs a solid foundation with strong stakeholder relationships in order to attract investors. To achieve this, policy uncertainty must be eliminated and trust rebuilt, to create an enabling environment for new investment.

 

Signa Group’s Standpoint

South Africa’s greatest benefit in terms of job preservation, wage parity and community development, will arise from greater investment in the mining sector and the ultimate beneficiation of minerals.

There is no doubt that a major hindrance to investment in the mining sector is policy uncertainty around B-BBEE requirements and black ownership targets. There are multiple examples of successful business models around the world, where mineral rights are owned by the country and its people, and where mining companies, through reliable policy certainty, can operate sustainable and profitable mines.

The longer it takes for the Mining Charter to be finalised, through a transparent and fully inclusive process, the longer it will take for all South Africans to benefit from the wealth that is contained in our earth.

Signa Group strongly supports an engagement between business, labour and government to find each other through a consultative process that will bring about long-term policy certainty.

Article 2

May 25, 2018

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Article 1

May 25, 2018

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