Johannesburg, 27 Sep 2018
The good news, according to Sivarajan Naidoo, a Director at EduPower, is that recently announced changes to the broad-based black economic empowerment scorecard are going to create more job opportunities for youth.
The latest proposed revision to the B-BBEE codes follows President Cyril Ramaphosa's announcement of the Youth Empowerment Service (YES) during his State of the Nation address earlier this year. When it was first launched, the intention behind YES was to provide 12-month work opportunities for black youth between the ages of 18 and 35, and at that stage, wasn't linked to any other initiative. In March, it was proposed that YES be linked to the B-BBEE scorecard, with very specific conditions attached, so business could benefit from participating in the programme.
Naidoo explains: "The main crux of this proposed amendment is to appeal to specific types of entities in South Africa that may lose out heavily on the ownership portion of the B-BBEE scorecard simply because they're a foreign-owned company. The best that this type of company can hope for is a Level 8 ranking because of their ownership status."
The other category that can benefit from this new addition to the B-BBEE scorecard is South African companies that are almost 100% white owned. Naidoo says: "Unless they bring in black partners, they too will never achieve more than a Level 8, which is the lowest level of BEE compliance."
How YES works
Naidoo refers to it as the 'YES dimension'.
"Originally, YES targeted a million youth between the ages of 18 and 35 to be given a work opportunity for a period of 12 months at a salary of R3 500 per month. An additional R13 000 must be spent per individual to create a new post; the youth can't be hired into a temporary post or displace existing staff members. This is not a box-ticking exercise; the intention is to create more real jobs."
Naturally, not all businesses are able to create new positions, possibly because strict governance simply won't permit it. If this is the case, these companies can act as sponsors by placing youth in black-owned SMEs and giving the SME R55 000 to create a post for that person, covering both their salary and the R13 000. The size of the SME dictates the number of youth that must be placed there, on a sliding scale.
A third option permits an enterprise to choose a black-owned micro or small enterprise start-up to assist with R55 000 in funding. "The ultimate goal of all three options is job creation," says Naidoo.
Linking YES and B-BBEE
The recently gazetted proposed amendment to the B-BBEE scorecard enables BEE skills spend to go towards job creation for unemployed black youth, offering companies that can't improve on their ownership score the opportunity to improve on their skills category.
Naidoo clarifies: "If a company does one of the three things outlined under the YES initiative, and also allocates 2.5% of its 6% skills spend on higher education and training bursaries, the company can then qualify to move up as much as two levels on its B-BBEE scorecard. This could elevate a company from Level 8 to a Level 6, which is a significant improvement. In fact, he says, some corporates could even achieve a Level 5, which was just not possible previously.
Over and above the 2.5% bursary allocation, a company can choose to sponsor unemployed youth by placing them at black-owned SMEs, and then allocate 3% of its remaining skills spend to training those youth, in the form of on-the-job training or some other unofficial type of skills development programme.
"All of these measures are good for the business, which improves its B-BBEE score significantly; it creates empowerment opportunities through corporate funding, while creating skills development for the youth.
"At the end of the 12-month period, you're going to have a young person who has some work experience and will therefore be eminently more employable in terms of their CV and skills."
Evolving B-BBEE
This is going to have a significant impact on the B-BBEE scorecard as it changes the skills dynamic considerably. Previously, 85% of a company's 6% skills spend had to be used for some form of accredited training such as learnerships. "That's no longer going to happen," says Naidoo. "The new scorecard permits companies to spend 2.5% on higher education and an additional 3% on youth, which only leaves 0.5% of their skills spend for learnership training.
However, this is entirely optional and companies that are already ranking fairly well on the B-BBEE scorecard with good ownership scores might not use this option. Multinational corporates, on the other hand, will find it a very useful amendment.
The only caveat when it comes to companies wanting to benefit from the proposed amendments to the B-BBEE scorecard, is that these measures can only be implemented for companies that will equal or better their B-BBEE score from the previous year.
Naidoo says his best guess is that the proposed amendments will come into force early next year: "Although as 2019 is an election year, it is possible that it might be fast-tracked and pushed through sooner.
"As youth unemployment figures are almost double the official unemployment figures for the entire country, the success of this initiative is vital for the country's economy."
In its Q4 figures from 2017, Statistics SA puts the youth unemployment rate at 5.9 million.
"Overall, this is an extremely positive initiative and corporates don't have any other option but to embrace and support endeavours like this to get as many young people into employment opportunities as quickly as possible. If we don't do anything to address this shocking unemployment statistic, we're not going to just see evolutionary change, we're going to see revolutionary change. And nobody wants that."
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